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90_SB0097
40 ILCS 5/1-101.1 from Ch. 108 1/2, par. 1-101.1
40 ILCS 5/1-101.2 new
40 ILCS 5/1-101.3 new
40 ILCS 5/1-101.4 new
40 ILCS 5/1-113 from Ch. 108 1/2, par. 1-113
40 ILCS 5/1-113.1 new
40 ILCS 5/1-113.2 new
40 ILCS 5/1-113.3 new
40 ILCS 5/1-113.4 new
40 ILCS 5/1-113.5 new
40 ILCS 5/1-113.6 new
40 ILCS 5/1-113.7 new
40 ILCS 5/1-113.8 new
40 ILCS 5/1-113.9 new
40 ILCS 5/1-113.10 new
40 ILCS 5/1-113.11 new
40 ILCS 5/3-102 from Ch. 108 1/2, par. 3-102
40 ILCS 5/3-108.2 new
40 ILCS 5/3-108.3 new
40 ILCS 5/3-132 from Ch. 108 1/2, par. 3-132
40 ILCS 5/3-135 from Ch. 108 1/2, par. 3-135
40 ILCS 5/3-143 from Ch. 108 1/2, par. 3-143
40 ILCS 5/4-105c new
40 ILCS 5/4-105d new
40 ILCS 5/4-123 from Ch. 108 1/2, par. 4-123
40 ILCS 5/4-128 from Ch. 108 1/2, par. 4-128
40 ILCS 5/4-134 from Ch. 108 1/2, par. 4-134
815 ILCS 5/8 from Ch. 121 1/2, par. 137.8
Amends the Illinois Pension Code to expand the investment
authority of downstate police and fire pension funds. Adopts
provisions relating to fiduciaries and investment advisers.
Amends the Illinois Securities Law of 1953 to specify that
dealers, salespersons, and investment advisers may be
disciplined for causing or advising a public pension fund to
make an investment or engage in a transaction not authorized
under the Illinois Pension Code. Effective immediately.
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1 AN ACT in relation to public employee pensions, amending
2 named Acts.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Illinois Pension Code is amended by
6 changing Sections 1-101.1, 1-113, 3-102, 3-132, 3-135, 3-143,
7 4-123, 4-128, and 4-134 and adding Sections 1-101.2,
8 1-101.3, 1-101.4, 1-113.1, 1-113.2, 1-113.3, 1-113.4,
9 1-113.5, 1-113.6, 1-113.7, 1-113.8, 1-113.9, 1-113.10,
10 1-113.11, 3-108.2, 3-108.3, 4-105c, and 4-105d as follows:
11 (40 ILCS 5/1-101.1) (from Ch. 108 1/2, par. 1-101.1)
12 Sec. 1-101.1. Definitions. For purposes of this Article,
13 unless the context otherwise requires, the words defined in
14 the Sections following this Section and preceding Section
15 1-102 shall have meanings given in those Sections.:
16 (a) A person is a "Fiduciary" with respect to a
17 retirement system or pension fund established under this Code
18 to the extent that such person:
19 (i) exercises any discretionary authority or
20 discretionary control respecting management of such
21 retirement system or pension fund, or exercises any authority
22 or control respecting management or disposition of its
23 assets;
24 (ii) renders investment advice for a fee or other
25 compensation, direct or indirect, with respect to any moneys
26 or other property of such retirement system or pension fund,
27 or has any authority or responsibility to do so; or
28 (iii) has any discretionary authority or discretionary
29 responsibility in the administration of such retirement
30 system.
31 (b) A person is a "Party in interest" with respect to a
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1 retirement system or pension fund established under this Code
2 if such person is:
3 (i) a fiduciary, counsel or employee of such retirement
4 system or pension fund;
5 (ii) a person providing services to such retirement
6 system or pension fund;
7 (iii) an employer, any of whose employees are covered by
8 such retirement system or pension fund;
9 (iv) an employee organization any of whose members are
10 covered by such retirement system or pension fund;
11 (v) a relative of any individual described in paragraph
12 (i) or (ii) above of this subsection (b); or
13 (vi) an employee, officer or director (or an individual
14 having powers or responsibilities similar to those of
15 officers or directors) of a person described in paragraphs
16 (ii), (iii) or (iv) above of this subsection (b), or of such
17 retirement system or pension fund.
18 (c) A person is an "Investment manager" with respect to
19 a retirement system or pension fund established under this
20 Code if such person:
21 (i) is a fiduciary appointed by the board of trustees of
22 a retirement system or pension fund in accordance with
23 Section 1-109.1;
24 (ii) has the power to manage, acquire or dispose of any
25 asset of the retirement system or pension fund;
26 (iii) is either -
27 (A) registered as an investment advisor under the
28 Investment Advisors Act of 1940 (15 U.S.C. 80b-1, et seq.);
29 (B) a bank, as defined in that Act; or
30 (C) an insurance company; and
31 (iv) has acknowledged in writing that he is a fiduciary
32 with respect to the retirement system or pension fund.
33 (Source: P.A. 82-960.)
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1 (40 ILCS 5/1-101.2 new)
2 Sec. 1-101.2. Fiduciary. A person is a "fiduciary" with
3 respect to a pension fund or retirement system established
4 under this Code to the extent that the person:
5 (1) exercises any discretionary authority or
6 discretionary control respecting management of the
7 pension fund or retirement system, or exercises any
8 authority or control respecting management or disposition
9 of its assets;
10 (2) renders investment advice for a fee or other
11 compensation, direct or indirect, with respect to any
12 moneys or other property of the pension fund or
13 retirement system, or has any authority or responsibility
14 to do so; or
15 (3) has any discretionary authority or
16 discretionary responsibility in the administration of the
17 pension fund or retirement system.
18 (40 ILCS 5/1-101.3 new)
19 Sec. 1-101.3. Party in interest. A person is a "party in
20 interest" with respect to a pension fund or retirement system
21 established under this Code if the person is:
22 (1) a fiduciary, counsel, or employee of the
23 pension fund or retirement system, or a relative of such
24 a person;
25 (2) a person providing services to the pension fund
26 or retirement system, or a relative of such a person;
27 (3) an employer, any of whose employees are covered
28 by the pension fund or retirement system;
29 (4) an employee organization, any members of which
30 are covered by the pension fund or retirement system; or
31 (5) an employee, officer, or director (or an
32 individual having powers or responsibilities similar to
33 those of an officer or director) of the pension fund or
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1 retirement system or of a person described under item
2 (2), (3), or (4) of this Section.
3 (40 ILCS 5/1-101.4 new)
4 Sec. 1-101.4. Investment adviser. A person is an
5 "investment adviser", "investment advisor", or "investment
6 manager" with respect to a pension fund or retirement system
7 established under this Code if the person:
8 (1) is a fiduciary appointed by the board of
9 trustees of the pension fund or retirement system in
10 accordance with Section 1-109.1;
11 (2) has the power to manage, acquire, or dispose of
12 any asset of the retirement system or pension fund;
13 (3) has acknowledged in writing that he or she is a
14 fiduciary with respect to the pension fund or retirement
15 system; and
16 (4) is at least one of the following: (i)
17 registered as an investment adviser under the federal
18 Investment Advisers Act of 1940 (15 U.S.C. 80b-1, et
19 seq.); (ii) registered as an investment adviser under the
20 Illinois Securities Law of 1953; (iii) a bank, as defined
21 in the Investment Advisers Act of 1940; or (iv) an
22 insurance company authorized to transact business in this
23 State.
24 (40 ILCS 5/1-113) (from Ch. 108 1/2, par. 1-113)
25 Sec. 1-113. Investment authority of certain pension
26 funds, not including those established under Article 3 or 4.
27 The investment authority of a board of trustees of a
28 retirement system or pension fund established under this Code
29 shall, if so provided in the Article establishing such
30 retirement system or pension fund, embrace the following
31 investments:
32 (1) Bonds, notes and other direct obligations of the
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1 United States Government; bonds, notes and other obligations
2 of any United States Government agency or instrumentality,
3 whether or not guaranteed; and obligations the principal and
4 interest of which are guaranteed unconditionally by the
5 United States Government or by an agency or instrumentality
6 thereof.
7 (2) Obligations of the Inter-American Development Bank,
8 the International Bank for Reconstruction and Development,
9 the African Development Bank, the International Finance
10 Corporation, and the Asian Development Bank.
11 (3) Obligations of any state, or of any political
12 subdivision in Illinois, or of any county or city in any
13 other state having a population as shown by the last federal
14 census of not less than 30,000 inhabitants provided that such
15 political subdivision is not permitted by law to become
16 indebted in excess of 10% of the assessed valuation of
17 property therein and has not defaulted for a period longer
18 than 30 days in the payment of interest and principal on any
19 of its general obligations or indebtedness during a period of
20 10 calendar years immediately preceding such investment.
