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90_HB0023sam001
LRB9000434EGfgam02
1 AMENDMENT TO HOUSE BILL 23
2 AMENDMENT NO. . Amend House Bill 23 on page 1, by
3 replacing lines 1 and 2 with the following:
4 "AN ACT in relation to public employee pensions."; and
5 on page 1, below line 4, by inserting the following:
6 "Section 2. The State Finance Act is amended by adding
7 Section 8f as follows:
8 (30 ILCS 105/8f new)
9 Sec. 8f. Public Pension Regulation Fund. The Public
10 Pension Regulation Fund is created in the State Treasury.
11 Except as otherwise provided in the Illinois Pension Code,
12 all money received by the Illinois Department of Insurance
13 under the Illinois Pension Code shall be paid into the Fund.
14 The State Treasurer promptly shall invest the money in the
15 Fund, and all earnings that accrue on the money in the Fund
16 shall be credited to the Fund. No money may be transferred
17 from this Fund to any other fund. The General Assembly may
18 make appropriations from this Fund for the ordinary and
19 contingent expenses of the Public Pension Division of the
20 Illinois Department of Insurance.
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1 Section 3. The Public Funds Investment Act is amended
2 by changing Section 1 as follows:
3 (30 ILCS 235/1) (from Ch. 85, par. 901)
4 Sec. 1. The words "public funds", as used in this Act,
5 mean current operating funds, special funds, interest and
6 sinking funds, and funds of any kind or character belonging
7 to or in the custody of any public agency.
8 The words "public agency", as used in this Act, mean the
9 State of Illinois, the various counties, townships, cities,
10 towns, villages, school districts, educational service
11 regions, special road districts, public water supply
12 districts, fire protection districts, drainage districts,
13 levee districts, sewer districts, housing authorities, the
14 Illinois Bank Examiners' Education Foundation, the Chicago
15 Park District, and all other political corporations or
16 subdivisions of the State of Illinois, now or hereafter
17 created, whether herein specifically mentioned or not.
18 Beginning January 1, 1998, this Act does not apply to police
19 pension funds established under Article 3 of the Illinois
20 Pension Code or firefighter pension funds established under
21 Article 4 of the Illinois Pension Code, unless otherwise
22 provided by that Code.
23 (Source: P.A. 87-968.)
24 Section 4. The Illinois Pension Code is amended by
25 changing Sections 1-101.1, 1-113, 3-102, 3-132, 3-135, 3-143,
26 4-123, 4-128, and 4-134 and adding Sections 1-101.2, 1-101.3,
27 1-101.4, 1-113.1, 1-113.2, 1-113.3, 1-113.4, 1-113.5,
28 1-113.6, 1-113.7, 1-113.8, 1-113.9, 1-113.10, 1-113.11,
29 1A-101, 1A-102, 1A-103, 1A-104, 1A-105, 1A-106, 1A-107,
30 1A-108, 1A-109, 1A-110, 1A-111, 1A-112, 1A-113, 3-108.2,
31 3-108.3, and 4-105d as follows:
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1 (40 ILCS 5/1-101.1) (from Ch. 108 1/2, par. 1-101.1)
2 Sec. 1-101.1. Definitions. For purposes of this Article,
3 unless the context otherwise requires, the words defined in
4 the Sections following this Section and preceding Section
5 1-102 shall have meanings given in those Sections.:
6 (a) A person is a "Fiduciary" with respect to a
7 retirement system or pension fund established under this Code
8 to the extent that such person:
9 (i) exercises any discretionary authority or
10 discretionary control respecting management of such
11 retirement system or pension fund, or exercises any authority
12 or control respecting management or disposition of its
13 assets;
14 (ii) renders investment advice for a fee or other
15 compensation, direct or indirect, with respect to any moneys
16 or other property of such retirement system or pension fund,
17 or has any authority or responsibility to do so; or
18 (iii) has any discretionary authority or discretionary
19 responsibility in the administration of such retirement
20 system.
21 (b) A person is a "Party in interest" with respect to a
22 retirement system or pension fund established under this Code
23 if such person is:
24 (i) a fiduciary, counsel or employee of such retirement
25 system or pension fund;
26 (ii) a person providing services to such retirement
27 system or pension fund;
28 (iii) an employer, any of whose employees are covered by
29 such retirement system or pension fund;
30 (iv) an employee organization any of whose members are
31 covered by such retirement system or pension fund;
32 (v) a relative of any individual described in paragraph
33 (i) or (ii) above of this subsection (b); or
34 (vi) an employee, officer or director (or an individual
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1 having powers or responsibilities similar to those of
2 officers or directors) of a person described in paragraphs
3 (ii), (iii) or (iv) above of this subsection (b), or of such
4 retirement system or pension fund.
5 (c) A person is an "Investment manager" with respect to
6 a retirement system or pension fund established under this
7 Code if such person:
8 (i) is a fiduciary appointed by the board of trustees of
9 a retirement system or pension fund in accordance with
10 Section 1-109.1;
11 (ii) has the power to manage, acquire or dispose of any
12 asset of the retirement system or pension fund;
13 (iii) is either -
14 (A) registered as an investment advisor under the
15 Investment Advisors Act of 1940 (15 U.S.C. 80b-1, et seq.);
16 (B) a bank, as defined in that Act; or
17 (C) an insurance company; and
18 (iv) has acknowledged in writing that he is a fiduciary
19 with respect to the retirement system or pension fund.
20 (Source: P.A. 82-960.)
21 (40 ILCS 5/1-101.2 new)
22 Sec. 1-101.2. Fiduciary. A person is a "fiduciary" with
23 respect to a pension fund or retirement system established
24 under this Code to the extent that the person:
25 (1) exercises any discretionary authority or
26 discretionary control respecting management of the
27 pension fund or retirement system, or exercises any
28 authority or control respecting management or disposition
29 of its assets;
30 (2) renders investment advice for a fee or other
31 compensation, direct or indirect, with respect to any
32 moneys or other property of the pension fund or
33 retirement system, or has any authority or responsibility
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1 to do so; or
2 (3) has any discretionary authority or
3 discretionary responsibility in the administration of the
4 pension fund or retirement system.
5 (40 ILCS 5/1-101.3 new)
6 Sec. 1-101.3. Party in interest. A person is a "party in
7 interest" with respect to a pension fund or retirement system
8 established under this Code if the person is:
9 (1) a fiduciary, counsel, or employee of the
10 pension fund or retirement system, or a relative of such
11 a person;
12 (2) a person providing services to the pension fund
13 or retirement system, or a relative of such a person;
14 (3) an employer, any of whose employees are covered
15 by the pension fund or retirement system;
16 (4) an employee organization, any members of which
17 are covered by the pension fund or retirement system; or
18 (5) an employee, officer, or director (or an
19 individual having powers or responsibilities similar to
20 those of an officer or director) of the pension fund or
21 retirement system or of a person described under item
22 (2), (3), or (4) of this Section.
23 (40 ILCS 5/1-101.4 new)
24 Sec. 1-101.4. Investment adviser. A person is an
25 "investment adviser", "investment advisor", or "investment
26 manager" with respect to a pension fund or retirement system
27 established under this Code if the person:
28 (1) is a fiduciary appointed by the board of
29 trustees of the pension fund or retirement system in
30 accordance with Section 1-109.1;
31 (2) has the power to manage, acquire, or dispose of
32 any asset of the retirement system or pension fund;
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1 (3) has acknowledged in writing that he or she is a
2 fiduciary with respect to the pension fund or retirement
3 system; and
4 (4) is at least one of the following: (i)
5 registered as an investment adviser under the federal
6 Investment Advisers Act of 1940 (15 U.S.C. 80b-1, et
7 seq.); (ii) registered as an investment adviser under the
8 Illinois Securities Law of 1953; (iii) a bank, as defined
9 in the Investment Advisers Act of 1940; or (iv) an
10 insurance company authorized to transact business in this
11 State.
12 (40 ILCS 5/1-113) (from Ch. 108 1/2, par. 1-113)
13 Sec. 1-113. Investment authority of certain pension
14 funds, not including those established under Article 3 or 4.
15 The investment authority of a board of trustees of a
16 retirement system or pension fund established under this Code
17 shall, if so provided in the Article establishing such
18 retirement system or pension fund, embrace the following
19 investments:
20 (1) Bonds, notes and other direct obligations of the
21 United States Government; bonds, notes and other obligations
22 of any United States Government agency or instrumentality,
23 whether or not guaranteed; and obligations the principal and
24 interest of which are guaranteed unconditionally by the
25 United States Government or by an agency or instrumentality
26 thereof.
27 (2) Obligations of the Inter-American Development Bank,
28 the International Bank for Reconstruction and Development,
29 the African Development Bank, the International Finance
30 Corporation, and the Asian Development Bank.
31 (3) Obligations of any state, or of any political
32 subdivision in Illinois, or of any county or city in any
33 other state having a population as shown by the last federal
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1 census of not less than 30,000 inhabitants provided that such
2 political subdivision is not permitted by law to become
3 indebted in excess of 10% of the assessed valuation of
4 property therein and has not defaulted for a period longer
5 than 30 days in the payment of interest and principal on any
6 of its general obligations or indebtedness during a period of
7 10 calendar years immediately preceding such investment.
8 (4) Nonconvertible bonds, debentures, notes and other
9 corporate obligations of any corporation created or existing
10 under the laws of the United States or any state, district or
11 territory thereof, provided there has been no default on the
12 obligations of the corporation or its predecessor(s) during
13 the 5 calendar years immediately preceding the purchase.
14 (5) Obligations guaranteed by the Government of Canada,
15 or by any Province of Canada, or by any Canadian city with a
16 population of not less than 150,000 inhabitants, provided (a)
17 they are payable in United States currency and are exempt
18 from any Canadian withholding tax; (b) the investment in any
19 one issue of bonds shall not exceed 10% of the amount
20 outstanding; and (c) the total investments at book value in
21 Canadian securities shall be limited to 5% of the total
22 investment account of the board at book value.
23 (5.1) Direct obligations of the State of Israel for the
24 payment of money, or obligations for the payment of money
25 which are guaranteed as to the payment of principal and
26 interest by the State of Israel, or common or preferred stock
27 or notes issued by a bank owned or controlled in whole or in
28 part by the State of Israel, on the following conditions:
29 (a) The total investments in such obligations shall
30 not exceed 5% of the book value of the aggregate
31 investments owned by the board;
32 (b) The State of Israel shall not be in default in
33 the payment of principal or interest on any of its direct
34 general obligations on the date of such investment;
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1 (c) The bonds, stock or notes, and interest thereon
2 shall be payable in currency of the United States;
3 (d) The bonds shall (1) contain an option for the
4 redemption thereof after 90 days from date of purchase or
5 (2) either become due 5 years from the date of their
6 purchase or be subject to redemption 120 days after the
7 date of notice for redemption;
8 (e) The investment in these obligations has been
9 approved in writing by investment counsel employed by the
10 board, which counsel shall be a national or state bank or
11 trust company authorized to do a trust business in the
12 State of Illinois, or an investment advisor qualified
13 under the federal Investment Advisors Act of 1940 and
14 registered under the Illinois Securities Act of 1953;
15 (f) The fund or system making the investment shall
16 have at least $5,000,000 of net present assets.
17 (6) Notes secured by mortgages under Sections 203, 207,
18 220 and 221 of the National Housing Act which are insured by
19 the Federal Housing Commissioner, or his successor assigns,
20 or debentures issued by such Commissioner, which are
21 guaranteed as to principal and interest by the Federal
22 Housing Administration, or agency of the United States
23 Government, provided the aggregate investment shall not
24 exceed 20% of the total investment account of the board at
25 book value, and provided further that the investment in such
26 notes under Sections 220 and 221 shall in no event exceed
27 one-half of the maximum investment in notes under this
28 paragraph.
29 (7) Loans to veterans guaranteed in whole or part by the
30 United States Government pursuant to Title III of the Act of
31 Congress known as the "Servicemen's Readjustment Act of
32 1944," 58 Stat. 284, 38 U.S.C. 693, as amended or
33 supplemented from time to time, provided such guaranteed
34 loans are liens upon real estate.