21 (4) Nonconvertible bonds, debentures, notes and other
22 corporate obligations of any corporation created or existing
23 under the laws of the United States or any state, district or
24 territory thereof, provided there has been no default on the
25 obligations of the corporation or its predecessor(s) during
26 the 5 calendar years immediately preceding the purchase.
27 (5) Obligations guaranteed by the Government of Canada,
28 or by any Province of Canada, or by any Canadian city with a
29 population of not less than 150,000 inhabitants, provided (a)
30 they are payable in United States currency and are exempt
31 from any Canadian withholding tax; (b) the investment in any
32 one issue of bonds shall not exceed 10% of the amount
33 outstanding; and (c) the total investments at book value in
34 Canadian securities shall be limited to 5% of the total
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1 investment account of the board at book value.
2 (5.1) Direct obligations of the State of Israel for the
3 payment of money, or obligations for the payment of money
4 which are guaranteed as to the payment of principal and
5 interest by the State of Israel, or common or preferred stock
6 or notes issued by a bank owned or controlled in whole or in
7 part by the State of Israel, on the following conditions:
8 (a) The total investments in such obligations shall
9 not exceed 5% of the book value of the aggregate
10 investments owned by the board;
11 (b) The State of Israel shall not be in default in
12 the payment of principal or interest on any of its direct
13 general obligations on the date of such investment;
14 (c) The bonds, stock or notes, and interest thereon
15 shall be payable in currency of the United States;
16 (d) The bonds shall (1) contain an option for the
17 redemption thereof after 90 days from date of purchase or
18 (2) either become due 5 years from the date of their
19 purchase or be subject to redemption 120 days after the
20 date of notice for redemption;
21 (e) The investment in these obligations has been
22 approved in writing by investment counsel employed by the
23 board, which counsel shall be a national or state bank or
24 trust company authorized to do a trust business in the
25 State of Illinois, or an investment advisor qualified
26 under the federal Investment Advisors Act of 1940 and
27 registered under the Illinois Securities Act of 1953;
28 (f) The fund or system making the investment shall
29 have at least $5,000,000 of net present assets.
30 (6) Notes secured by mortgages under Sections 203, 207,
31 220 and 221 of the National Housing Act which are insured by
32 the Federal Housing Commissioner, or his successor assigns,
33 or debentures issued by such Commissioner, which are
34 guaranteed as to principal and interest by the Federal
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1 Housing Administration, or agency of the United States
2 Government, provided the aggregate investment shall not
3 exceed 20% of the total investment account of the board at
4 book value, and provided further that the investment in such
5 notes under Sections 220 and 221 shall in no event exceed
6 one-half of the maximum investment in notes under this
7 paragraph.
8 (7) Loans to veterans guaranteed in whole or part by the
9 United States Government pursuant to Title III of the Act of
10 Congress known as the "Servicemen's Readjustment Act of
11 1944," 58 Stat. 284, 38 U.S.C. 693, as amended or
12 supplemented from time to time, provided such guaranteed
13 loans are liens upon real estate.
14 (8) Common and preferred stocks and convertible debt
15 securities authorized for investment of trust funds under the
16 laws of the State of Illinois, provided:
17 (a) the common stocks, except as provided in
18 subparagraph (g) (h), are listed on a national securities
19 exchange or board of trade, as defined in the federal
20 Securities Exchange Act of 1934, or quoted in the
21 National Association of Securities Dealers Automated
22 Quotation System (NASDAQ);
23 (b) the securities are of a corporation created or
24 existing under the laws of the United States or any
25 state, district or territory thereof;
26 (c) the corporation is not in arrears on payment of
27 dividends on its preferred stock;
28 (d) the total book value of all stocks and
29 convertible debt owned by any pension fund or retirement
30 system shall not exceed 40% of the aggregate book value
31 of all investments of such pension fund or retirement
32 system, except for that system governed by Article 17,
33 where the total of all stocks and convertible debt shall
34 not exceed 50% of the aggregate book value of all fund
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1 investments;
2 (e) the book value of stock and convertible debt
3 investments in any one corporation shall not exceed 5% of
4 the total investment account at book value in which such
5 securities are held, determined as of the date of the
6 investment, and the investments in the stock of any one
7 corporation shall not exceed 5% of the total outstanding
8 stock of such corporation, and the investments in the
9 convertible debt of any one corporation shall not exceed
10 5% of the total amount of such debt that may be
11 outstanding;
12 (f) the straight preferred stocks or convertible
13 preferred stocks and convertible debt securities are
14 issued or guaranteed by a corporation whose common stock
15 qualifies for investment by the board; and
16 (g) that any common stocks not listed or quoted as
17 provided in subdivision 8(a) above be limited to the
18 following types of institutions: (a) any bank which is a
19 member of the Federal Deposit Insurance Corporation
20 having capital funds represented by capital stock,
21 surplus and undivided profits of at least $20,000,000;
22 (b) any life insurance company having capital funds
23 represented by capital stock, special surplus funds and
24 unassigned surplus totalling at least $50,000,000; and
25 (c) any fire or casualty insurance company, or a
26 combination thereof, having capital funds represented by
27 capital stock, net surplus and voluntary reserves of at
28 least $50,000,000.
29 (9) Withdrawable accounts of State chartered and federal
30 chartered savings and loan associations insured by the
31 Federal Savings and Loan Insurance Corporation; deposits or
32 certificates of deposit in State and national banks insured
33 by the Federal Deposit Insurance Corporation; and share
34 accounts or share certificate accounts in a State or federal
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1 credit union, the accounts of which are insured as required
2 by the Illinois Credit Union Act or the Federal Credit Union
3 Act, as applicable.
4 No bank or savings and loan association shall receive
5 investment funds as permitted by this subsection (9), unless
6 it has complied with the requirements established pursuant to
7 Section 6 of the Public Funds Investment Act.
8 (10) Trading, purchase or sale of listed options on
9 underlying securities owned by the board.
10 (11) Contracts and agreements supplemental thereto
11 providing for investments in the general account of a life
12 insurance company authorized to do business in Illinois.
13 (12) Conventional mortgage pass-through securities which
14 are evidenced by interests in Illinois owner-occupied
15 residential mortgages, having not less than an "A" rating
16 from at least one national securities rating service. Such
17 mortgages may have loan-to-value ratios up to 95%, provided
18 that any amount over 80% is insured by private mortgage
19 insurance. The pool of such mortgages shall be insured by
20 mortgage guaranty or equivalent insurance, in accordance with
21 industry standards.
22 (13) Pooled or commingled funds managed by a national or
23 State bank which is authorized to do a trust business in the
24 State of Illinois, shares of registered investment companies
25 as defined in the federal Investment Company Act of 1940
26 which are registered under that Act, and separate accounts of
27 a life insurance company authorized to do business in
28 Illinois, where such pooled or commingled funds, shares, or
29 separate accounts are comprised of common or preferred
30 stocks, bonds, or money market instruments.
31 (14) Pooled or commingled funds managed by a national or
32 state bank which is authorized to do a trust business in the
33 State of Illinois, separate accounts managed by a life
34 insurance company authorized to do business in Illinois, and
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1 commingled group trusts managed by an investment adviser
2 registered under the federal Investment Advisors Act of 1940
3 (15 U.S.C. 80b-1 et seq.) and under The Illinois Securities
4 Law of 1953, where such pooled or commingled funds, separate
5 accounts or commingled group trusts are comprised of real
6 estate or loans upon real estate secured by first or second
7 mortgages. The total investment in such pooled or commingled
8 funds, commingled group trusts and separate accounts shall
9 not exceed 10% of the aggregate book value of all investments
10 owned by the fund.
11 (15) Investment companies which (a) are registered as
12 such under the Investment Company Act of 1940, (b) are
13 diversified, open-end management investment companies and (c)
14 invest only in money market instruments.
15 (16) Up to 10% of the assets of the fund may be invested
16 in investments not included in paragraphs (1) through (15) of
17 this Section, provided that such investments comply with the
18 requirements and restrictions set forth in Sections 1-109,
19 1-109.1, 1-109.2, 1-110 and 1-111 of this Code.
20 The board shall have the authority to enter into such
21 agreements and to execute such documents as it determines to
22 be necessary to complete any investment transaction.
23 Any limitations herein set forth shall be applicable only
24 at the time of purchase and shall not require the liquidation
25 of any investment at any time.
26 All investments shall be clearly held and accounted for
27 to indicate ownership by such board. Such board may direct
28 the registration of securities in its own name or in the name
29 of a nominee created for the express purpose of registration
30 of securities by a national or state bank or trust company
31 authorized to conduct a trust business in the State of
32 Illinois.
33 Investments shall be carried at cost or at a book value
34 in accordance with accounting procedures approved by such
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1 board. No adjustments shall be made in investment carrying
2 values for ordinary current market price fluctuations; but
3 reserves may be provided to account for possible losses or
4 unrealized gains as determined by such board.
5 The book value of investments held by any pension fund or
6 retirement system in one or more commingled investment
7 accounts shall be the cost of its units of participation in
8 such commingled account or accounts as recorded on the books
9 of such board.
10 (Source: P.A. 86-272; 87-575; 87-794; 87-895.)
11 (40 ILCS 5/1-113.1 new)
12 Sec. 1-113.1. Investment authority of pension funds
13 established under Article 3 or 4. The board of trustees of a
14 police pension fund established under Article 3 of this Code
15 or firefighter pension fund established under Article 4 of
16 this Code shall draw pension funds from the treasurer of the
17 municipality and invest any part thereof in the name of the
18 board in the items listed in Sections 1-113.2 through 1-113.4
19 according to the limitations and requirements of this
20 Article. These investments shall be made with the care,
21 skill, prudence, and diligence that a prudent person acting
22 in like capacity and familiar with such matters would use in
23 the conduct of an enterprise of like character with like
24 aims.
25 Interest and any other income from the investments shall
26 be credited to the pension fund.
27 For the purposes of Sections 1-113.2 through 1-113.11,
28 the "net assets" of a pension fund include both the cash and
29 invested assets of the pension fund, as certified by the
30 board in its most recent annual statement filed with the
31 Department of Insurance under Section 22-503 or as verified
32 through examination by the Department, whichever is later.
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1 (40 ILCS 5/1-113.2 new)
2 Sec. 1-113.2. List of permitted investments for all
3 Article 3 or 4 pension funds. Any pension fund established
4 under Article 3 or 4 may invest in the following items:
5 (1) Interest bearing direct obligations of the United
6 States of America.
7 (2) Interest bearing obligations to the extent that they
8 are fully guaranteed or insured as to payment of principal
9 and interest by the United States of America.
10 (3) Interest bearing bonds, notes, debentures, or other
11 similar obligations of agencies of the United States of
12 America.
13 (4) Interest bearing savings accounts or certificates of
14 deposit, issued by federally chartered banks or savings and
15 loan associations, to the extent that the deposits are
16 insured by agencies or instrumentalities of the federal
17 government.
18 (5) Interest bearing savings accounts or certificates of
19 deposit, issued by State of Illinois chartered banks or
20 savings and loan associations, to the extent that the
21 deposits are insured by agencies or instrumentalities of the
22 federal government.
23 (6) Investments in credit unions, to the extent that the
24 investments are insured by agencies or instrumentalities of
25 the federal government.
26 (7) Interest bearing bonds of the State of Illinois.
27 (8) Pooled interest bearing accounts managed by the
28 Illinois Public Treasurer's Investment Pool in accordance
29 with the Deposit of State Moneys Act and interest bearing
30 funds or pooled accounts managed, operated, and administered
31 by banks, subsidiaries of banks, or subsidiaries of bank
32 holding companies in accordance with the Public Funds
33 Investment Act.
34 (9) Interest bearing bonds or tax anticipation warrants
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1 of any county, township, or municipal corporation of the
2 State of Illinois.
3 (10) Direct obligations of the State of Israel, subject
4 to the conditions and limitations of item (5.1) of Section
5 1-113.
6 (11) Money market mutual funds managed by investment
7 companies that are registered under the federal Investment
8 Company Act of 1940 and the Illinois Securities Law of 1953
9 and are diversified, open-ended management investment
10 companies; provided that the portfolio of the money market
11 mutual fund is limited to the following:
12 (i) bonds, notes, certificates of indebtedness,
13 treasury bills, or other securities that are guaranteed
14 by the full faith and credit of the United States of
15 America as to principal and interest;
16 (ii) bonds, notes, debentures, or other similar
17 obligations of the United States of America or its
18 agencies; and
19 (iii) short term obligations of corporations
20 organized in the United States with assets exceeding
21 $400,000,000, provided that (A) the obligations mature no
22 later than 180 days from the date of purchase, (B) at the
23 time of purchase, the obligations are rated by at least 2
24 standard national rating services at one of their 3
25 highest classifications, and (C) the obligations held by
26 the mutual fund do not exceed 10% of the corporation's
27 outstanding obligations.
28 (12) General accounts of life insurance companies
29 authorized to transact business in Illinois.
30 (13) Any combination of the following, not to exceed 10%
31 of the pension fund's net assets:
32 (i) separate accounts that are managed by life
33 insurance companies authorized to transact business in
34 Illinois and are comprised of diversified portfolios
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1 consisting of common or preferred stocks, bonds, or money
2 market instruments; and
3 (ii) separate accounts that are managed by
4 insurance companies authorized to transact business in
5 Illinois, and are comprised of real estate or loans upon
6 real estate secured by first or second mortgages.
7 (40 ILCS 5/1-113.3 new)
8 Sec. 1-113.3. List of additional permitted investments
9 for pension funds with net assets of $2,500,000 or more. In
10 addition to the items in Section 3-113.2, a pension fund
11 established under Article 3 that has net assets of at least
12 $2,500,000 may invest up to 35% of its net assets, and a
13 pension fund established under Article 4 that has net assets
14 of at least $2,500,000 may invest up to 10% of its net
15 assets, in the following items:
16 (1) Separate accounts that are managed by life insurance
17 companies authorized to transact business in Illinois and are
18 comprised of diversified portfolios consisting of common or
19 preferred stocks, bonds, or money market instruments.
20 (2) Mutual funds that meet the following requirements:
21 (i) the mutual fund is managed by an investment
22 company as defined and registered under the federal
23 Investment Company Act of 1940 and registered under the
24 Illinois Securities Law of 1953;
25 (ii) the mutual fund has been in operation for at
26 least 5 years;
27 (iii) the mutual fund has total net assets of $250
28 million or more; and
29 (iv) the mutual fund is comprised of diversified
30 portfolios of common or preferred stocks, bonds, or money
31 market instruments.
32 (40 ILCS 5/1-113.4 new)
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1 Sec. 1-113.4. List of additional permitted investments
2 for pension funds with net assets of $5,000,000 or more. In
3 addition to the items in Sections 1-113.2 and 1-113.3, a
4 pension fund established under Article 3 that has net assets
5 of at least $5,000,000 and has appointed an investment
6 adviser under Section 1-113.5 may invest up to 35% of its net
7 assets, and a pension fund established under Article 4 that
8 has net assets of at least $5,000,000 and has appointed an
9 investment adviser under Section 1-113.5 may invest up to 10%
10 of its net assets, in common and preferred stocks authorized
11 for investments of trust funds under the laws of the State of
12 Illinois. The stocks must meet all of the following
13 requirements:
14 (1) The common stocks are listed on a national
15 securities exchange or board of trade (as defined in the
16 federal Securities Exchange Act of 1934 and set forth in
17 Section 3.G of the Illinois Securities Law of 1953) or
18 quoted in the National Association of Securities Dealers
19 Automated Quotation System National Market System (NASDAQ
20 NMS).
21 (2) The securities are of a corporation created or
22 existing under the laws of the United States or any
23 state, district, or territory thereof and the corporation
24 has been in existence for at least 5 years.
25 (3) The corporation has not been in arrears on
26 payment of dividends on its preferred stock during the
27 preceding 5 years.
28 (4) The market value of stock in any one
29 corporation does not exceed 5% of the cash and invested
30 assets of the pension fund, and the investments in the
31 stock of any one corporation do not exceed 5% of the
32 total outstanding stock of that corporation.
33 (5) The straight preferred stocks or convertible
34 preferred stocks are issued or guaranteed by a
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1 corporation whose common stock qualifies for investment
2 by the board.
3 (6) The issuer of the stocks has been subject to
4 the requirements of Section 12 of the federal Securities
5 Exchange Act of 1934 and has been current with the filing
6 requirements of Sections 13 and 14 of that Act during the
7 preceding 3 years.
8 (40 ILCS 5/1-113.5 new)
9 Sec. 1-113.5. Investment advisers and investment
10 services.
11 (a) The board of trustees of a pension fund may appoint
12 investment advisers as defined in Section 1-101.4. The board
13 of any pension fund investing in common or preferred stock
14 under Section 1-113.4 shall appoint an investment adviser
15 before making such investments.
16 The investment adviser shall be a fiduciary, as defined
17 in Section 1-101.2, with respect to the pension fund and
18 shall be one of the following:
19 (1) an investment adviser registered under the
20 federal Investment Advisers Act of 1940 and the Illinois
21 Securities Law of 1953;
22 (2) a bank or trust company authorized to conduct a
23 trust business in Illinois;
24 (3) a life insurance company authorized to transact
25 business in Illinois; or
26 (4) an investment company as defined and registered
27 under the federal Investment Company Act of 1940 and
28 registered under the Illinois Securities Law of 1953.
29 (b) All investment advice and services provided by an
30 investment adviser appointed under this Section shall be
31 rendered pursuant to a written contract between the
32 investment adviser and the board, and in accordance with the
33 board's investment policy.