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1 (8) Common and preferred stocks and convertible debt
2 securities authorized for investment of trust funds under the
3 laws of the State of Illinois, provided:
4 (a) the common stocks, except as provided in
5 subparagraph (g) (h), are listed on a national securities
6 exchange or board of trade, as defined in the federal
7 Securities Exchange Act of 1934, or quoted in the
8 National Association of Securities Dealers Automated
9 Quotation System (NASDAQ);
10 (b) the securities are of a corporation created or
11 existing under the laws of the United States or any
12 state, district or territory thereof;
13 (c) the corporation is not in arrears on payment of
14 dividends on its preferred stock;
15 (d) the total book value of all stocks and
16 convertible debt owned by any pension fund or retirement
17 system shall not exceed 40% of the aggregate book value
18 of all investments of such pension fund or retirement
19 system, except for that system governed by Article 17,
20 where the total of all stocks and convertible debt shall
21 not exceed 50% of the aggregate book value of all fund
22 investments;
23 (e) the book value of stock and convertible debt
24 investments in any one corporation shall not exceed 5% of
25 the total investment account at book value in which such
26 securities are held, determined as of the date of the
27 investment, and the investments in the stock of any one
28 corporation shall not exceed 5% of the total outstanding
29 stock of such corporation, and the investments in the
30 convertible debt of any one corporation shall not exceed
31 5% of the total amount of such debt that may be
32 outstanding;
33 (f) the straight preferred stocks or convertible
34 preferred stocks and convertible debt securities are
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1 issued or guaranteed by a corporation whose common stock
2 qualifies for investment by the board; and
3 (g) that any common stocks not listed or quoted as
4 provided in subdivision 8(a) above be limited to the
5 following types of institutions: (a) any bank which is a
6 member of the Federal Deposit Insurance Corporation
7 having capital funds represented by capital stock,
8 surplus and undivided profits of at least $20,000,000;
9 (b) any life insurance company having capital funds
10 represented by capital stock, special surplus funds and
11 unassigned surplus totalling at least $50,000,000; and
12 (c) any fire or casualty insurance company, or a
13 combination thereof, having capital funds represented by
14 capital stock, net surplus and voluntary reserves of at
15 least $50,000,000.
16 (9) Withdrawable accounts of State chartered and federal
17 chartered savings and loan associations insured by the
18 Federal Savings and Loan Insurance Corporation; deposits or
19 certificates of deposit in State and national banks insured
20 by the Federal Deposit Insurance Corporation; and share
21 accounts or share certificate accounts in a State or federal
22 credit union, the accounts of which are insured as required
23 by the Illinois Credit Union Act or the Federal Credit Union
24 Act, as applicable.
25 No bank or savings and loan association shall receive
26 investment funds as permitted by this subsection (9), unless
27 it has complied with the requirements established pursuant to
28 Section 6 of the Public Funds Investment Act.
29 (10) Trading, purchase or sale of listed options on
30 underlying securities owned by the board.
31 (11) Contracts and agreements supplemental thereto
32 providing for investments in the general account of a life
33 insurance company authorized to do business in Illinois.
34 (12) Conventional mortgage pass-through securities which
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1 are evidenced by interests in Illinois owner-occupied
2 residential mortgages, having not less than an "A" rating
3 from at least one national securities rating service. Such
4 mortgages may have loan-to-value ratios up to 95%, provided
5 that any amount over 80% is insured by private mortgage
6 insurance. The pool of such mortgages shall be insured by
7 mortgage guaranty or equivalent insurance, in accordance with
8 industry standards.
9 (13) Pooled or commingled funds managed by a national or
10 State bank which is authorized to do a trust business in the
11 State of Illinois, shares of registered investment companies
12 as defined in the federal Investment Company Act of 1940
13 which are registered under that Act, and separate accounts of
14 a life insurance company authorized to do business in
15 Illinois, where such pooled or commingled funds, shares, or
16 separate accounts are comprised of common or preferred
17 stocks, bonds, or money market instruments.
18 (14) Pooled or commingled funds managed by a national or
19 state bank which is authorized to do a trust business in the
20 State of Illinois, separate accounts managed by a life
21 insurance company authorized to do business in Illinois, and
22 commingled group trusts managed by an investment adviser
23 registered under the federal Investment Advisors Act of 1940
24 (15 U.S.C. 80b-1 et seq.) and under The Illinois Securities
25 Law of 1953, where such pooled or commingled funds, separate
26 accounts or commingled group trusts are comprised of real
27 estate or loans upon real estate secured by first or second
28 mortgages. The total investment in such pooled or commingled
29 funds, commingled group trusts and separate accounts shall
30 not exceed 10% of the aggregate book value of all investments
31 owned by the fund.
32 (15) Investment companies which (a) are registered as
33 such under the Investment Company Act of 1940, (b) are
34 diversified, open-end management investment companies and (c)
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1 invest only in money market instruments.
2 (16) Up to 10% of the assets of the fund may be invested
3 in investments not included in paragraphs (1) through (15) of
4 this Section, provided that such investments comply with the
5 requirements and restrictions set forth in Sections 1-109,
6 1-109.1, 1-109.2, 1-110 and 1-111 of this Code.
7 The board shall have the authority to enter into such
8 agreements and to execute such documents as it determines to
9 be necessary to complete any investment transaction.
10 Any limitations herein set forth shall be applicable only
11 at the time of purchase and shall not require the liquidation
12 of any investment at any time.
13 All investments shall be clearly held and accounted for
14 to indicate ownership by such board. Such board may direct
15 the registration of securities in its own name or in the name
16 of a nominee created for the express purpose of registration
17 of securities by a national or state bank or trust company
18 authorized to conduct a trust business in the State of
19 Illinois.
20 Investments shall be carried at cost or at a book value
21 in accordance with accounting procedures approved by such
22 board. No adjustments shall be made in investment carrying
23 values for ordinary current market price fluctuations; but
24 reserves may be provided to account for possible losses or
25 unrealized gains as determined by such board.
26 The book value of investments held by any pension fund or
27 retirement system in one or more commingled investment
28 accounts shall be the cost of its units of participation in
29 such commingled account or accounts as recorded on the books
30 of such board.
31 (Source: P.A. 86-272; 87-575; 87-794; 87-895.)
32 (40 ILCS 5/1-113.1 new)
33 Sec. 1-113.1. Investment authority of pension funds
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1 established under Article 3 or 4. The board of trustees of a
2 police pension fund established under Article 3 of this Code
3 or firefighter pension fund established under Article 4 of
4 this Code shall draw pension funds from the treasurer of the
5 municipality and, beginning January 1, 1998, invest any part
6 thereof in the name of the board in the items listed in
7 Sections 1-113.2 through 1-113.4 according to the limitations
8 and requirements of this Article. These investments shall be
9 made with the care, skill, prudence, and diligence that a
10 prudent person acting in like capacity and familiar with such
11 matters would use in the conduct of an enterprise of like
12 character with like aims.
13 Interest and any other income from the investments shall
14 be credited to the pension fund.
15 For the purposes of Sections 1-113.2 through 1-113.11,
16 the "net assets" of a pension fund include both the cash and
17 invested assets of the pension fund.
18 (40 ILCS 5/1-113.2 new)
19 Sec. 1-113.2. List of permitted investments for all
20 Article 3 or 4 pension funds. Any pension fund established
21 under Article 3 or 4 may invest in the following items:
22 (1) Interest bearing direct obligations of the United
23 States of America.
24 (2) Interest bearing obligations to the extent that they
25 are fully guaranteed or insured as to payment of principal
26 and interest by the United States of America.
27 (3) Interest bearing bonds, notes, debentures, or other
28 similar obligations of agencies of the United States of
29 America. For the purposes of this Section, "agencies of the
30 United States of America" includes: (i) the Federal National
31 Mortgage Association and the Student Loan Marketing
32 Association; (ii) federal land banks, federal intermediate
33 credit banks, federal farm credit banks, and any other entity
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1 authorized to issue direct debt obligations of the United
2 States of America under the Farm Credit Act of 1971 or
3 amendments to that Act; (iii) federal home loan banks and the
4 Federal Home Loan Mortgage Corporation; and (iv) any agency
5 created by Act of Congress that is authorized to issue direct
6 debt obligations of the United States of America.
7 (4) Interest bearing savings accounts or certificates of
8 deposit, issued by federally chartered banks or savings and
9 loan associations, to the extent that the deposits are
10 insured by agencies or instrumentalities of the federal
11 government.
12 (5) Interest bearing savings accounts or certificates of
13 deposit, issued by State of Illinois chartered banks or
14 savings and loan associations, to the extent that the
15 deposits are insured by agencies or instrumentalities of the
16 federal government.
17 (6) Investments in credit unions, to the extent that the
18 investments are insured by agencies or instrumentalities of
19 the federal government.
20 (7) Interest bearing bonds of the State of Illinois.
21 (8) Pooled interest bearing accounts managed by the
22 Illinois Public Treasurer's Investment Pool in accordance
23 with the Deposit of State Moneys Act and interest bearing
24 funds or pooled accounts managed, operated, and administered
25 by banks, subsidiaries of banks, or subsidiaries of bank
26 holding companies in accordance with the laws of the State of
27 Illinois.
28 (9) Interest bearing bonds or tax anticipation warrants
29 of any county, township, or municipal corporation of the
30 State of Illinois.
31 (10) Direct obligations of the State of Israel, subject
32 to the conditions and limitations of item (5.1) of Section
33 1-113.
34 (11) Money market mutual funds managed by investment
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1 companies that are registered under the federal Investment
2 Company Act of 1940 and the Illinois Securities Law of 1953
3 and are diversified, open-ended management investment
4 companies; provided that the portfolio of the money market
5 mutual fund is limited to the following:
6 (i) bonds, notes, certificates of indebtedness,
7 treasury bills, or other securities that are guaranteed
8 by the full faith and credit of the United States of
9 America as to principal and interest;
10 (ii) bonds, notes, debentures, or other similar
11 obligations of the United States of America or its
12 agencies; and
13 (iii) short term obligations of corporations
14 organized in the United States with assets exceeding
15 $400,000,000, provided that (A) the obligations mature no
16 later than 180 days from the date of purchase, (B) at the
17 time of purchase, the obligations are rated by at least 2
18 standard national rating services at one of their 3
19 highest classifications, and (C) the obligations held by
20 the mutual fund do not exceed 10% of the corporation's
21 outstanding obligations.
22 (12) General accounts of life insurance companies
23 authorized to transact business in Illinois.
24 (13) Any combination of the following, not to exceed 10%
25 of the pension fund's net assets:
26 (i) separate accounts that are managed by life
27 insurance companies authorized to transact business in
28 Illinois and are comprised of diversified portfolios
29 consisting of common or preferred stocks, bonds, or money
30 market instruments; and
31 (ii) separate accounts that are managed by
32 insurance companies authorized to transact business in
33 Illinois, and are comprised of real estate or loans upon
34 real estate secured by first or second mortgages.
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1 (40 ILCS 5/1-113.3 new)
2 Sec. 1-113.3. List of additional permitted investments
3 for pension funds with net assets of $2,500,000 or more.
4 (a) In addition to the items in Section 3-113.2, a
5 pension fund established under Article 3 or 4 that has net
6 assets of at least $2,500,000 may invest a portion of its net
7 assets in the following items:
8 (1) Separate accounts that are managed by life insurance
9 companies authorized to transact business in Illinois and are
10 comprised of diversified portfolios consisting of common or
11 preferred stocks, bonds, or money market instruments.
12 (2) Mutual funds that meet the following requirements:
13 (i) the mutual fund is managed by an investment
14 company as defined and registered under the federal
15 Investment Company Act of 1940 and registered under the
16 Illinois Securities Law of 1953;
17 (ii) the mutual fund has been in operation for at
18 least 5 years;
19 (iii) the mutual fund has total net assets of $250
20 million or more; and
21 (iv) the mutual fund is comprised of diversified
22 portfolios of common or preferred stocks, bonds, or money
23 market instruments.
24 (b) A pension fund's total investment in the items
25 authorized under this Section shall not exceed 35% of the
26 market value of the pension fund's net present assets stated
27 in its most recent annual report on file with the Illinois
28 Department of Insurance.
29 (40 ILCS 5/1-113.4 new)
30 Sec. 1-113.4. List of additional permitted investments
31 for pension funds with net assets of $5,000,000 or more.
32 (a) In addition to the items in Sections 1-113.2 and
33 1-113.3, a pension fund established under Article 3 or 4 that
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1 has net assets of at least $5,000,000 and has appointed an
2 investment adviser under Section 1-113.5 may, through that
3 investment adviser, invest a portion of its assets in common
4 and preferred stocks authorized for investments of trust
5 funds under the laws of the State of Illinois. The stocks
6 must meet all of the following requirements:
7 (1) The common stocks are listed on a national
8 securities exchange or board of trade (as defined in the
9 federal Securities Exchange Act of 1934 and set forth in
10 Section 3.G of the Illinois Securities Law of 1953) or
11 quoted in the National Association of Securities Dealers
12 Automated Quotation System National Market System (NASDAQ
13 NMS).
14 (2) The securities are of a corporation created or
15 existing under the laws of the United States or any
16 state, district, or territory thereof and the corporation
17 has been in existence for at least 5 years.
18 (3) The corporation has not been in arrears on
19 payment of dividends on its preferred stock during the
20 preceding 5 years.
21 (4) The market value of stock in any one
22 corporation does not exceed 5% of the cash and invested
23 assets of the pension fund, and the investments in the
24 stock of any one corporation do not exceed 5% of the
25 total outstanding stock of that corporation.
26 (5) The straight preferred stocks or convertible
27 preferred stocks are issued or guaranteed by a
28 corporation whose common stock qualifies for investment
29 by the board.
30 (6) The issuer of the stocks has been subject to
31 the requirements of Section 12 of the federal Securities
32 Exchange Act of 1934 and has been current with the filing
33 requirements of Sections 13 and 14 of that Act during the
34 preceding 3 years.
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1 (b) A pension fund's total investment in the items
2 authorized under this Section and Section 1-113.3 shall not
3 exceed 35% of the market value of the pension fund's net
4 present assets stated in its most recent annual report on
5 file with the Illinois Department of Insurance.
6 (c) A pension fund that invests funds under this Section
7 shall electronically file with the Division any reports of
8 its investment activities that the Division may require, at
9 the times and in the format required by the Division.
10 (40 ILCS 5/1-113.5 new)
11 Sec. 1-113.5. Investment advisers and investment
12 services.
13 (a) The board of trustees of a pension fund may appoint
14 investment advisers as defined in Section 1-101.4. The board
15 of any pension fund investing in common or preferred stock
16 under Section 1-113.4 shall appoint an investment adviser
17 before making such investments.
18 The investment adviser shall be a fiduciary, as defined
19 in Section 1-101.2, with respect to the pension fund and
20 shall be one of the following:
21 (1) an investment adviser registered under the
22 federal Investment Advisers Act of 1940 and the Illinois
23 Securities Law of 1953;
24 (2) a bank or trust company authorized to conduct a
25 trust business in Illinois;
26 (3) a life insurance company authorized to transact
27 business in Illinois; or
28 (4) an investment company as defined and registered
29 under the federal Investment Company Act of 1940 and
30 registered under the Illinois Securities Law of 1953.
31 (b) All investment advice and services provided by an
32 investment adviser appointed under this Section shall be
33 rendered pursuant to a written contract between the
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1 investment adviser and the board, and in accordance with the
2 board's investment policy.
3 The contract shall include all of the following:
4 (1) acknowledgement in writing by the investment
5 adviser that he or she is a fiduciary with respect to the
6 pension fund;
7 (2) the board's investment policy;
8 (3) full disclosure of direct and indirect fees,
9 commissions, penalties, and any other compensation that
10 may be received by the investment adviser, including
11 reimbursement for expenses; and
12 (4) a requirement that the investment adviser
13 submit periodic written reports, on at least a quarterly
14 basis, for the board's review at its regularly scheduled
15 meetings. All returns on investment shall be reported as
16 net returns after payment of all fees, commissions, and
17 any other compensation.
18 (c) Within 30 days after appointing an investment
19 adviser, the board shall submit a copy of the contract to the
20 Department of Insurance.
21 (d) Investment services provided by a person other than
22 an investment adviser appointed under this Section, including
23 but not limited to services provided by the kinds of persons
24 listed in items (1) through (4) of subsection (a), shall be
25 rendered only after full written disclosure of direct and
26 indirect fees, commissions, penalties, and any other
27 compensation that shall or may be received by the person
28 rendering those services.
29 (e) The board of trustees of each pension fund shall
30 retain records of investment transactions in accordance with
31 the rules of the Department of Insurance.
32 (40 ILCS 5/1-113.6 new)
33 Sec. 1-113.6. Investment policies. Every board of
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1 trustees of a pension fund shall adopt a written investment
2 policy and file a copy of that policy with the Department of
3 Insurance within 30 days after its adoption. Whenever a
4 board changes its investment policy, it shall file a copy of
5 the new policy with the Department within 30 days.
6 (40 ILCS 5/1-113.7 new)
7 Sec. 1-113.7. Registration of investments; custody and
8 safekeeping. The board of trustees may register the
9 investments of its pension fund in the name of the pension
10 fund, in the nominee name of an investment adviser appointed
11 under Section 1-113.5, in the nominee name of a bank or trust
12 company authorized to conduct a trust business in Illinois,
13 or in the nominee name of the Illinois Public Treasurer's
14 Investment Pool.
15 The assets of the pension fund and ownership of its
16 investments shall be protected through third-party custodial
17 safekeeping. The board of trustees may appoint as custodian
18 of the investments of its pension fund the treasurer of the
19 municipality, an investment adviser appointed under Section
20 1-113.5, a bank or trust company authorized to conduct a
21 trust business in Illinois, or the Illinois Public
22 Treasurer's Investment Pool.
23 No pension fund investments may be held by a dealer or
24 salesperson as defined in the Illinois Securities Law of
25 1953, except in a money market mutual fund in accordance with
26 Section 1-113.2 for a period of time not to exceed 180 days.
27 A bank or trust company authorized to conduct a trust
28 business in Illinois shall register, deposit, or hold
29 investments for safekeeping, all in accordance with the
30 obligations and subject to the limitations of the Securities
31 in Fiduciary Accounts Act.
32 (40 ILCS 5/1-113.8 new)
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1 Sec. 1-113.8. Limitations on banks and savings and loan
2 associations. A bank or savings and loan association shall
3 not receive investment funds from a pension fund established
4 under Article 3 or 4 of this Code, unless it has complied
5 with the requirements established under Section 6 of the
6 Public Funds Investment Act. The limitations set forth in
7 that Section 6 are applicable only at the time of investment
8 and do not require the liquidation of any investment at any
9 time.
10 (40 ILCS 5/1-113.9 new)
11 Sec. 1-113.9. Illegal investments. A person registered
12 as a dealer, salesperson, or investment adviser under the
13 Illinois Securities Law of 1953 who advises or causes a
14 pension fund to make an investment or engage in a transaction
15 not authorized by this Code is subject to the penalty
16 provisions of paragraph q of subsection E of Section 8 of
17 that law.
18 A bank or trust company authorized to conduct a trust
19 business in Illinois, and any officer, director, or employee
20 thereof, that advises or causes a pension fund to make an
21 investment or engages in a transaction not authorized by this
22 Code is subject to the penalty provisions of Article V of the
23 Corporate Fiduciary Act.
24 (40 ILCS 5/1-113.10 new)
25 Sec. 1-113.10. Legality at time of investment. The
26 investment limitations set forth in this Article are
27 applicable only at the time of investment and do not require
28 the liquidation of any investment at any time. However, no
29 additional pension funds may be invested in any investment
30 item while the market value of the pension fund's investments
31 in that item meets or exceeds the applicable limitation.
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1 (40 ILCS 5/1-113.11 new)
2 Sec. 1-113.11. Rules. The Department of Insurance is
3 authorized to promulgate rules that are necessary or useful
4 for the administration and enforcement of Sections 1-113.1
5 through 1-113.10 of this Article.
6 (40 ILCS 5/Art. 1A heading new)
7 ARTICLE 1A. REGULATION OF PUBLIC PENSION FUNDS
8 (40 ILCS 5/1A-101 new)
9 Sec. 1A-101. Creation of Public Pension Division. There
10 is created in the Department of Insurance a Public Pension
11 Division which, under the supervision and direction of the
12 Director of Insurance, shall exercise the powers and perform
13 the duties and functions prescribed under this Code. The
14 Division shall consist of an administrator, a supervisor, a
15 technical staff trained in the fundamentals of public pension
16 fund planning, operations, administration, and investment of
17 public pension funds, and such other personnel as may be
18 necessary properly and effectively to discharge the functions
19 of the Division.
20 (40 ILCS 5/1A-102 new)
21 Sec. 1A-102. Definitions. As used in this Article, the
22 following terms have the meanings ascribed to them in this
23 Section, unless the context otherwise requires:
24 "Accrued liability" means the actuarial present value of
25 future benefit payments and appropriate administrative
26 expenses under a plan, reduced by the actuarial present value
27 of all future normal costs (including any participant
28 contributions) with respect to the participants included in
29 the actuarial valuation of the plan.
30 "Actuarial present value" means the single amount, as of
31 a given valuation date, that results from applying actuarial
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1 assumptions to an amount or series of amounts payable or
2 receivable at various times.
3 "Actuarial value of assets" means the value assigned by
4 the actuary to the assets of a plan for the purposes of an
5 actuarial valuation.
6 "Basis point" means 1/100th of one percent.
7 "Beneficiary" means a person eligible for or receiving
8 benefits from a pension fund as provided in the Article of
9 this Code under which the fund is established.
10 "Credited projected benefit" means that portion of a
11 participant's projected benefit based on an allocation taking
12 into account service to date determined in accordance with
13 the terms of the plan based on anticipated future
14 compensation.
15 "Current value" means the fair market value when
16 available; otherwise, the fair value as determined in good
17 faith by a trustee, assuming an orderly liquidation at the
18 time of the determination.
19 "Department" means the Department of Insurance of the
20 State of Illinois.
21 "Director" means the Director of the Department of
22 Insurance.
23 "Division" means the Public Pension Division of the
24 Department of Insurance.
25 "Governmental unit" means the State of Illinois, any
26 instrumentality or agency thereof (except transit authorities
27 or agencies operating within or within and without cities
28 with a population over 3,000,000), and any political
29 subdivision or municipal corporation that establishes and
30 maintains a public pension fund.
31 "Normal cost" means that part of the actuarial present
32 value of all future benefit payments and appropriate
33 administrative expenses assigned to the current year under
34 the actuarial valuation method used by the plan (excluding
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1 any amortization of the unfunded accrued liability).
2 "Participant" means a participating member or deferred
3 pensioner or annuitant of a pension fund as provided in the
4 Article of this Code under which the pension fund is
5 established, or a beneficiary thereof.
6 "Pension fund" means any public pension fund, annuity and
7 benefit fund, or retirement system established under this
8 Code.
9 "Plan year" means the calendar or fiscal year on which
10 the records of a given plan are kept.
11 "Projected benefits" means benefit amounts under a plan
12 which are expected to be paid at various future times under a
13 particular set of actuarial assumptions, taking into account,
14 as applicable, the effect of advancement in age and past and
15 anticipated future compensation and service credits.
16 "Supplemental annual cost" means that portion of the
17 unfunded accrued liability assigned to the current year under
18 one of the following bases:
19 (1) interest only on the unfunded accrued
20 liability;
21 (2) the level annual amount required to amortize
22 the unfunded accrued liability over a period not
23 exceeding 40 years;
24 (3) the amount required for the current year to
25 amortize the unfunded accrued liability over a period not
26 exceeding 40 years as a level percentage of payroll.