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1 The contract shall include all of the following:
2 (1) acknowledgement in writing by the investment
3 adviser that he or she is a fiduciary with respect to the
4 pension fund;
5 (2) the board's investment policy;
6 (3) full disclosure of direct and indirect fees,
7 commissions, penalties, and any other compensation that
8 may be received by the investment adviser, including
9 reimbursement for expenses; and
10 (4) a requirement that the investment adviser
11 submit periodic written reports, on at least a quarterly
12 basis, for the board's review at its regularly scheduled
13 meetings. All returns on investment shall be reported as
14 net returns after payment of all fees, commissions, and
15 any other compensation.
16 (c) Within 90 days after appointing an investment
17 adviser, the board shall submit a copy of the contract to the
18 Department of Insurance.
19 (d) Investment services provided by a person other than
20 an investment adviser appointed under this Section, including
21 but not limited to services provided by the kinds of persons
22 listed in items (1) through (4) of subsection (a), shall be
23 rendered only after full written disclosure of direct and
24 indirect fees, commissions, penalties, and any other
25 compensation that shall or may be received by the person
26 rendering those services.
27 (e) The board of trustees of each pension fund shall
28 retain records of investment transactions in accordance with
29 the rules of the Department of Insurance.
30 (40 ILCS 5/1-113.6 new)
31 Sec. 1-113.6. Investment policies. Every board of
32 trustees of a pension fund shall adopt a written investment
33 policy and file a copy of that policy with the Department of
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1 Insurance within 90 days after its adoption. Whenever a
2 board changes its investment policy, it shall file a copy of
3 the new policy with the Department within 30 days.
4 (40 ILCS 5/1-113.7 new)
5 Sec. 1-113.7. Registration of investments; custody and
6 safekeeping. The board of trustees may register the
7 investments of its pension fund in the name of the pension
8 fund, in the nominee name of an investment adviser appointed
9 under Section 1-113.5, in the nominee name of a bank or trust
10 company authorized to conduct a trust business in Illinois,
11 or in the nominee name of the Illinois Public Treasurer's
12 Investment Pool.
13 The assets of the pension fund and ownership of its
14 investments shall be protected through third-party custodial
15 safekeeping. The board of trustees may appoint as custodian
16 of the investments of its pension fund the treasurer of the
17 municipality, an investment adviser appointed under Section
18 1-113.5, a bank or trust company authorized to conduct a
19 trust business in Illinois, or the Illinois Public
20 Treasurer's Investment Pool.
21 No pension fund investments may be held by a dealer or
22 salesperson as defined in the Illinois Securities Law of
23 1953, except in a money market mutual fund in accordance with
24 Section 1-113.2 for a period of time not to exceed 180 days.
25 A bank or trust company authorized to conduct a trust
26 business in Illinois shall register, deposit, or hold
27 investments for safekeeping, all in accordance with the
28 obligations and subject to the limitations of the Securities
29 in Fiduciary Accounts Act.
30 (40 ILCS 5/1-113.8 new)
31 Sec. 1-113.8. Limitations on banks and savings and loan
32 associations. A bank or savings and loan association shall
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1 not receive investment funds from a pension fund established
2 under Article 3 or 4 of this Code, unless it has complied
3 with the requirements established under Section 6 of the
4 Public Funds Investment Act. The limitations set forth in
5 that Section 6 are applicable only at the time of investment
6 and do not require the liquidation of any investment at any
7 time.
8 (40 ILCS 5/1-113.9 new)
9 Sec. 1-113.9. Illegal investments. A person registered
10 as a dealer, salesperson, or investment adviser under the
11 Illinois Securities Law of 1953 who advises or causes a
12 pension fund to make an investment or engage in a transaction
13 not authorized by this Code is subject to the penalty
14 provisions of paragraph q of subsection E of Section 8 of
15 that law.
16 A bank or trust company authorized to conduct a trust
17 business in Illinois, and any officer, director, or employee
18 thereof, that advises or causes a pension fund to make an
19 investment or engages in a transaction not authorized by this
20 Code is subject to the penalty provisions of Article V of the
21 Corporate Fiduciary Act.
22 (40 ILCS 5/1-113.10 new)
23 Sec. 1-113.10. Legality at time of investment. The
24 investment limitations set forth in this Article are
25 applicable only at the time of investment and do not require
26 the liquidation of any investment at any time. However, no
27 additional pension funds may be invested in any investment
28 item while the market value of the pension fund's investments
29 in that item meets or exceeds the applicable limitation.
30 (40 ILCS 5/1-113.11 new)
31 Sec. 1-113.11. Rules. The Department of Insurance is
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1 authorized to promulgate rules that are necessary or useful
2 for the administration and enforcement of Sections 1-113.1
3 through 1-113.10 of this Article.
4 (40 ILCS 5/3-102) (from Ch. 108 1/2, par. 3-102)
5 Sec. 3-102. Terms defined. The terms used in this
6 Article have the meanings ascribed to them in Sections 3-103
7 through 3-108.3 3-108.1, except when the context otherwise
8 requires.
9 (Source: P.A. 83-1440.)
10 (40 ILCS 5/3-108.2 new)
11 Sec. 3-108.2. Participant. "Participant": A police
12 officer or deferred pensioner of a pension fund, or a
13 beneficiary of the pension fund.
14 (40 ILCS 5/3-108.3 new)
15 Sec. 3-108.3. Beneficiary. "Beneficiary": A person
16 receiving benefits from a pension fund, including, but not
17 limited to, retired pensioners, disabled pensioners, their
18 surviving spouses, minor children, disabled children, and
19 dependent parents.
20 (40 ILCS 5/3-132) (from Ch. 108 1/2, par. 3-132)
21 Sec. 3-132. To control and manage the Pension Fund. In
22 accordance with the applicable provisions of Article 1, this
23 Article, and Division 5 of Article 22, to control and manage,
24 exclusively, the following:
25 (1) the pension fund,
26 (2) investment expenditures and income, including
27 interest dividends, capital gains and other distributions
28 on the investments, and
29 (3) all money donated, paid, or assessed, or
30 provided by law for the pensioning of disabled and
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1 retired police officers, their surviving spouses, minor
2 children, and dependent parents.
3 All money received or collected shall be credited by the
4 treasurer of the municipality such moneys shall be placed by
5 the treasurer of the municipality to the account credit of
6 the pension fund, and held by the treasurer of the
7 municipality subject to the order and control of the board.
8 The treasurer of the municipality shall maintain a record of
9 all money received, transferred, and held for the account of
10 the board.
11 (Source: P.A. 83-1440.)
12 (40 ILCS 5/3-135) (from Ch. 108 1/2, par. 3-135)
13 Sec. 3-135. To draw and invest funds. The board shall
14 invest funds in accordance with Sections 1-113.1 through
15 1-113.10 of this Code. To draw pension funds from the
16 treasurer of the municipality, and invest any part thereof in
17 the name of the board in: (1) interest bearing bonds or tax
18 anticipation warrants of the United States, of the State of
19 Illinois, or of any county, township or municipal corporation
20 of the State of Illinois; (2) insured withdrawable capital
21 accounts of State chartered savings and loan associations;
22 (3) insured withdrawable capital accounts of federal
23 chartered federal savings and loan associations if the
24 withdrawable capital accounts are insured by the Federal
25 Savings and Loan Insurance Corporation; (4) insured
26 investments in credit unions if the investments are insured
27 by the National Credit Union Administration; (5) savings
28 accounts or certificates of deposit of a national or State
29 bank; (6) securities described in item 5.1 of Section 1-113
30 of this Code, but only subject to the conditions therein set
31 forth; (7) 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; (8)
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1 separate accounts of a life insurance company authorized to
2 do business in Illinois, comprised of common or preferred
3 stocks, bonds, or money market instruments; and (9) separate
4 accounts managed by a life insurance company authorized to do
5 business in Illinois, comprised of real estate or loans upon
6 real estate secured by first or second mortgages. The total
7 investment in such separate accounts shall not exceed 10% of
8 the aggregate book value of all investments owned by the
9 fund. All securities shall be deposited with the treasurer of
10 the municipality, and be subject to the order of the board.
11 Interest on the investments shall be credited to the pension
12 fund.
13 No bank or savings and loan association shall receive
14 investment funds as permitted by this Section, unless it has
15 complied with the requirements established pursuant to
16 Section 6 of "An Act relating to certain investments of
17 public funds by public agencies", approved July 23, 1943, as
18 now or hereafter amended. The limitations set forth in such
19 Section 6 shall be applicable only at the time of investment
20 and shall not require the liquidation of any investment at
21 any time.
22 (Source: P.A. 84-1472.)
23 (40 ILCS 5/3-143) (from Ch. 108 1/2, par. 3-143)
24 Sec. 3-143. Report by board. The board shall report
25 annually to the city council or board of trustees of the
26 municipality on the condition of the pension fund at the end
27 of its most recently completed fiscal year. The report shall
28 be made prior to the council or board meeting held for the
29 levying of taxes for the year for which the report is made.