27 "Total annual cost" means the sum of the normal cost plus
28 the supplemental annual cost.
29 "Unfunded accrued liability" means the excess of the
30 accrued liability over the actuarial value of the assets of a
31 plan.
32 "Vested pension benefit" means an interest obtained by a
33 participant or beneficiary in that part of an immediate or
34 deferred benefit under a plan which arises from the
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1 participant's service and is not conditional upon the
2 participant's continued service for an employer any of whose
3 employees are covered under the plan, and which has not been
4 forfeited under the terms of the plan.
5 (40 ILCS 5/1A-103 new)
6 Sec. 1A-103. Rules. The Department is authorized to
7 promulgate rules necessary for the administration and
8 enforcement of this Code. Except as otherwise provided under
9 this Code, these rules shall apply only to pension funds
10 established under Article 3 or Article 4 of this Code. Rules
11 adopted pursuant to this Section shall govern where conflict
12 with local rules and regulations exists.
13 (40 ILCS 5/1A-104 new)
14 Sec. 1A-104. Examinations and investigations.
15 (a) The Division shall make periodic examinations and
16 investigations of all pension funds established under this
17 Code and maintained for the benefit of employees and officers
18 of governmental units in the State of Illinois. However, in
19 lieu of making an examination and investigation, the Division
20 may accept and rely upon a report of audit or examination of
21 any pension fund made by an independent certified public
22 accountant pursuant to the provisions of the Article of this
23 Code governing the pension fund. The acceptance of the
24 report of audit or examination does not bar the Division from
25 making a further audit, examination, and investigation if
26 deemed necessary by the Division.
27 The Department may implement a flexible system of
28 examinations under which it directs resources as it deems
29 necessary or appropriate. In consultation with the pension
30 fund being examined, the Division may retain attorneys,
31 independent actuaries, independent certified public
32 accountants, and other professionals and specialists as
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1 examiners, the cost of which shall be borne by the pension
2 fund that is the subject of the examination.
3 (b) Beginning July 1, 1999, the Division shall examine
4 or investigate each pension fund established under Article 3
5 or Article 4 of this Code at least once every 2 years.
6 Each examination shall include the following:
7 (1) an audit of financial transactions, investment
8 policies, and procedures;
9 (2) an examination of books, records, documents,
10 files, and other pertinent memoranda relating to
11 financial, statistical, and administrative operations;
12 (3) a review of policies and procedures maintained
13 for the administration and operation of the pension fund;
14 (4) a determination of whether or not full effect
15 is being given to the statutory provisions governing the
16 operation of the pension fund;
17 (5) a determination of whether or not the
18 administrative policies in force are in accord with the
19 purposes of the statutory provisions and effectively
20 protect and preserve the rights and equities of the
21 participants; and
22 (6) a determination of whether or not proper
23 financial and statistical records have been established
24 and adequate documentary evidence is recorded and
25 maintained in support of the several types of annuity and
26 benefit payments being made.
27 In addition, the Division may conduct investigations,
28 which shall be identified as such and which may include one
29 or more of the items listed in this subsection.
30 A copy of the report of examination or investigation as
31 prepared by the Division shall be submitted to the secretary
32 of the board of trustees of the pension fund examined or
33 investigated. The Director, upon request, shall grant a
34 hearing to the officers or trustees of the pension fund or
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1 their duly appointed representatives, upon any facts
2 contained in the report of examination. The hearing shall be
3 conducted before filing the report or making public any
4 information contained in the report. The Director may
5 withhold the report from public inspection for up to 60 days
6 following the hearing.
7 (40 ILCS 5/1A-105 new)
8 Sec. 1A-105. Examination and subpoena of records and
9 witnesses. The Director may administer oaths and
10 affirmations and summon and compel the attendance before him
11 or her and examine under oath any officer, trustee, agent,
12 actuary, attorney, or employee connected either directly or
13 indirectly with any pension fund, or any other person having
14 information regarding the condition, affairs, management,
15 administration, or methods of conducting a pension fund. The
16 Director may require any person having possession of any
17 record, book, paper, contract, or other document pertaining
18 to a pension fund to surrender it or to otherwise afford the
19 Director access to it and for failure so to do the Director
20 may attach the same.
21 Should any person fail to obey the summons of the
22 Director or refuse to surrender to him or her or afford him
23 or her access to any such record, book, paper, contract, or
24 other document, the Director may apply to the circuit court
25 of the county in which the principal office of the pension
26 fund involved is located, and the court, if it finds that the
27 Director has not exceeded his or her authority in the matter,
28 may, by order duly entered, require the attendance of
29 witnesses and the production of all relevant documents
30 required by the Director in carrying out his or her
31 responsibilities under this Code. Upon refusal or neglect to
32 obey the order of the court, the court may compel obedience
33 by proceedings for contempt of court.
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1 (40 ILCS 5/1A-106 new)
2 Sec. 1A-106. Advisory services. The Division shall
3 render advisory services to the pension funds on all matters
4 pertaining to their operations and shall recommend any
5 corrective or clarifying legislation that it may deem
6 necessary. These recommendations shall be made in the report
7 of examination of the particular pension fund and in the
8 biennial report to the General Assembly under Section 1A-108.
9 The recommendations may embrace all substantive legislative
10 and administrative policies, including, but not limited to,
11 matters dealing with the payment of annuities and benefits,
12 the investment of funds, and the condition of the books,
13 records, and accounts of the pension fund.
14 (40 ILCS 5/1A-107 new)
15 Sec. 1A-107. Automation of services. The Division shall
16 automate its operations, services, and communications to the
17 fullest practical extent. This automation shall include, but
18 need not be limited to, the acquisition, use, and maintenance
19 of electronic data processing technology to (i) automate
20 Division operations as necessary to carry out its duties and
21 responsibilities under this Code, (ii) provide by FY 2000
22 electronic exchange of information between the Division and
23 pension funds subject to this Code, (iii) provide to pension
24 funds and the general public and receive from pension funds
25 and the general public data on computer processible media,
26 and (iv) control access to information when necessary to
27 protect the confidentiality of persons identified in the
28 information.
29 The Director is authorized to enter into contracts for
30 the purposes set forth in this Section. The Director is
31 further authorized to contract with public pension funds and
32 other entities, and to receive payment under those contracts.
33 All money collected under this Section shall be deposited as
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1 provided in Section 1A-112.
2 (40 ILCS 5/1A-108 new)
3 Sec. 1A-108. Report to the Governor and General Assembly.
4 On or before October 1 following the convening of a regular
5 session of the General Assembly, the Division shall submit a
6 report to the Governor and General Assembly setting forth the
7 latest financial statements on the pension funds operating in
8 the State of Illinois, a summary of the current provisions
9 underlying these funds, and a report on any changes that have
10 occurred in these provisions since the date of the last such
11 report submitted by the Division.
12 The report shall also include the results of examinations
13 made by the Division of any pension fund and any specific
14 recommendations for legislative and administrative correction
15 that the Division deems necessary. The report may embody
16 general recommendations concerning desirable changes in any
17 existing pension, annuity, or retirement laws designed to
18 standardize and establish uniformity in their basic
19 provisions and to bring about an improvement in the financial
20 condition of the pension funds. The purposes of these
21 recommendations and the objectives sought shall be clearly
22 expressed in the report.
23 The requirement for reporting to the General Assembly
24 shall be satisfied by filing copies of the report with the
25 Speaker, the Minority Leader, and the Clerk of the House of
26 Representatives, the President, the Minority Leader, and the
27 Secretary of the Senate, and the Legislative Research Unit,
28 as required by Section 3.1 of the General Assembly
29 Organization Act, and filing additional copies with the State
30 Government Report Distribution Center for the General
31 Assembly as required under paragraph (t) of Section 7 of the
32 State Library Act.
33 Upon request, the Division shall distribute additional
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1 copies of the report at no charge to the secretary of each
2 pension fund established under Article 3 or 4, the treasurer
3 or fiscal officer of each municipality with an established
4 police or firefighter pension fund, the executive director of
5 every other pension fund established under this Code, and to
6 public libraries, State agencies, and police, firefighter,
7 and municipal organizations active in the public pension
8 area.
9 (40 ILCS 5/1A-109 new)
10 Sec. 1A-109. Annual statements by pension funds. Each
11 pension fund shall furnish to the Division an annual
12 statement in a format prepared by the Division. The Division
13 shall design the form and prescribe the content of the annual
14 statement and, at least 60 days prior to the filing date,
15 shall furnish the form to each pension fund for completion.
16 The annual statement shall be prepared by each fund, properly
17 certified by its officers, and submitted to the Division
18 within 6 months following the close of the fiscal year of the
19 pension fund.
20 The annual statement shall include, but need not be
21 limited to, the following:
22 (1) a financial balance sheet as of the close of
23 the fiscal year;
24 (2) a statement of income and expenditures;
25 (3) an actuarial balance sheet;
26 (4) statistical data reflecting age, service, and
27 salary characteristics concerning all participants;
28 (5) special facts concerning disability or other
29 claims;
30 (6) details on investment transactions that
31 occurred during the fiscal year covered by the report;
32 (7) details on administrative expenses; and
33 (8) such other supporting data and schedules as in
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1 the judgement of the Division may be necessary for a
2 proper appraisal of the financial condition of the
3 pension fund and the results of its operations. The
4 annual statement shall also specify the actuarial and
5 interest tables used in the operation of the pension
6 fund.
7 A pension fund that fails to file its annual statement
8 within the time prescribed under this Section is subject to
9 the penalty provisions of Section 1A-113.
10 (40 ILCS 5/1A-110 new)
11 Sec. 1A-110. Actuarial statements by pension funds
12 established under Articles other than 3 or 4.
13 (a) Each pension fund established under an Article of
14 this Code other than Article 3 or 4 shall include as part of
15 its annual statement a complete actuarial statement
16 applicable to the plan year.
17 The actuarial statement shall be filed with the Division
18 within 9 months after the close of the fiscal year of the
19 pension fund. Any pension fund that fails to file within
20 that time is subject to the penalty provisions of Section
21 1A-113.
22 The board of trustees of each pension fund subject to
23 this Section, on behalf of all its participants, shall engage
24 an enrolled actuary who shall be responsible for the
25 preparation of the materials comprising the actuarial
26 statement. The enrolled actuary shall utilize such
27 assumptions and methods as are necessary for the contents of
28 the matters reported in the actuarial statement to be
29 reasonably related to the experience of the plan and to
30 reasonable expectations, and to represent in the aggregate
31 the actuary's best estimate of anticipated experience under
32 the plan.
33 The actuarial statement shall include a description of
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1 the actuarial assumptions and methods used to determine the
2 actuarial values in the statement and shall disclose the
3 impact of significant changes in the actuarial assumptions
4 and methods, plan provisions, and other pertinent factors on
5 the actuarial position of the plan.
6 The actuarial statement shall include a statement by the
7 enrolled actuary that to the best of his or her knowledge the
8 actuarial statement is complete and accurate and has been
9 prepared in accordance with generally accepted actuarial
10 principles and practice.
11 For the purposes of this Section, "enrolled actuary"
12 means an actuary who (1) is a member of the Society of
13 Actuaries or the American Academy of Actuaries and (2) either
14 is enrolled under Subtitle C of Title III of the Employee
15 Retirement Income Security Act of 1974 or was engaged in
16 providing actuarial services to a public retirement plan in
17 Illinois on July 1, 1983.
18 (b) The actuarial statement referred to in subsection
19 (a) shall include all of the following:
20 (1) The dates of the plan year and the date of the
21 actuarial valuation applicable to the plan year for which
22 the actuarial statement is filed.
23 (2) The amount of (i) the contributions made by the
24 participants, and (ii) all other contributions, including
25 those made by the employer or employers.
26 (3) The total estimated amount of the covered
27 compensation with respect to active participants for the
28 plan year for which the statement is filed.
29 (4) The number of (i) active participants, (ii)
30 terminated participants currently eligible for deferred
31 vested pension benefits or the return of contributions
32 made by those participants, and (iii) all other
33 participants and beneficiaries included in the actuarial
34 valuation.
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1 (5) The following values as of the date of the
2 actuarial valuation applicable to the plan year for which
3 the statement is filed:
4 (i) The current value of assets accumulated in
5 the plan.
6 (ii) The unfunded accrued liability. The
7 major factors that have resulted in the change in
8 the unfunded accrued liability from the previous
9 year shall be identified. Effects that are
10 individually significant shall be separately
11 identified. As a minimum, the effect of the
12 following shall be shown: plan amendments; changes
13 in actuarial assumptions; experience less (or more)
14 favorable than that assumed; and contributions less
15 (or more) than the normal cost plus interest on the
16 unfunded accrued liability.
17 (iii) The amount of accumulated contributions
18 for active participants (including interest, if
19 any).
20 (iv) The actuarial present value of credited
21 projected benefits for vested participants currently
22 receiving benefits, other vested participants, and
23 non-vested participants.
24 (6) The actuarial value of assets.
25 (7) Any other information that is necessary to
26 fully and fairly disclose the actuarial position of the
27 plan and any other information the enrolled actuary may
28 present.
29 (8) Any other information regarding the plan that
30 the Division may by rule request.
31 (40 ILCS 5/1A-111 new)
32 Sec. 1A-111. Actuarial statements by pension funds
33 established under Article 3 or 4.
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1 (a) Each pension fund established under Article 3 or 4
2 of this Code shall include as part of its annual statement a
3 complete actuarial statement applicable to the plan year.
4 If the actuarial statement is prepared by a person other
5 than the Department, it shall be filed with the Division
6 within 9 months after the close of the fiscal year of the
7 pension fund. Any pension fund that fails to file within
8 that time shall be subject to the penalty provisions of
9 Section 1A-113. The statement shall be prepared by or under
10 the supervision of a qualified actuary, signed by the
11 qualified actuary, and contain such information as the
12 Division may by rule require.
13 (b) For the purposes of this Section, "qualified
14 actuary" means (i) a member of the American Academy of
15 Actuaries, or (ii) an individual who has demonstrated to the
16 satisfaction of the Director that he or she has the
17 educational background necessary for the practice of
18 actuarial science and has at least 7 years of actuarial
19 experience.
20 (40 ILCS 5/1A-112 new)
21 Sec. 1A-112. Fees.
22 (a) Every pension fund that is required to file an
23 annual statement under Section 1A-109 shall pay to the
24 Department an annual compliance fee. In the case of a
25 pension fund under Article 3 or 4 of this Code, the annual
26 compliance fee shall be 0.007% (0.7 basis points) of the
27 total assets of the pension fund, as reported in the most
28 current annual statement of the fund, but not more than
29 $10,000. In the case of all other pension funds and
30 retirement systems, the annual compliance fee shall be
31 $6,000.
32 (b) The annual compliance fee shall be due on June 30
33 for the following State fiscal year, except that the fee
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1 payable in 1997 for fiscal year 1998 shall be due no earlier
2 than 30 days following the effective date of this amendatory
3 Act of 1997.
4 (c) Any information obtained by the Division that is
5 available to the public under the Freedom of Information Act
6 and is either compiled in published form or maintained on a
7 computer processible medium shall be furnished upon the
8 written request of any applicant and the payment of a
9 reasonable information services fee established by the
10 Director, sufficient to cover the total cost to the Division
11 of compiling, processing, maintaining, and generating the
12 information. The information may be furnished by means of
13 published copy or on a computer processed or computer
14 processible medium.
15 No fee may be charged to any person for information that
16 the Division is required by law to furnish to that person.
17 (d) Except as otherwise provided in this Section, all
18 fees and penalties collected by the Department under this
19 Code shall be deposited into the Public Pension Regulation
20 Fund.
21 (e) Fees collected under subsection (c) of this Section
22 and money collected under Section 1A-107 shall be deposited
23 into the Department's Statistical Services Revolving Fund and
24 credited to the account of the Public Pension Division. This
25 income shall be used exclusively for the purposes set forth
26 in Section 1A-107. Notwithstanding the provisions of Section
27 408.2 of the Illinois Insurance Code, no surplus funds
28 remaining in this account shall be deposited in the Insurance
29 Financial Regulation Fund. All money in this account that
30 the Director certifies is not needed for the purposes set
31 forth in Section 1A-107 of this Code shall be transferred to
32 the Public Pension Regulation Fund.
33 (f) Nothing in this Code prohibits the General Assembly
34 from appropriating funds from the General Revenue Fund to the
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1 Department for the purpose of administering or enforcing this
2 Code.
3 (40 ILCS 5/1A-113 new)
4 Sec. 1A-113. Penalties.
5 (a) A pension fund that fails, without just cause, to
6 file its annual statement within the time prescribed under
7 Section 1A-109 shall pay to the Department a penalty to be
8 determined by the Department, which shall not exceed $100 for
9 each day's delay.
10 (b) A pension fund that fails, without just cause, to
11 file its actuarial statement within the time prescribed under
12 Section 1A-110 or 1A-111 shall pay to the Department a
13 penalty to be determined by the Department, which shall not
14 exceed $100 for each day's delay.
15 (c) A pension fund that fails to pay a fee within the
16 time prescribed under Section 1A-112 shall pay to the
17 Department a penalty of 5% of the amount of the fee for each
18 month or part of a month that the fee is late. The entire
19 penalty shall not exceed 25% of the fee due.
20 (d) This subsection applies to any governmental unit, as
21 defined in Section 1A-102, that is subject to any law
22 establishing a pension fund or retirement system for the
23 benefit of employees of the governmental unit.
24 Whenever the Division determines by examination,
25 investigation, or in any other manner that the governing body
26 or any elected or appointed officer or official of a
27 governmental unit has failed to comply with any provision of
28 that law:
29 (1) The Director shall notify in writing the
30 governing body, officer, or official of the specific
31 provision or provisions of the law with which the person
32 has failed to comply.
33 (2) Upon receipt of the notice, the person notified
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1 shall take immediate steps to comply with the provisions
2 of law specified in the notice.
3 (3) If the person notified fails to comply within a
4 reasonable time after receiving the notice, the Director
5 may hold a hearing at which the person notified may show
6 cause for noncompliance with the law.
7 (4) If upon hearing the Director determines that
8 good and sufficient cause for noncompliance has not been
9 shown, the Director may order the person to submit
10 evidence of compliance within a specified period of not
11 less than 30 days.
12 (5) If evidence of compliance has not been
13 submitted to the Director within the period of time
14 prescribed in the order and no administrative appeal from
15 the order has been initiated, the Director may assess a
16 civil penalty of up to $2,000 against the governing body,
17 officer, or official for each noncompliance with an order
18 of the Director.
19 The Director shall develop by rule, with as much
20 specificity as practicable, the standards and criteria to be
21 used in assessing penalties and their amounts. The standards
22 and criteria shall include, but need not be limited to,
23 consideration of evidence of efforts made in good faith to
24 comply with applicable legal requirements. This rulemaking
25 is subject to the provisions of the Illinois Administrative
26 Procedure Act.
27 If a penalty is not paid within 30 days of the date of
28 assessment, the Director without further notice shall report
29 the act of noncompliance to the Attorney General of this
30 State. It shall be the duty of the Attorney General or, if
31 the Attorney General so designates, the State's Attorney of
32 the county in which the governmental unit is located to apply
33 promptly by complaint on relation of the Director of
34 Insurance in the name of the people of the State of Illinois,
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1 as plaintiff, to the circuit court of the county in which the
2 governmental unit is located for enforcement of the penalty
3 prescribed in this subsection or for such additional relief
4 as the nature of the case and the interest of the employees
5 of the governmental unit or the public may require.
6 (e) Whoever knowingly makes a false certificate, entry,
7 or memorandum upon any of the books or papers pertaining to
8 any pension fund or upon any statement, report, or exhibit
9 filed or offered for file with the Division or the Director
10 of Insurance in the course of any examination, inquiry, or
11 investigation, with intent to deceive the Director, the
12 Division, or any of its employees is guilty of a Class A
13 misdemeanor.
14 (40 ILCS 5/3-102) (from Ch. 108 1/2, par. 3-102)
15 Sec. 3-102. Terms defined. The terms used in this
16 Article have the meanings ascribed to them in Sections 3-103
17 through 3-108.3 3-108.1, except when the context otherwise
18 requires.
19 (Source: P.A. 83-1440.)
20 (40 ILCS 5/3-108.2 new)
21 Sec. 3-108.2. Participant. "Participant": A police
22 officer or deferred pensioner of a pension fund, or a
23 beneficiary of the pension fund.
24 (40 ILCS 5/3-108.3 new)
25 Sec. 3-108.3. Beneficiary. "Beneficiary": A person
26 receiving benefits from a pension fund, including, but not
27 limited to, retired pensioners, disabled pensioners, their
28 surviving spouses, minor children, disabled children, and
29 dependent parents.
30 (40 ILCS 5/3-132) (from Ch. 108 1/2, par. 3-132)
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1 Sec. 3-132. To control and manage the Pension Fund. In
2 accordance with the applicable provisions of Articles 1 and
3 1A and this Article, to control and manage, exclusively, the
4 following:
5 (1) the pension fund,
6 (2) investment expenditures and income, including
7 interest dividends, capital gains and other distributions
8 on the investments, and
9 (3) all money donated, paid, or assessed, or
10 provided by law for the pensioning of disabled and
11 retired police officers, their surviving spouses, minor
12 children, and dependent parents.
13 All money received or collected shall be credited by the
14 treasurer of the municipality such moneys shall be placed by
15 the treasurer of the municipality to the account credit of
16 the pension fund, and held by the treasurer of the
17 municipality subject to the order and control of the board.
18 The treasurer of the municipality shall maintain a record of
19 all money received, transferred, and held for the account of
20 the board.
21 (Source: P.A. 83-1440.)
22 (40 ILCS 5/3-135) (from Ch. 108 1/2, par. 3-135)
23 Sec. 3-135. To draw and invest funds. Beginning January
24 1, 1998, the board shall invest funds in accordance with
25 Sections 1-113.1 through 1-113.10 of this Code. To draw
26 pension funds from the treasurer of the municipality, and
27 invest any part thereof in the name of the board in: (1)
28 interest bearing bonds or tax anticipation warrants of the
29 United States, of the State of Illinois, or of any county,
30 township or municipal corporation of the State of Illinois;
31 (2) insured withdrawable capital accounts of State chartered
32 savings and loan associations; (3) insured withdrawable
33 capital accounts of federal chartered federal savings and
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1 loan associations if the withdrawable capital accounts are
2 insured by the Federal Savings and Loan Insurance
3 Corporation; (4) insured investments in credit unions if the
4 investments are insured by the National Credit Union
5 Administration; (5) savings accounts or certificates of
6 deposit of a national or State bank; (6) securities described
7 in item 5.1 of Section 1-113 of this Code, but only subject
8 to the conditions therein set forth; (7) contracts and
9 agreements supplemental thereto providing for investments in
10 the general account of a life insurance company authorized to
11 do business in Illinois; (8) separate accounts of a life
12 insurance company authorized to do business in Illinois,
13 comprised of common or preferred stocks, bonds, or money
14 market instruments; and (9) separate accounts managed by a
15 life insurance company authorized to do business in Illinois,
16 comprised of real estate or loans upon real estate secured by
17 first or second mortgages. The total investment in such
18 separate accounts shall not exceed 10% of the aggregate book
19 value of all investments owned by the fund. All securities
20 shall be deposited with the treasurer of the municipality,
21 and be subject to the order of the board. Interest on the
22 investments shall be credited to the pension fund.