30 The board shall certify:
31 (1) the assets of the fund in its custody at the
32 end of the fiscal year such time;
33 (2) the estimated receipts during the next
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1 succeeding fiscal calendar year from deductions from the
2 salaries of police officers, and from all other sources;
3 and
4 (3) the estimated amount required during the next
5 succeeding fiscal said calendar year to (a) pay all
6 pensions and other obligations provided in this Article,
7 and (b) to meet the annual requirements of the fund as
8 provided in Sections Section 3-125 and 3-127; and
9 (4) the total net income received from investment
10 of assets, compared to such income received during the
11 preceding fiscal year.
12 Prior to making its report, the board shall have the
13 assets of the fund and their current market value verified by
14 an independent certified public accountant of its choice.
15 (Source: P.A. 83-1440.)
16 (40 ILCS 5/4-105c new)
17 Sec. 4-105c. Participant. "Participant": A firefighter
18 or deferred pensioner of a pension fund, or a beneficiary of
19 the pension fund.
20 (40 ILCS 5/4-105d new)
21 Sec. 4-105d. Beneficiary. "Beneficiary": A person
22 receiving benefits from a pension fund, including, but not
23 limited to, retired pensioners, disabled pensioners, their
24 surviving spouses, minor children, disabled children, and
25 dependent parents.
26 (40 ILCS 5/4-123) (from Ch. 108 1/2, par. 4-123)
27 Sec. 4-123. To control and manage the Pension Fund. In
28 accordance with the applicable provisions of Article 1, this
29 Article, and Division 5 of Article 22, to control and manage,
30 exclusively, the following:
31 (1) the pension fund,
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1 (2) investment expenditures and income, including
2 interest dividends, capital gains, and other
3 distributions on the investments, and
4 (3) all money donated, paid, assessed, or provided
5 by law for the pensioning of disabled and retired
6 firefighters, their surviving spouses, minor children,
7 and dependent parents.
8 All money received or collected shall be credited by the
9 treasurer of the municipality to the account of the pension
10 fund and held by the treasurer of the municipality subject to
11 the order and control of the board. The treasurer of the
12 municipality shall maintain a record of all money received,
13 transferred, and held for the account of the board.
14 (Source: P.A. 83-1440.)
15 (40 ILCS 5/4-128) (from Ch. 108 1/2, par. 4-128)
16 Sec. 4-128. To invest funds. The board shall invest
17 funds in accordance with Sections 1-113.1 through 1-113.10 of
18 this Code. To invest the money of the pension fund only in:
19 (1) interest bearing bonds of the United States, or of the
20 State of Illinois, or of any county, city, township, village,
21 incorporated town, municipal corporation or school district
22 in this State; (2) tax anticipation warrants issued by any
23 city, township, village, incorporated town, or fire
24 protection district included within this Article; (3) notes,
25 bonds, debentures or other similar obligations which are
26 guaranteed as to principal and interest by the United States;
27 (4) insured withdrawable capital accounts of State chartered
28 savings and loan associations; (5) insured withdrawable
29 capital accounts of federal chartered federal savings and
30 loan associations if the withdrawable capital accounts are
31 insured by the Federal Savings and Loan Insurance
32 Corporation; (6) insured investments in credit unions if the
33 investments are insured by the National Credit Union
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1 Administration; and (7) savings accounts or certificates of
2 deposit of a national or State bank; (8) securities described
3 in item 5.1 of Section 1-113 of this Code, but only subject
4 to the conditions therein set forth; (9) contracts and
5 agreements supplemental thereto providing for investments in
6 the general account of a life insurance company authorized to
7 do business in Illinois; (10) separate accounts of a life
8 insurance company authorized to do business in Illinois,
9 comprised of common or preferred stocks, bonds, or money
10 market instruments; and (11) separate accounts managed by a
11 life insurance company authorized to do business in Illinois,
12 comprised of real estate or loans upon real estate secured by
13 first or second mortgages. The total investment in such
14 separate accounts shall not exceed 10% of the aggregate book
15 value of all investments owned by the fund.
16 Bonds purchased hereunder shall be registered in the name
17 of the board or held under custodial agreement at a bank.
18 No bank or savings and loan association shall receive
19 investment funds as permitted by this Section, unless it has
20 complied with the requirements established pursuant to
21 Section 6 of "An Act relating to certain investments of
22 public funds by public agencies", approved July 23, 1943, as
23 now or hereafter amended. The limitations set forth in such
24 Section 6 shall be applicable only at the time of investment
25 and shall not require the liquidation of any investment at
26 any time.
27 (Source: P.A. 84-1472.)
28 (40 ILCS 5/4-134) (from Ch. 108 1/2, par. 4-134)
29 Sec. 4-134. Report for tax levy. The board shall report
30 to the city council or board of trustees of the municipality
31 on the condition of the pension fund at the end of its most
32 recently completed fiscal year. The report shall be made
33 prior to the council or board meeting held for appropriating
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1 and levying taxes for the year for which the report is made.
2 The board in the report shall certify:
3 (1) the assets of the fund and their current market
4 value in its custody at such time;
5 (2) the estimated receipts during the next
6 succeeding fiscal year (from January 1 to December 31)
7 from deductions from the salaries or wages of
8 firefighters firemen, and from all other sources;
9 (3) the estimated amount necessary during the
10 fiscal year such period to meet the annual actuarial
11 requirements of the pension fund as provided in Sections
12 Section 4-118 and 4-120; and
13 (4) the total net income received from investment
14 of assets, compared to such income received during the
15 preceding fiscal year.
16 Prior to making its report, the board shall have the
17 assets of the fund and their current market value verified by
18 an independent certified public accountant of its choice.
19 (Source: P.A. 85-293.)
20 Section 10. The Illinois Securities Law of 1953 is
21 amended by changing Section 8 as follows:
22 (815 ILCS 5/8) (from Ch. 121 1/2, par. 137.8)
23 Sec. 8. Registration of dealers, salespersons and
24 investment advisers.
25 A. Except as otherwise provided in this subsection A,
26 every dealer, salesperson and investment adviser shall be
27 registered as such with the Secretary of State. No dealer or
28 salesperson need be registered as such when offering or
29 selling securities in transactions believed in good faith to
30 be exempted by subsection A, B, C, E, G, H, I, J, K, M, O, P,
31 Q, R or S of Section 4 of this Act, provided that such dealer
32 or salesperson is not regularly engaged in the business of
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1 offering or selling securities in reliance upon the exemption
2 set forth in subsection G or M of Section 4 of this Act. No
3 dealer, issuer or controlling person shall employ a
4 salesperson unless such salesperson is registered as such
5 with the Secretary of State or is employed for the purpose of
6 offering or selling securities solely in transactions
7 believed in good faith to be exempted by subsection A, B, C,
8 D, E, G, H, I, J, K, L, M, O, P, Q, R or S of Section 4 of
9 this Act; provided that such salesperson need not be
10 registered when engaged in the offer or sale of securities in
11 respect of which he or she has beneficial ownership and is a
12 controlling person. The Secretary of State may, by rule,
13 regulation or order and subject to such terms, conditions as
14 fees as may be prescribed in such rule, regulation or order,
15 exempt from the registration requirements of this Section 8
16 any investment adviser, if the Secretary of State shall find
17 that such registration is not necessary in the public
18 interest by reason of the small number of clients or
19 otherwise limited character of operation of such investment
20 adviser.
21 B. An application for registration as a dealer,
22 executed, verified, or authenticated by or on behalf of the
23 applicant, shall be filed with the Secretary of State, in
24 such form as the Secretary of State may by rule, regulation
25 or order prescribe, setting forth or accompanied by:
26 (1) The name and address of the applicant, the
27 location of its principal business office and all branch
28 offices, if any, and the date of its organization;
29 (2) A statement of any other Federal or state
30 licenses or registrations which have been granted the
31 applicant and whether any such licenses or registrations
32 have ever been refused, cancelled, suspended, revoked or
33 withdrawn;
34 (3) The assets and all liabilities, including
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1 contingent liabilities of the applicant, as of a date not
2 more than 60 days prior to the filing of the application;
3 (4) (a) A brief description of any civil or
4 criminal proceeding of which fraud is an essential
5 element pending against the applicant and whether the
6 applicant has ever been convicted of a felony, or of any
7 misdemeanor of which fraud is an essential element;
8 (b) A list setting forth the name, residence and
9 business address and a 10 year occupational statement of
10 each principal of the applicant and a statement
11 describing briefly any civil or criminal proceedings of
12 which fraud is an essential element pending against any
13 such principal and the facts concerning any conviction of
14 any such principal of a felony, or of any misdemeanor of
15 which fraud is an essential element;
16 (5) If the applicant is a corporation: a copy of
17 its articles of incorporation in their most current form,
18 unless they are already on file in the office of the
19 Secretary of State; a list of its officers and directors
20 setting forth the residence and business address of each;
21 a 10-year occupational statement of each such officer or
22 director; and a statement describing briefly any civil or
23 criminal proceedings of which fraud is an essential
24 element pending against each such officer or director and
25 the facts concerning any conviction of any officer or
26 director of a felony, or of any misdemeanor of which
27 fraud is an essential element;
28 (6) If the applicant is a sole proprietorship, a
29 partnership, limited liability company, an unincorporated
30 association or any similar form of business organization:
31 the name, residence and business address of the
32 proprietor or of each partner, member, officer, director,
33 trustee or manager; the limitations, if any, of the
34 liability of each such individual; a 10-year occupational
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1 statement of each such individual; a statement describing
2 briefly any civil or criminal proceedings of which fraud
3 is an essential element pending against each such
4 individual and the facts concerning any conviction of any
5 such individual of a felony, or of any misdemeanor of
6 which fraud is an essential element;
7 (7) Such additional information as the Secretary of
8 State may by rule or regulation prescribe as necessary to
9 determine the applicant's financial responsibility,
10 business repute and qualification to act as a dealer.