23 No bank or savings and loan association shall receive
24 investment funds as permitted by this Section, unless it has
25 complied with the requirements established pursuant to
26 Section 6 of "An Act relating to certain investments of
27 public funds by public agencies", approved July 23, 1943, as
28 now or hereafter amended. The limitations set forth in such
29 Section 6 shall be applicable only at the time of investment
30 and shall not require the liquidation of any investment at
31 any time.
32 (Source: P.A. 84-1472.)
33 (40 ILCS 5/3-143) (from Ch. 108 1/2, par. 3-143)
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1 Sec. 3-143. Report by board. The board shall report
2 annually to the city council or board of trustees of the
3 municipality on the condition of the pension fund at the end
4 of its most recently completed fiscal year. The report shall
5 be made prior to the council or board meeting held for the
6 levying of taxes for the year for which the report is made.
7 The board shall certify:
8 (1) the assets of the fund in its custody at the
9 end of the fiscal year such time;
10 (2) the estimated receipts during the next
11 succeeding fiscal calendar year from deductions from the
12 salaries of police officers, and from all other sources;
13 and
14 (3) the estimated amount required during the next
15 succeeding fiscal said calendar year to (a) pay all
16 pensions and other obligations provided in this Article,
17 and (b) to meet the annual requirements of the fund as
18 provided in Sections Section 3-125 and 3-127; and
19 (4) the total net income received from investment
20 of assets, compared to such income received during the
21 preceding fiscal year.
22 Prior to making its report, the board shall have the
23 assets of the fund and their current market value verified by
24 an independent certified public accountant of its choice.
25 (Source: P.A. 83-1440.)
26 (40 ILCS 5/4-105c new)
27 Sec. 4-105c. Participant. "Participant": A firefighter
28 or deferred pensioner of a pension fund, or a beneficiary of
29 the pension fund.
30 (40 ILCS 5/4-105d new)
31 Sec. 4-105d. Beneficiary. "Beneficiary": A person
32 receiving benefits from a pension fund, including, but not
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1 limited to, retired pensioners, disabled pensioners, their
2 surviving spouses, minor children, disabled children, and
3 dependent parents.
4 (40 ILCS 5/4-123) (from Ch. 108 1/2, par. 4-123)
5 Sec. 4-123. To control and manage the Pension Fund. In
6 accordance with the applicable provisions of Articles 1 and
7 1A and this Article, to control and manage, exclusively, the
8 following:
9 (1) the pension fund,
10 (2) investment expenditures and income, including
11 interest dividends, capital gains, and other
12 distributions on the investments, and
13 (3) all money donated, paid, assessed, or provided
14 by law for the pensioning of disabled and retired
15 firefighters, their surviving spouses, minor children,
16 and dependent parents.
17 All money received or collected shall be credited by the
18 treasurer of the municipality to the account of the pension
19 fund and held by the treasurer of the municipality subject to
20 the order and control of the board. The treasurer of the
21 municipality shall maintain a record of all money received,
22 transferred, and held for the account of the board.
23 (Source: P.A. 83-1440.)
24 (40 ILCS 5/4-128) (from Ch. 108 1/2, par. 4-128)
25 Sec. 4-128. To invest funds. Beginning January 1, 1998,
26 the board shall invest funds in accordance with Sections
27 1-113.1 through 1-113.10 of this Code. To invest the money
28 of the pension fund only in: (1) interest bearing bonds of
29 the United States, or of the State of Illinois, or of any
30 county, city, township, village, incorporated town, municipal
31 corporation or school district in this State; (2) tax
32 anticipation warrants issued by any city, township, village,
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1 incorporated town, or fire protection district included
2 within this Article; (3) notes, bonds, debentures or other
3 similar obligations which are guaranteed as to principal and
4 interest by the United States; (4) insured withdrawable
5 capital accounts of State chartered savings and loan
6 associations; (5) insured withdrawable capital accounts of
7 federal chartered federal savings and loan associations if
8 the withdrawable capital accounts are insured by the Federal
9 Savings and Loan Insurance Corporation; (6) insured
10 investments in credit unions if the investments are insured
11 by the National Credit Union Administration; and (7) savings
12 accounts or certificates of deposit of a national or State
13 bank; (8) securities described in item 5.1 of Section 1-113
14 of this Code, but only subject to the conditions therein set
15 forth; (9) contracts and agreements supplemental thereto
16 providing for investments in the general account of a life
17 insurance company authorized to do business in Illinois; (10)
18 separate accounts of a life insurance company authorized to
19 do business in Illinois, comprised of common or preferred
20 stocks, bonds, or money market instruments; and (11) separate
21 accounts managed by a life insurance company authorized to do
22 business in Illinois, comprised of real estate or loans upon
23 real estate secured by first or second mortgages. The total
24 investment in such separate accounts shall not exceed 10% of
25 the aggregate book value of all investments owned by the
26 fund.
27 Bonds purchased hereunder shall be registered in the name
28 of the board or held under custodial agreement at a bank.
29 No bank or savings and loan association shall receive
30 investment funds as permitted by this Section, unless it has
31 complied with the requirements established pursuant to
32 Section 6 of "An Act relating to certain investments of
33 public funds by public agencies", approved July 23, 1943, as
34 now or hereafter amended. The limitations set forth in such
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1 Section 6 shall be applicable only at the time of investment
2 and shall not require the liquidation of any investment at
3 any time.
4 (Source: P.A. 84-1472.)
5 (40 ILCS 5/4-134) (from Ch. 108 1/2, par. 4-134)
6 Sec. 4-134. Report for tax levy. The board shall report
7 to the city council or board of trustees of the municipality
8 on the condition of the pension fund at the end of its most
9 recently completed fiscal year. The report shall be made
10 prior to the council or board meeting held for appropriating
11 and levying taxes for the year for which the report is made.
12 The board in the report shall certify:
13 (1) the assets of the fund and their current market
14 value in its custody at such time;
15 (2) the estimated receipts during the next
16 succeeding fiscal year (from January 1 to December 31)
17 from deductions from the salaries or wages of
18 firefighters firemen, and from all other sources;
19 (3) the estimated amount necessary during the
20 fiscal year such period to meet the annual actuarial
21 requirements of the pension fund as provided in Sections
22 Section 4-118 and 4-120; and
23 (4) the total net income received from investment
24 of assets, compared to such income received during the
25 preceding fiscal year.
26 Prior to making its report, the board shall have the
27 assets of the fund and and their current market value
28 verified by an independent certified public accountant of its
29 choice.
30 (Source: P.A. 85-293.)"; and
31 on page 2, below line 23, by inserting the following:
32 "(40 ILCS 5/Art. 22, Div. 5 rep.)
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1 Section 10. Division 5 of Article 22 of the Illinois
2 Pension Code is repealed.
3 Section 15. The Illinois Securities Law of 1953 is
4 amended by changing Section 8 as follows:
5 (815 ILCS 5/8) (from Ch. 121 1/2, par. 137.8)
6 Sec. 8. Registration of dealers, salespersons and
7 investment advisers.
8 A. Except as otherwise provided in this subsection A,
9 every dealer, salesperson and investment adviser shall be
10 registered as such with the Secretary of State. No dealer or
11 salesperson need be registered as such when offering or
12 selling securities in transactions believed in good faith to
13 be exempted by subsection A, B, C, E, G, H, I, J, K, M, O, P,
14 Q, R or S of Section 4 of this Act, provided that such dealer
15 or salesperson is not regularly engaged in the business of
16 offering or selling securities in reliance upon the exemption
17 set forth in subsection G or M of Section 4 of this Act. No
18 dealer, issuer or controlling person shall employ a
19 salesperson unless such salesperson is registered as such
20 with the Secretary of State or is employed for the purpose of
21 offering or selling securities solely in transactions
22 believed in good faith to be exempted by subsection A, B, C,
23 D, E, G, H, I, J, K, L, M, O, P, Q, R or S of Section 4 of
24 this Act; provided that such salesperson need not be
25 registered when engaged in the offer or sale of securities in
26 respect of which he or she has beneficial ownership and is a
27 controlling person. The Secretary of State may, by rule,
28 regulation or order and subject to such terms, conditions as
29 fees as may be prescribed in such rule, regulation or order,
30 exempt from the registration requirements of this Section 8
31 any investment adviser, if the Secretary of State shall find
32 that such registration is not necessary in the public
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1 interest by reason of the small number of clients or
2 otherwise limited character of operation of such investment
3 adviser.
4 B. An application for registration as a dealer,
5 executed, verified, or authenticated by or on behalf of the
6 applicant, shall be filed with the Secretary of State, in
7 such form as the Secretary of State may by rule, regulation
8 or order prescribe, setting forth or accompanied by:
9 (1) The name and address of the applicant, the
10 location of its principal business office and all branch
11 offices, if any, and the date of its organization;
12 (2) A statement of any other Federal or state
13 licenses or registrations which have been granted the
14 applicant and whether any such licenses or registrations
15 have ever been refused, cancelled, suspended, revoked or
16 withdrawn;
17 (3) The assets and all liabilities, including
18 contingent liabilities of the applicant, as of a date not
19 more than 60 days prior to the filing of the application;
20 (4) (a) A brief description of any civil or
21 criminal proceeding of which fraud is an essential
22 element pending against the applicant and whether the
23 applicant has ever been convicted of a felony, or of any
24 misdemeanor of which fraud is an essential element;
25 (b) A list setting forth the name, residence and
26 business address and a 10 year occupational statement of
27 each principal of the applicant and a statement
28 describing briefly any civil or criminal proceedings of
29 which fraud is an essential element pending against any
30 such principal and the facts concerning any conviction of
31 any such principal of a felony, or of any misdemeanor of
32 which fraud is an essential element;
33 (5) If the applicant is a corporation: a copy of
34 its articles of incorporation in their most current form,
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1 unless they are already on file in the office of the
2 Secretary of State; a list of its officers and directors
3 setting forth the residence and business address of each;
4 a 10-year occupational statement of each such officer or
5 director; and a statement describing briefly any civil or
6 criminal proceedings of which fraud is an essential
7 element pending against each such officer or director and
8 the facts concerning any conviction of any officer or
9 director of a felony, or of any misdemeanor of which
10 fraud is an essential element;
11 (6) If the applicant is a sole proprietorship, a
12 partnership, limited liability company, an unincorporated
13 association or any similar form of business organization:
14 the name, residence and business address of the
15 proprietor or of each partner, member, officer, director,
16 trustee or manager; the limitations, if any, of the
17 liability of each such individual; a 10-year occupational
18 statement of each such individual; a statement describing
19 briefly any civil or criminal proceedings of which fraud
20 is an essential element pending against each such
21 individual and the facts concerning any conviction of any
22 such individual of a felony, or of any misdemeanor of
23 which fraud is an essential element;
24 (7) Such additional information as the Secretary of
25 State may by rule or regulation prescribe as necessary to
26 determine the applicant's financial responsibility,
27 business repute and qualification to act as a dealer.
28 (8) (a) No applicant shall be registered or
29 re-registered as a dealer under this Section unless and
30 until each principal of the dealer has passed an
31 examination conducted by the Secretary of State or a
32 self-regulatory organization of securities dealers or
33 similar person, which examination has been designated by
34 the Secretary of State by rule, regulation or order to
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1 be satisfactory for purposes of determining whether the
2 applicant has sufficient knowledge of the securities
3 business and laws relating thereto to act as a registered
4 dealer. Any dealer who was registered on September 30,
5 1963, and has continued to be so registered; and any
6 principal of any registered dealer, who was acting in
7 such capacity on and continuously since September 30,
8 1963; and any individual who has previously passed a
9 securities dealer examination administered by the
10 Secretary of State or any examination designated by the
11 Secretary of State to be satisfactory for purposes of
12 determining whether the applicant has sufficient
13 knowledge of the securities business and laws relating
14 thereto to act as a registered dealer by rule, regulation
15 or order, shall not be required to pass an examination in
16 order to continue to act in such capacity. The Secretary
17 of State may by order waive the examination requirement
18 for any principal of an applicant for registration under
19 this subsection B who has had such experience or
20 education relating to the securities business as may be
21 determined by the Secretary of State to be the equivalent
22 of such examination. Any request for such a waiver shall
23 be filed with the Secretary of State in such form as may
24 be prescribed by rule or regulation.
25 (b) Unless an applicant is a member of the body
26 corporate known as the Securities Investor Protection
27 Corporation established pursuant to the Act of Congress
28 of the United States known as the Securities Investor
29 Protection Act of 1970, as amended, or a member of an
30 association of dealers registered as a national
31 securities association pursuant to Section 15A of the
32 Federal 1934 Act, an applicant shall not be registered or
33 re-registered unless and until there is filed with the
34 Secretary of State evidence that such applicant has in
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1 effect insurance or other equivalent protection for each
2 client's cash or securities held by such applicant, and
3 an undertaking that such applicant will continually
4 maintain such insurance or other protection during the
5 period of registration or re-registration. Such
6 insurance or other protection shall be in a form and
7 amount reasonably prescribed by the Secretary of State by
8 rule or regulation.
9 (9) The application for the registration of a
10 dealer shall be accompanied by a filing fee and a fee
11 for each branch office in this State, in each case in the
12 amount established pursuant to Section 11a of this Act,
13 which fees shall not be returnable in any event.
14 (10) The Secretary of State shall notify the dealer
15 by written notice (which may be by electronic,
16 telegraphic, or facsimile transmission) of the
17 effectiveness of the registration as a dealer in this
18 State.
19 (11) Any change which renders no longer accurate
20 any information contained in any application for
21 registration or re-registration of a dealer shall be
22 reported to the Secretary of State within 10 business
23 days after the occurrence of such change; but in respect
24 to assets and liabilities only materially adverse changes
25 need be reported.
26 C. Any registered dealer, issuer, or controlling person
27 desiring to register a salesperson shall file an application
28 with the Secretary of State, in such form as the Secretary of
29 State may by rule or regulation prescribe, which the
30 salesperson is required by this Section to provide to the
31 dealer, issuer, or controlling person, executed, verified, or
32 authenticated by the salesperson setting forth or accompanied
33 by:
34 (1) The name, residence and business address of the
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1 salesperson;
2 (2) Whether any federal or State license or
3 registration as dealer or salesperson has ever been
4 refused the salesperson or cancelled, suspended,
5 revoked, or withdrawn;
6 (3) The nature of employment with, and names and
7 addresses of, employers of the salesperson for the 10
8 years immediately preceding the date of application;
9 (4) A brief description of any civil or criminal
10 proceedings of which fraud is an essential element
11 pending against the salesperson, and whether the
12 salesperson has ever been convicted of a felony, or of
13 any misdemeanor of which fraud is an essential element;
14 (5) Such additional information as the Secretary of
15 State may by rule, regulation or order prescribe as
16 necessary to determine the salesperson's business repute
17 and qualification to act as a salesperson; and
18 (6) No individual shall be registered or
19 re-registered as a salesperson under this Section unless
20 and until such individual has passed an examination
21 conducted by the Secretary of State or a self-regulatory
22 organization of securities dealers or similar person,
23 which examination has been designated by the Secretary of
24 State by rule, regulation or order to be satisfactory for
25 purposes of determining whether the applicant has
26 sufficient knowledge of the securities business and laws
27 relating thereto to act as a registered salesperson.
28 Any salesperson who was registered prior to
29 September 30, 1963, and has continued to be so
30 registered, and any individual who has passed a
31 securities salesperson examination administered by the
32 Secretary of State or an examination designated by the
33 Secretary of State by rule, regulation or order to be
34 satisfactory for purposes of determining whether the
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1 applicant has sufficient knowledge of the securities
2 business and laws relating thereto to act as a registered
3 salesperson, shall not be required to pass an examination
4 in order to continue to act as a salesperson. The
5 Secretary of State may by order waive the examination
6 requirement for any applicant for registration under this
7 subsection C who has had such experience or education
8 relating to the securities business as may be determined
9 by the Secretary of State to be the equivalent of such
10 examination. Any request for such a waiver shall be
11 filed with the Secretary of State in such form as may be
12 prescribed by rule, regulation or order.
13 (7) The application for registration of a
14 salesperson shall be accompanied by a filing fee and a
15 Securities Audit and Enforcement Fund fee, each in the
16 amount established pursuant to Section 11a of this Act,
17 which shall not be returnable in any event.
18 (8) Any change which renders no longer accurate any
19 information contained in any application for registration
20 or re-registration as a salesperson shall be reported to
21 the Secretary of State within 10 business days after the
22 occurrence of such change. If the activities are
23 terminated which rendered an individual a salesperson for
24 the dealer, issuer or controlling person, the dealer,
25 issuer or controlling person, as the case may be, shall
26 notify the Secretary of State, in writing, within 30 days
27 of the salesperson's cessation of activities, using the
28 appropriate termination notice form.
29 (9) A registered salesperson may transfer his or
30 her registration under this Section 8 for the unexpired
31 term thereof from one registered dealer to another by the
32 giving of notice of the transfer by the new registered
33 dealer to the Secretary of State in such form and subject
34 to such conditions as the Secretary of State shall by
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1 rule or regulation prescribe. The new registered dealer
2 shall promptly file an application for registration of
3 such salesperson as provided in this subsection C,
4 accompanied by the filing fee prescribed by paragraph (7)
5 of this subsection C.
6 D. An application for registration as an investment
7 adviser, executed, verified, or authenticated by or on behalf
8 of the applicant, shall be filed with the Secretary of State,
9 in such form as the Secretary of State may by rule or
10 regulation prescribe, setting forth or accompanied by:
11 (1) The name and form of organization under which
12 the 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,
18 if the investment adviser is an individual, of the
19 individual; and the number of the adviser's employees who
20 perform investment advisory functions;
21 (2) The education, the business affiliations for
22 the past 10 years, and the present business affiliations
23 of the investment adviser and of the adviser's principal,
24 partners, officers, directors, and persons performing
25 similar functions and of any person controlling the
26 investment adviser;
27 (3) The nature of the business of the investment
28 adviser, including the manner of giving advice and
29 rendering analyses or reports;
30 (4) The nature and scope of the authority of the
31 investment adviser with respect to clients' funds and
32 accounts;
33 (5) The basis or bases upon which the investment
34 adviser is compensated;
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1 (6) Whether the investment adviser or any
2 principal, partner, officer, director, person performing
3 similar functions or person controlling the investment
4 adviser (i) within 10 years of the filing of the
5 application has been convicted of a felony, or of any
6 misdemeanor of which fraud is an essential element, or
7 (ii) is permanently or temporarily enjoined by order or
8 judgment from acting as an investment adviser,
9 underwriter, dealer, principal or salesperson, or from
10 engaging in or continuing any conduct or practice in
11 connection with any such activity or in connection with
12 the purchase or sale of any security, and in each case
13 the facts relating to the conviction, order or judgment;
14 (7) (a) A statement as to whether the investment
15 adviser is engaged or is to engage primarily in the
16 business of rendering investment supervisory services;
17 and
18 (b) A statement that the investment adviser will
19 furnish his, her, or its clients with such information as
20 the Secretary of State deems necessary in the form
21 prescribed by the Secretary of State by rule or
22 regulation;
23 (8) Such additional information as the Secretary of
24 State may, by rule, regulation or order prescribe as
25 necessary to determine the applicant's financial
26 responsibility, business repute and qualification to act
27 as an investment adviser.
28 (9) No applicant shall be registered or
29 re-registered as an investment adviser under this Section
30 unless and until each principal of the applicant who is
31 actively engaged in the conduct and management of the
32 applicant's advisory business in this State has passed an
33 examination or completed an educational program conducted
34 by the Secretary of State or an association of investment
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1 advisers or similar person, which examination or
2 educational program has been designated by the Secretary
3 of State by rule, regulation or order to be satisfactory
4 for purposes of determining whether the applicant has
5 sufficient knowledge of the securities business and laws
6 relating thereto to conduct the business of a registered
7 investment adviser.
8 Any person who was a registered investment adviser
9 prior to September 30, 1963, and has continued to be so
10 registered, and any individual who has passed an
11 investment adviser examination administered by the
12 Secretary of State, or passed an examination or completed
13 an educational program designated by the Secretary of
14 State by rule, regulation or order to be satisfactory for
15 purposes of determining whether the applicant has
16 sufficient knowledge of the securities business and laws
17 relating thereto to conduct the business of a registered
18 investment adviser, shall not be required to pass an
19 examination or complete an educational program in order
20 to continue to act as an investment adviser. The
21 Secretary of State may by order waive the examination or
22 educational program requirement for any applicant for
23 registration under this subsection D if the principal of
24 the applicant who is actively engaged in the conduct and
25 management of the applicant's advisory business in this
26 State has had such experience or education relating to
27 the securities business as may be determined by the
28 Secretary of State to be the equivalent of the
29 examination or educational program. Any request for a
30 waiver shall be filed with the Secretary of State in such
31 form as may be prescribed by rule or regulation.
32 (10) No applicant shall be registered or
33 re-registered as an investment adviser under this Section
34 8 unless (i) the application for registration or
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1 re-registration is accompanied by a list of all persons
2 acting as investment adviser representatives on behalf of
3 the adviser and (ii) a Securities Audit and Enforcement
4 Fund fee that shall not be returnable in any event is
5 paid with respect to each investment adviser
6 representative. No fee, however, shall be required under
7 this paragraph if the investment adviser representative
8 is also registered as a salesperson and the Securities
9 Audit and Enforcement Fund fee required under subsection
10 C or subsection H of this Section has been paid to the
11 Secretary of State.
12 (11) The application for registration of an
13 investment adviser shall be accompanied by a filing fee
14 and a fee for each branch office in this State, in each
15 case in the amount established pursuant to Section 11a of
16 this Act, which fees shall not be returnable in any
17 event.
18 (12) The Secretary of State shall notify the
19 investment adviser by written notice (which may be by
20 electronic, telegraphic, or facsimile transmission) of
21 the effectiveness of the registration as an investment
22 adviser in this State.
23 (13) Any change which renders no longer accurate
24 any information contained in any application for
25 registration or re-registration of an investment adviser
26 shall be reported to the Secretary of State within 10
27 business days after the occurrence of the change. In
28 respect to assets and liabilities of an investment
29 adviser that retains custody of clients' cash or
30 securities or accepts pre-payment of fees in excess of
31 $500 per client and 6 or more months in advance only
32 materially adverse changes need be reported by written
33 notice (which may be by telegraphic or facsimile
34 transmission) no later than the close of business on the
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1 second business day following the discovery thereof.
2 (14) Each application for registration as an
3 investment adviser shall become effective automatically
4 on the 45th day following the filing of the application,
5 required documents or information, and payment of the
6 required fee unless (i) the Secretary of State has
7 registered the investment adviser prior to that date or
8 (ii) an action with respect to the applicant is pending
9 under Section 11 of this Act.