11 (8) (a) No applicant shall be registered or
12 re-registered as a dealer under this Section unless and
13 until each principal of the dealer has passed an
14 examination conducted by the Secretary of State or a
15 self-regulatory organization of securities dealers or
16 similar person, which examination has been designated by
17 the Secretary of State by rule, regulation or order to
18 be satisfactory for purposes of determining whether the
19 applicant has sufficient knowledge of the securities
20 business and laws relating thereto to act as a registered
21 dealer. Any dealer who was registered on September 30,
22 1963, and has continued to be so registered; and any
23 principal of any registered dealer, who was acting in
24 such capacity on and continuously since September 30,
25 1963; and any individual who has previously passed a
26 securities dealer examination administered by the
27 Secretary of State or any examination designated by the
28 Secretary of State to be satisfactory for purposes of
29 determining whether the applicant has sufficient
30 knowledge of the securities business and laws relating
31 thereto to act as a registered dealer by rule, regulation
32 or order, shall not be required to pass an examination in
33 order to continue to act in such capacity. The Secretary
34 of State may by order waive the examination requirement
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1 for any principal of an applicant for registration under
2 this subsection B who has had such experience or
3 education relating to the securities business as may be
4 determined by the Secretary of State to be the equivalent
5 of such examination. Any request for such a waiver shall
6 be filed with the Secretary of State in such form as may
7 be prescribed by rule or regulation.
8 (b) Unless an applicant is a member of the body
9 corporate known as the Securities Investor Protection
10 Corporation established pursuant to the Act of Congress
11 of the United States known as the Securities Investor
12 Protection Act of 1970, as amended, or a member of an
13 association of dealers registered as a national
14 securities association pursuant to Section 15A of the
15 Federal 1934 Act, an applicant shall not be registered or
16 re-registered unless and until there is filed with the
17 Secretary of State evidence that such applicant has in
18 effect insurance or other equivalent protection for each
19 client's cash or securities held by such applicant, and
20 an undertaking that such applicant will continually
21 maintain such insurance or other protection during the
22 period of registration or re-registration. Such
23 insurance or other protection shall be in a form and
24 amount reasonably prescribed by the Secretary of State by
25 rule or regulation.
26 (9) The application for the registration of a
27 dealer shall be accompanied by a filing fee and a fee
28 for each branch office in this State, in each case in the
29 amount established pursuant to Section 11a of this Act,
30 which fees shall not be returnable in any event.
31 (10) The Secretary of State shall notify the dealer
32 by written notice (which may be by electronic,
33 telegraphic, or facsimile transmission) of the
34 effectiveness of the registration as a dealer in this
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1 State.
2 (11) Any change which renders no longer accurate
3 any information contained in any application for
4 registration or re-registration of a dealer shall be
5 reported to the Secretary of State within 10 business
6 days after the occurrence of such change; but in respect
7 to assets and liabilities only materially adverse changes
8 need be reported.
9 C. Any registered dealer, issuer, or controlling person
10 desiring to register a salesperson shall file an application
11 with the Secretary of State, in such form as the Secretary of
12 State may by rule or regulation prescribe, which the
13 salesperson is required by this Section to provide to the
14 dealer, issuer, or controlling person, executed, verified, or
15 authenticated by the salesperson setting forth or accompanied
16 by:
17 (1) The name, residence and business address of the
18 salesperson;
19 (2) Whether any federal or State license or
20 registration as dealer or salesperson has ever been
21 refused the salesperson or cancelled, suspended,
22 revoked, or withdrawn;
23 (3) The nature of employment with, and names and
24 addresses of, employers of the salesperson for the 10
25 years immediately preceding the date of application;
26 (4) A brief description of any civil or criminal
27 proceedings of which fraud is an essential element
28 pending against the salesperson, and whether the
29 salesperson has ever been convicted of a felony, or of
30 any misdemeanor of which fraud is an essential element;
31 (5) Such additional information as the Secretary of
32 State may by rule, regulation or order prescribe as
33 necessary to determine the salesperson's business repute
34 and qualification to act as a salesperson; and
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1 (6) No individual shall be registered or
2 re-registered as a salesperson under this Section unless
3 and until such individual has passed an examination
4 conducted by the Secretary of State or a self-regulatory
5 organization of securities dealers or similar person,
6 which examination has been designated by the Secretary of
7 State by rule, regulation or order to be satisfactory for
8 purposes of determining whether the applicant has
9 sufficient knowledge of the securities business and laws
10 relating thereto to act as a registered salesperson.
11 Any salesperson who was registered prior to
12 September 30, 1963, and has continued to be so
13 registered, and any individual who has passed a
14 securities salesperson examination administered by the
15 Secretary of State or an examination designated by the
16 Secretary of State by rule, regulation or order to be
17 satisfactory for purposes of determining whether the
18 applicant has sufficient knowledge of the securities
19 business and laws relating thereto to act as a registered
20 salesperson, shall not be required to pass an examination
21 in order to continue to act as a salesperson. The
22 Secretary of State may by order waive the examination
23 requirement for any applicant for registration under this
24 subsection C who has had such experience or education
25 relating to the securities business as may be determined
26 by the Secretary of State to be the equivalent of such
27 examination. Any request for such a waiver shall be
28 filed with the Secretary of State in such form as may be
29 prescribed by rule, regulation or order.
30 (7) The application for registration of a
31 salesperson shall be accompanied by a filing fee and a
32 Securities Audit and Enforcement Fund fee, each in the
33 amount established pursuant to Section 11a of this Act,
34 which shall not be returnable in any event.
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1 (8) Any change which renders no longer accurate any
2 information contained in any application for registration
3 or re-registration as a salesperson shall be reported to
4 the Secretary of State within 10 business days after the
5 occurrence of such change. If the activities are
6 terminated which rendered an individual a salesperson for
7 the dealer, issuer or controlling person, the dealer,
8 issuer or controlling person, as the case may be, shall
9 notify the Secretary of State, in writing, within 30 days
10 of the salesperson's cessation of activities, using the
11 appropriate termination notice form.
12 (9) A registered salesperson may transfer his or
13 her registration under this Section 8 for the unexpired
14 term thereof from one registered dealer to another by the
15 giving of notice of the transfer by the new registered
16 dealer to the Secretary of State in such form and subject
17 to such conditions as the Secretary of State shall by
18 rule or regulation prescribe. The new registered dealer
19 shall promptly file an application for registration of
20 such salesperson as provided in this subsection C,
21 accompanied by the filing fee prescribed by paragraph (7)
22 of this subsection C.
23 D. An application for registration as an investment
24 adviser, executed, verified, or authenticated by or on behalf
25 of the applicant, shall be filed with the Secretary of State,
26 in such form as the Secretary of State may by rule or
27 regulation prescribe, setting forth or accompanied by:
28 (1) The name and form of organization under which
29 the investment adviser engages or intends to engage in
30 business; the state or country and date of its
31 organization; the location of the adviser's principal
32 business office and branch offices, if any; the names and
33 addresses of the adviser's principal, partners, officers,
34 directors, and persons performing similar functions or,
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1 if the investment adviser is an individual, of the
2 individual; and the number of the adviser's employees who
3 perform investment advisory functions;
4 (2) The education, the business affiliations for
5 the past 10 years, and the present business affiliations
6 of the investment adviser and of the adviser's principal,
7 partners, officers, directors, and persons performing
8 similar functions and of any person controlling the
9 investment adviser;
10 (3) The nature of the business of the investment
11 adviser, including the manner of giving advice and
12 rendering analyses or reports;
13 (4) The nature and scope of the authority of the
14 investment adviser with respect to clients' funds and
15 accounts;
16 (5) The basis or bases upon which the investment
17 adviser is compensated;
18 (6) Whether the investment adviser or any
19 principal, partner, officer, director, person performing
20 similar functions or person controlling the investment
21 adviser (i) within 10 years of the filing of the
22 application has been convicted of a felony, or of any
23 misdemeanor of which fraud is an essential element, or
24 (ii) is permanently or temporarily enjoined by order or
25 judgment from acting as an investment adviser,
26 underwriter, dealer, principal or salesperson, or from
27 engaging in or continuing any conduct or practice in
28 connection with any such activity or in connection with
29 the purchase or sale of any security, and in each case
30 the facts relating to the conviction, order or judgment;
31 (7) (a) A statement as to whether the investment
32 adviser is engaged or is to engage primarily in the
33 business of rendering investment supervisory services;
34 and
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1 (b) A statement that the investment adviser will
2 furnish his, her, or its clients with such information as
3 the Secretary of State deems necessary in the form
4 prescribed by the Secretary of State by rule or
5 regulation;
6 (8) Such additional information as the Secretary of
7 State may, by rule, regulation or order prescribe as
8 necessary to determine the applicant's financial
9 responsibility, business repute and qualification to act
10 as an investment adviser.