10 E. (1) Subject to the provisions of subsection F of
11 Section 11 of this Act, the registration of a dealer,
12 salesperson or investment adviser may be denied, suspended or
13 revoked if the Secretary of State finds that the dealer,
14 salesperson or investment adviser or any officer, director,
15 partner, member, trustee, manager or any person who performs
16 a similar function of the dealer or investment adviser:
17 (a) Has been convicted of any felony, or of any
18 misdemeanor of which fraud is an essential element;
19 (b) Has engaged in any inequitable practice in the
20 offer or sale of securities or in any fraudulent business
21 practice;
22 (c) Has failed to account for any money or
23 property, or has failed to deliver any security, to any
24 person entitled thereto when due or within a reasonable
25 time thereafter;
26 (d) In the case of a dealer or investment adviser,
27 is insolvent;
28 (e) In the case of a dealer (i) has failed
29 reasonably to supervise the securities activities of any
30 of its salespersons and the failure has permitted or
31 facilitated a violation of Section 12 of this Act or (ii)
32 is offering or selling or has offered or sold securities
33 in this State through a salesperson other than a
34 registered salesperson, or, in the case of a salesperson,
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1 is selling or has sold securities in this State for a
2 dealer, issuer or controlling person with knowledge that
3 the dealer, issuer or controlling person has not complied
4 with the provisions of this Act;
5 (f) In the case of an investment adviser, has
6 failed reasonably to supervise the advisory activities of
7 any of its employees and the failure has permitted or
8 facilitated a violation of Section 12 of this Act;
9 (g) Has violated any of the provisions of this Act;
10 (h) Has made any material misrepresentation to the
11 Secretary of State in connection with any information
12 deemed necessary by the Secretary of State to determine a
13 dealer's or investment adviser's financial responsibility
14 or a dealer's, investment adviser's or salesperson's
15 business repute or qualifications, or has refused to
16 furnish any such information requested by the Secretary
17 of State;
18 (i) Has had a license or registration under any
19 Federal or State law regulating the offer or sale of
20 securities or commodity futures contracts, refused,
21 cancelled, suspended or withdrawn;
22 (j) Has been suspended or expelled from or refused
23 membership in or association with or limited in any
24 capacity by any self-regulatory organization registered
25 under the Federal 1934 Act or the Federal 1974 Act
26 arising from any fraudulent or deceptive act or a
27 practice in violation of any rule, regulation or standard
28 duly promulgated by the self-regulatory organization;
29 (k) Has had any order entered against it after
30 notice and opportunity for hearing by a securities agency
31 of any state, any foreign government or agency thereof,
32 the Securities and Exchange Commission, or the Federal
33 Commodities Futures Trading Commission arising from any
34 fraudulent or deceptive act or a practice in violation of
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1 any statute, rule or regulation administered or
2 promulgated by the agency or commission;
3 (l) In the case of a dealer, fails to maintain a
4 minimum net capital in an amount which the Secretary of
5 State may by rule or regulation require;
6 (m) Has conducted a continuing course of dealing of
7 such nature as to demonstrate an inability to properly
8 conduct the business of the dealer, salesperson or
9 investment adviser;
10 (n) Has had, after notice and opportunity for
11 hearing, any injunction or order entered against it or
12 license or registration refused, cancelled, suspended,
13 revoked, withdrawn or limited by any state or federal
14 body, agency or commission regulating banking, insurance,
15 finance or small loan companies, real estate or mortgage
16 brokers or companies, if the action resulted from any act
17 found by the body, agency or commission to be a
18 fraudulent or deceptive act or practice in violation of
19 any statute, rule or registration administered or
20 promulgated by the body, agency or commission;
21 (o) Has failed to file a return, or to pay the tax,
22 penalty or interest shown in a filed return, or to pay
23 any final assessment of tax, penalty or interest, as
24 required by any tax Act administered by the Illinois
25 Department of Revenue, until such time as the
26 requirements of that tax Act are satisfied;
27 (p) In the case of a natural person who is a
28 dealer, salesperson or investment adviser, has defaulted
29 on an educational loan guaranteed by the Illinois Student
30 Assistance Commission, until the natural person has
31 established a satisfactory repayment record as determined
32 by the Illinois Student Assistance Commission;
33 (q) Has failed to maintain the books and records
34 required under this Act or rules or regulations
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1 promulgated under this Act within a reasonable time after
2 receiving notice of any deficiency;
3 (r) Has refused to allow or otherwise impeded
4 designees of the Secretary of State from conducting an
5 audit, examination, inspection, or investigation provided
6 for under Section 8 or 11 of this Act;
7 (s) Has failed to maintain any minimum net capital
8 or bond requirement set forth in this Act or any rule or
9 regulation promulgated under this Act;
10 (t) Has refused the Secretary of State or his or
11 her designee access to any office or location within an
12 office to conduct an investigation, audit, examination,
13 or inspection;
14 (u) Has advised or caused a public pension fund or
15 retirement system established under the Illinois Pension
16 Code to make an investment or engage in a transaction not
17 authorized by that Code.
18 (2) If the Secretary of State finds that any registrant
19 or applicant for registration is no longer in existence or
20 has ceased to do business as a dealer, salesperson or
21 investment adviser, or is subject to an adjudication as a
22 person under legal disability or to the control of a
23 guardian, or cannot be located after reasonable search, or
24 has failed after written notice to pay to the Secretary of
25 State any additional fee prescribed by this Section or
26 specified by rule or regulation, or if a natural person, has
27 defaulted on an educational loan guaranteed by the Illinois
28 Student Assistance Commission, the Secretary of State may by
29 order cancel the registration or application.
30 (3) Withdrawal of an application for registration or
31 withdrawal from registration as a dealer, salesperson or
32 investment adviser becomes effective 30 days after receipt of
33 an application to withdraw or within such shorter period of
34 time as the Secretary of State may determine, unless any
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1 proceeding is pending under Section 11 of this Act when the
2 application is filed or a proceeding is instituted within 30
3 days after the application is filed. If a proceeding is
4 pending or instituted, withdrawal becomes effective at such
5 time and upon such conditions as the Secretary of State by
6 order determines. If no proceeding is pending or instituted
7 and withdrawal automatically becomes effective, the Secretary
8 of State may nevertheless institute a revocation or
9 suspension proceeding within one year after withdrawal became
10 effective and enter a revocation or suspension order as of
11 the last date on which registration was effective.
12 F. The Secretary of State shall make available upon
13 request the date that each dealer, investment adviser or
14 salesperson was granted registration, together with the name
15 and address of the dealer or issuer on whose behalf the
16 salesperson is registered, and all orders of the Secretary of
17 State denying or abandoning an application, or suspending or
18 revoking registration, or censuring the persons. The
19 Secretary of State may designate by rule, regulation or order
20 the statements, information or reports submitted to or filed
21 with him or her pursuant to this Section 8 which the
22 Secretary of State determines are of a sensitive nature and
23 therefore should be exempt from public disclosure. Any such
24 statement, information or report shall be deemed confidential
25 and shall not be disclosed to the public except upon the
26 consent of the person filing or submitting the statement,
27 information or report or by order of court or in court
28 proceedings.
29 G. The registration or re-registration of a dealer and
30 of all salespersons registered upon application of the dealer
31 shall expire on the next succeeding anniversary date of the
32 registration or re-registration of the dealer; and the
33 registration or re-registration of an investment adviser
34 shall expire on the next succeeding anniversary date of the
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1 registration of the investment adviser; provided, that the
2 Secretary of State may by rule or regulation prescribe an
3 alternate date which any dealer registered under the Federal
4 1934 Act or a member of any self-regulatory association
5 approved pursuant thereto, or any investment adviser
6 registered under the Federal 1940 Investment Advisers Act may
7 elect as the expiration date of its dealer and salesperson
8 registrations, or the expiration date of its investment
9 adviser registration, as the case may be. A registration of
10 a salesperson registered upon application of an issuer or
11 controlling person shall expire on the next succeeding
12 anniversary date of the registration, or upon termination or
13 expiration of the registration of the securities, if any,
14 designated in the application for his or her registration or
15 the alternative date as the Secretary may prescribe by rule
16 or regulation. Subject to paragraph (9) of subsection C of
17 this Section 8, a salesperson's registration also shall
18 terminate upon cessation of his or her employment, or
19 termination of his or her appointment or authorization, in
20 each case by the person who applied for the salesperson's
21 registration, provided that the Secretary of State may by
22 rule or regulation prescribe an alternate date for the
23 expiration of the registration.
24 H. Applications for re-registration of dealers,
25 salespersons and investment advisers shall be filed with the
26 Secretary of State not less than 7 days preceding the
27 expiration of the then current registration and shall contain
28 such information as may be required by the Secretary of State
29 upon initial application with such omission therefrom or
30 addition thereto as the Secretary of State may authorize or
31 prescribe. Each application for re-registration of a dealer
32 or investment adviser shall be accompanied by a filing fee
33 and each application for re-registration as a salesperson
34 shall be accompanied by a filing fee and a Securities Audit
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1 and Enforcement Fund fee established pursuant to Section 11a
2 of this Act, which shall not be returnable in any event.
3 Notwithstanding the foregoing, (1) applications for
4 re-registration of dealers and investment advisers may be
5 filed within the 6 days next preceding the expiration of the
6 then current registration provided that the applicant pays
7 the annual registration fee for the year with respect to
8 which the re-registration is applicable together with an
9 additional amount equal to the annual registration fee; and
10 (2) applications for re-registration of dealers and
11 investment advisers may be filed within 30 days following the
12 expiration of the registration provided that the applicant
13 pays the annual registration fee together with an additional
14 amount equal to 2 times the annual registration fee and files
15 any other information or documents that the Secretary of
16 State may prescribe by rule or regulation or order. Any
17 application filed within 30 days following the expiration of
18 the registration shall be automatically effective as of the
19 time of the earlier expiration provided that the proper fee
20 has been paid to the Secretary of State.
21 Each registered dealer or investment adviser shall
22 continue to be registered if the registrant changes his, her,
23 or its form of organization provided that the dealer or
24 investment adviser files an amendment to his, her, or its
25 application not later than 30 days following the occurrence
26 of the change and pays the Secretary of State a fee in the
27 amount established under Section 11a of this Act.
28 I. (1) Every registered dealer and investment adviser
29 shall make and keep for such periods, such accounts,
30 correspondence, memoranda, papers, books and records as the
31 Secretary of State may by rule or regulation prescribe. All
32 records so required shall be preserved for 3 years unless the
33 Secretary of State by rule, regulation or order prescribes
34 otherwise for particular types of records.
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1 (2) Every registered dealer and investment adviser shall
2 file such financial reports as the Secretary of State may by
3 rule or regulation prescribe.
4 (3) All the books and records referred to in paragraph
5 (1) of this subsection I are subject at any time or from time
6 to time to such reasonable periodic, special or other audits,
7 examinations, or inspections by representatives of the
8 Secretary of State, within or without this State, as the
9 Secretary of State deems necessary or appropriate in the
10 public interest or for the protection of investors.
11 (4) At the time of an audit, examination, or inspection,
12 the Secretary of State, by his or her designees, may conduct
13 an interview of any person employed or appointed by or
14 affiliated with a registered dealer or investment advisor,
15 provided that the dealer or investment advisor shall be given
16 reasonable notice of the time and place for the interview.
17 At the option of the dealer or investment advisor, a
18 representative of the dealer or investment advisor with
19 supervisory responsibility over the individual being
20 interviewed may be present at the interview.
21 J. The Secretary of State may require by rule or
22 regulation the payment of an additional fee for the filing of
23 information or documents required to be filed by this Section
24 which have not been filed in a timely manner. The Secretary
25 of State may also require by rule or regulation the payment
26 of an examination fee for administering any examination which
27 it may conduct pursuant to subsection B, C or D of this
28 Section 8.
29 K. The Secretary of State may declare any application
30 for registration under this Section 8 abandoned by order if
31 the applicant fails to pay any fee or file any information or
32 document required under this Section 8 or by rule or
33 regulation for more than 30 days after the required payment
34 or filing date. The applicant may petition the Secretary of
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1 State for a hearing within 15 days after the applicant's
2 receipt of the order of abandonment, provided that the
3 petition sets forth the grounds upon which the applicant
4 seeks a hearing.
5 L. Any document being filed pursuant to this Section 8
6 shall be deemed filed, and any fee being paid pursuant to
7 this Section 8 shall be deemed paid, upon the date of actual
8 receipt thereof by the Secretary of State or his or her
9 designee.
10 M. The Secretary of State shall provide to the Illinois
11 Student Assistance Commission annually or at mutually agreed
12 periodic intervals the names and social security numbers of
13 natural persons registered under subsections B, C, and E of
14 this Section. The Illinois Student Assistance Commission
15 shall determine if any student loan defaulter is registered
16 as a dealer, salesperson, or investment adviser under this
17 Act and report its determination to the Secretary of State or
18 his or her designee.
19 (Source: P.A. 88-494; 89-209, eff. 1-1-96; 89-626, eff.
20 8-9-96.)".