11 (9) No applicant shall be registered or
12 re-registered as an investment adviser under this Section
13 unless and until each principal of the applicant who is
14 actively engaged in the conduct and management of the
15 applicant's advisory business in this State has passed an
16 examination or completed an educational program conducted
17 by the Secretary of State or an association of investment
18 advisers or similar person, which examination or
19 educational program has been designated by the Secretary
20 of State by rule, regulation or order to be satisfactory
21 for purposes of determining whether the applicant has
22 sufficient knowledge of the securities business and laws
23 relating thereto to conduct the business of a registered
24 investment adviser.
25 Any person who was a registered investment adviser
26 prior to September 30, 1963, and has continued to be so
27 registered, and any individual who has passed an
28 investment adviser examination administered by the
29 Secretary of State, or passed an examination or completed
30 an educational program designated by the Secretary of
31 State by rule, regulation or order to be satisfactory for
32 purposes of determining whether the applicant has
33 sufficient knowledge of the securities business and laws
34 relating thereto to conduct the business of a registered
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1 investment adviser, shall not be required to pass an
2 examination or complete an educational program in order
3 to continue to act as an investment adviser. The
4 Secretary of State may by order waive the examination or
5 educational program requirement for any applicant for
6 registration under this subsection D if the principal of
7 the applicant who is actively engaged in the conduct and
8 management of the applicant's advisory business in this
9 State has had such experience or education relating to
10 the securities business as may be determined by the
11 Secretary of State to be the equivalent of the
12 examination or educational program. Any request for a
13 waiver shall be filed with the Secretary of State in such
14 form as may be prescribed by rule or regulation.
15 (10) No applicant shall be registered or
16 re-registered as an investment adviser under this Section
17 8 unless (i) the application for registration or
18 re-registration is accompanied by a list of all persons
19 acting as investment adviser representatives on behalf of
20 the adviser and (ii) a Securities Audit and Enforcement
21 Fund fee that shall not be returnable in any event is
22 paid with respect to each investment adviser
23 representative. No fee, however, shall be required under
24 this paragraph if the investment adviser representative
25 is also registered as a salesperson and the Securities
26 Audit and Enforcement Fund fee required under subsection
27 C or subsection H of this Section has been paid to the
28 Secretary of State.
29 (11) The application for registration of an
30 investment adviser shall be accompanied by a filing fee
31 and a fee for each branch office in this State, in each
32 case in the amount established pursuant to Section 11a of
33 this Act, which fees shall not be returnable in any
34 event.
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1 (12) The Secretary of State shall notify the
2 investment adviser by written notice (which may be by
3 electronic, telegraphic, or facsimile transmission) of
4 the effectiveness of the registration as an investment
5 adviser in this State.
6 (13) Any change which renders no longer accurate
7 any information contained in any application for
8 registration or re-registration of an investment adviser
9 shall be reported to the Secretary of State within 10
10 business days after the occurrence of the change. In
11 respect to assets and liabilities of an investment
12 adviser that retains custody of clients' cash or
13 securities or accepts pre-payment of fees in excess of
14 $500 per client and 6 or more months in advance only
15 materially adverse changes need be reported by written
16 notice (which may be by telegraphic or facsimile
17 transmission) no later than the close of business on the
18 second business day following the discovery thereof.
19 (14) Each application for registration as an
20 investment adviser shall become effective automatically
21 on the 45th day following the filing of the application,
22 required documents or information, and payment of the
23 required fee unless (i) the Secretary of State has
24 registered the investment adviser prior to that date or
25 (ii) an action with respect to the applicant is pending
26 under Section 11 of this Act.
27 E. (1) Subject to the provisions of subsection F of
28 Section 11 of this Act, the registration of a dealer,
29 salesperson or investment adviser may be denied, suspended or
30 revoked if the Secretary of State finds that the dealer,
31 salesperson or investment adviser or any officer, director,
32 partner, member, trustee, manager or any person who performs
33 a similar function of the dealer or investment adviser:
34 (a) Has been convicted of any felony, or of any
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1 misdemeanor of which fraud is an essential element;
2 (b) Has engaged in any inequitable practice in the
3 offer or sale of securities or in any fraudulent business
4 practice;
5 (c) Has failed to account for any money or
6 property, or has failed to deliver any security, to any
7 person entitled thereto when due or within a reasonable
8 time thereafter;
9 (d) In the case of a dealer or investment adviser,
10 is insolvent;
11 (e) In the case of a dealer (i) has failed
12 reasonably to supervise the securities activities of any
13 of its salespersons and the failure has permitted or
14 facilitated a violation of Section 12 of this Act or (ii)
15 is offering or selling or has offered or sold securities
16 in this State through a salesperson other than a
17 registered salesperson, or, in the case of a salesperson,
18 is selling or has sold securities in this State for a
19 dealer, issuer or controlling person with knowledge that
20 the dealer, issuer or controlling person has not complied
21 with the provisions of this Act;
22 (f) In the case of an investment adviser, has
23 failed reasonably to supervise the advisory activities of
24 any of its employees and the failure has permitted or
25 facilitated a violation of Section 12 of this Act;
26 (g) Has violated any of the provisions of this Act;
27 (h) Has made any material misrepresentation to the
28 Secretary of State in connection with any information
29 deemed necessary by the Secretary of State to determine a
30 dealer's or investment adviser's financial responsibility
31 or a dealer's, investment adviser's or salesperson's
32 business repute or qualifications, or has refused to
33 furnish any such information requested by the Secretary
34 of State;
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1 (i) Has had a license or registration under any
2 Federal or State law regulating the offer or sale of
3 securities or commodity futures contracts, refused,
4 cancelled, suspended or withdrawn;
5 (j) Has been suspended or expelled from or refused
6 membership in or association with or limited in any
7 capacity by any self-regulatory organization registered
8 under the Federal 1934 Act or the Federal 1974 Act
9 arising from any fraudulent or deceptive act or a
10 practice in violation of any rule, regulation or standard
11 duly promulgated by the self-regulatory organization;
12 (k) Has had any order entered against it after
13 notice and opportunity for hearing by a securities agency
14 of any state, any foreign government or agency thereof,
15 the Securities and Exchange Commission, or the Federal
16 Commodities Futures Trading Commission arising from any
17 fraudulent or deceptive act or a practice in violation of
18 any statute, rule or regulation administered or
19 promulgated by the agency or commission;
20 (l) In the case of a dealer, fails to maintain a
21 minimum net capital in an amount which the Secretary of
22 State may by rule or regulation require;
23 (m) Has conducted a continuing course of dealing of
24 such nature as to demonstrate an inability to properly
25 conduct the business of the dealer, salesperson or
26 investment adviser;
27 (n) Has had, after notice and opportunity for
28 hearing, any injunction or order entered against it or
29 license or registration refused, cancelled, suspended,
30 revoked, withdrawn or limited by any state or federal
31 body, agency or commission regulating banking, insurance,
32 finance or small loan companies, real estate or mortgage
33 brokers or companies, if the action resulted from any act
34 found by the body, agency or commission to be a
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1 fraudulent or deceptive act or practice in violation of
2 any statute, rule or registration administered or
3 promulgated by the body, agency or commission;
4 (o) Has failed to file a return, or to pay the tax,
5 penalty or interest shown in a filed return, or to pay
6 any final assessment of tax, penalty or interest, as
7 required by any tax Act administered by the Illinois
8 Department of Revenue, until such time as the
9 requirements of that tax Act are satisfied;
10 (p) In the case of a natural person who is a
11 dealer, salesperson or investment adviser, has defaulted
12 on an educational loan guaranteed by the Illinois Student
13 Assistance Commission, until the natural person has
14 established a satisfactory repayment record as determined
15 by the Illinois Student Assistance Commission;
16 (q) Has failed to maintain the books and records
17 required under this Act or rules or regulations
18 promulgated under this Act within a reasonable time after
19 receiving notice of any deficiency;
20 (r) Has refused to allow or otherwise impeded
21 designees of the Secretary of State from conducting an
22 audit, examination, inspection, or investigation provided
23 for under Section 8 or 11 of this Act;
24 (s) Has failed to maintain any minimum net capital
25 or bond requirement set forth in this Act or any rule or
26 regulation promulgated under this Act;
27 (t) Has refused the Secretary of State or his or
28 her designee access to any office or location within an
29 office to conduct an investigation, audit, examination,
30 or inspection;
31 (u) Has advised or caused a public pension fund or
32 retirement system established under the Illinois Pension
33 Code to make an investment or engage in a transaction not
34 authorized by that Code.
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1 (2) If the Secretary of State finds that any registrant
2 or applicant for registration is no longer in existence or
3 has ceased to do business as a dealer, salesperson or
4 investment adviser, or is subject to an adjudication as a
5 person under legal disability or to the control of a
6 guardian, or cannot be located after reasonable search, or
7 has failed after written notice to pay to the Secretary of
8 State any additional fee prescribed by this Section or
9 specified by rule or regulation, or if a natural person, has
10 defaulted on an educational loan guaranteed by the Illinois
11 Student Assistance Commission, the Secretary of State may by
12 order cancel the registration or application.
13 (3) Withdrawal of an application for registration or
14 withdrawal from registration as a dealer, salesperson or
15 investment adviser becomes effective 30 days after receipt of
16 an application to withdraw or within such shorter period of
17 time as the Secretary of State may determine, unless any
18 proceeding is pending under Section 11 of this Act when the
19 application is filed or a proceeding is instituted within 30
20 days after the application is filed. If a proceeding is
21 pending or instituted, withdrawal becomes effective at such
22 time and upon such conditions as the Secretary of State by
23 order determines. If no proceeding is pending or instituted
24 and withdrawal automatically becomes effective, the Secretary
25 of State may nevertheless institute a revocation or
26 suspension proceeding within one year after withdrawal became
27 effective and enter a revocation or suspension order as of
28 the last date on which registration was effective.
29 F. The Secretary of State shall make available upon
30 request the date that each dealer, investment adviser or
31 salesperson was granted registration, together with the name
32 and address of the dealer or issuer on whose behalf the
33 salesperson is registered, and all orders of the Secretary of
34 State denying or abandoning an application, or suspending or
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1 revoking registration, or censuring the persons. The
2 Secretary of State may designate by rule, regulation or order
3 the statements, information or reports submitted to or filed
4 with him or her pursuant to this Section 8 which the
5 Secretary of State determines are of a sensitive nature and
6 therefore should be exempt from public disclosure. Any such
7 statement, information or report shall be deemed confidential
8 and shall not be disclosed to the public except upon the
9 consent of the person filing or submitting the statement,
10 information or report or by order of court or in court
11 proceedings.
12 G. The registration or re-registration of a dealer and
13 of all salespersons registered upon application of the dealer
14 shall expire on the next succeeding anniversary date of the
15 registration or re-registration of the dealer; and the
16 registration or re-registration of an investment adviser
17 shall expire on the next succeeding anniversary date of the
18 registration of the investment adviser; provided, that the
19 Secretary of State may by rule or regulation prescribe an
20 alternate date which any dealer registered under the Federal
21 1934 Act or a member of any self-regulatory association
22 approved pursuant thereto, or any investment adviser
23 registered under the Federal 1940 Investment Advisers Act may
24 elect as the expiration date of its dealer and salesperson
25 registrations, or the expiration date of its investment
26 adviser registration, as the case may be. A registration of
27 a salesperson registered upon application of an issuer or
28 controlling person shall expire on the next succeeding
29 anniversary date of the registration, or upon termination or
30 expiration of the registration of the securities, if any,
31 designated in the application for his or her registration or
32 the alternative date as the Secretary may prescribe by rule
33 or regulation. Subject to paragraph (9) of subsection C of
34 this Section 8, a salesperson's registration also shall
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1 terminate upon cessation of his or her employment, or
2 termination of his or her appointment or authorization, in
3 each case by the person who applied for the salesperson's
4 registration, provided that the Secretary of State may by
5 rule or regulation prescribe an alternate date for the
6 expiration of the registration.
7 H. Applications for re-registration of dealers,
8 salespersons and investment advisers shall be filed with the
9 Secretary of State not less than 7 days preceding the
10 expiration of the then current registration and shall contain
11 such information as may be required by the Secretary of State
12 upon initial application with such omission therefrom or
13 addition thereto as the Secretary of State may authorize or
14 prescribe. Each application for re-registration of a dealer
15 or investment adviser shall be accompanied by a filing fee
16 and each application for re-registration as a salesperson
17 shall be accompanied by a filing fee and a Securities Audit
18 and Enforcement Fund fee established pursuant to Section 11a
19 of this Act, which shall not be returnable in any event.
20 Notwithstanding the foregoing, (1) applications for
21 re-registration of dealers and investment advisers may be
22 filed within the 6 days next preceding the expiration of the
23 then current registration provided that the applicant pays
24 the annual registration fee for the year with respect to
25 which the re-registration is applicable together with an
26 additional amount equal to the annual registration fee; and
27 (2) applications for re-registration of dealers and
28 investment advisers may be filed within 30 days following the
29 expiration of the registration provided that the applicant
30 pays the annual registration fee together with an additional
31 amount equal to 2 times the annual registration fee and files
32 any other information or documents that the Secretary of
33 State may prescribe by rule or regulation or order. Any
34 application filed within 30 days following the expiration of
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1 the registration shall be automatically effective as of the
2 time of the earlier expiration provided that the proper fee
3 has been paid to the Secretary of State.
4 Each registered dealer or investment adviser shall
5 continue to be registered if the registrant changes his, her,
6 or its form of organization provided that the dealer or
7 investment adviser files an amendment to his, her, or its
8 application not later than 30 days following the occurrence
9 of the change and pays the Secretary of State a fee in the
10 amount established under Section 11a of this Act.
11 I. (1) Every registered dealer and investment adviser
12 shall make and keep for such periods, such accounts,
13 correspondence, memoranda, papers, books and records as the
14 Secretary of State may by rule or regulation prescribe. All
15 records so required shall be preserved for 3 years unless the
16 Secretary of State by rule, regulation or order prescribes
17 otherwise for particular types of records.
18 (2) Every registered dealer and investment adviser shall
19 file such financial reports as the Secretary of State may by
20 rule or regulation prescribe.
21 (3) All the books and records referred to in paragraph
22 (1) of this subsection I are subject at any time or from time
23 to time to such reasonable periodic, special or other audits,
24 examinations, or inspections by representatives of the
25 Secretary of State, within or without this State, as the
26 Secretary of State deems necessary or appropriate in the
27 public interest or for the protection of investors.
28 (4) At the time of an audit, examination, or inspection,
29 the Secretary of State, by his or her designees, may conduct
30 an interview of any person employed or appointed by or
31 affiliated with a registered dealer or investment advisor,
32 provided that the dealer or investment advisor shall be given
33 reasonable notice of the time and place for the interview.
34 At the option of the dealer or investment advisor, a
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1 representative of the dealer or investment advisor with
2 supervisory responsibility over the individual being
3 interviewed may be present at the interview.
4 J. The Secretary of State may require by rule or
5 regulation the payment of an additional fee for the filing of
6 information or documents required to be filed by this Section
7 which have not been filed in a timely manner. The Secretary
8 of State may also require by rule or regulation the payment
9 of an examination fee for administering any examination which
10 it may conduct pursuant to subsection B, C or D of this
11 Section 8.
12 K. The Secretary of State may declare any application
13 for registration under this Section 8 abandoned by order if
14 the applicant fails to pay any fee or file any information or
15 document required under this Section 8 or by rule or
16 regulation for more than 30 days after the required payment
17 or filing date. The applicant may petition the Secretary of
18 State for a hearing within 15 days after the applicant's
19 receipt of the order of abandonment, provided that the
20 petition sets forth the grounds upon which the applicant
21 seeks a hearing.
22 L. Any document being filed pursuant to this Section 8
23 shall be deemed filed, and any fee being paid pursuant to
24 this Section 8 shall be deemed paid, upon the date of actual
25 receipt thereof by the Secretary of State or his or her
26 designee.
27 M. The Secretary of State shall provide to the Illinois
28 Student Assistance Commission annually or at mutually agreed
29 periodic intervals the names and social security numbers of
30 natural persons registered under subsections B, C, and E of
31 this Section. The Illinois Student Assistance Commission
32 shall determine if any student loan defaulter is registered
33 as a dealer, salesperson, or investment adviser under this
34 Act and report its determination to the Secretary of State or
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1 his or her designee.
2 (Source: P.A. 88-494; 89-209, eff. 1-1-96; 89-626, eff.
3 8-9-96.)
4 Section 99. Effective date. This Act takes effect upon
5 becoming law.