Public Act 90-0507 of the 90th General Assembly
Public Act 90-0507
HB0023 Enrolled LRB9000434EGfg
AN ACT in relation to public employee pensions.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 2. The State Finance Act is amended by adding
Section 8f as follows:
(30 ILCS 105/8f new)
Sec. 8f. Public Pension Regulation Fund. The Public
Pension Regulation Fund is created in the State Treasury.
Except as otherwise provided in the Illinois Pension Code,
all money received by the Illinois Department of Insurance
under the Illinois Pension Code shall be paid into the Fund.
The State Treasurer promptly shall invest the money in the
Fund, and all earnings that accrue on the money in the Fund
shall be credited to the Fund. No money may be transferred
from this Fund to any other fund. The General Assembly may
make appropriations from this Fund for the ordinary and
contingent expenses of the Public Pension Division of the
Illinois Department of Insurance.
Section 3. The Public Funds Investment Act is amended
by changing Section 1 as follows:
(30 ILCS 235/1) (from Ch. 85, par. 901)
Sec. 1. The words "public funds", as used in this Act,
mean current operating funds, special funds, interest and
sinking funds, and funds of any kind or character belonging
to or in the custody of any public agency.
The words "public agency", as used in this Act, mean the
State of Illinois, the various counties, townships, cities,
towns, villages, school districts, educational service
regions, special road districts, public water supply
districts, fire protection districts, drainage districts,
levee districts, sewer districts, housing authorities, the
Illinois Bank Examiners' Education Foundation, the Chicago
Park District, and all other political corporations or
subdivisions of the State of Illinois, now or hereafter
created, whether herein specifically mentioned or not. This
Act does not apply to pension funds or retirement systems
established under the Illinois Pension Code, except as
otherwise provided in that Code.
(Source: P.A. 87-968.)
Section 4. The Illinois Pension Code is amended by
changing Sections 1-101.1, 1-113, 3-102, 3-132, 3-135, 3-143,
4-123, 4-128, and 4-134 and adding Sections 1-101.2, 1-101.3,
1-101.4, 1-113.1, 1-113.2, 1-113.3, 1-113.4, 1-113.5,
1-113.6, 1-113.7, 1-113.8, 1-113.9, 1-113.10, 1-113.11,
1-113.12, 1A-101, 1A-102, 1A-103, 1A-104, 1A-105, 1A-106,
1A-107, 1A-108, 1A-109, 1A-110, 1A-111, 1A-112, 1A-113,
3-108.2, 3-108.3, 4-105c, and 4-105d as follows:
(40 ILCS 5/1-101.1) (from Ch. 108 1/2, par. 1-101.1)
Sec. 1-101.1. Definitions. For purposes of this Article,
unless the context otherwise requires, the words defined in
the Sections following this Section and preceding Section
1-102 shall have meanings given in those Sections.:
(a) A person is a "Fiduciary" with respect to a
retirement system or pension fund established under this Code
to the extent that such person:
(i) exercises any discretionary authority or
discretionary control respecting management of such
retirement system or pension fund, or exercises any authority
or control respecting management or disposition of its
assets;
(ii) renders investment advice for a fee or other
compensation, direct or indirect, with respect to any moneys
or other property of such retirement system or pension fund,
or has any authority or responsibility to do so; or
(iii) has any discretionary authority or discretionary
responsibility in the administration of such retirement
system.
(b) A person is a "Party in interest" with respect to a
retirement system or pension fund established under this Code
if such person is:
(i) a fiduciary, counsel or employee of such retirement
system or pension fund;
(ii) a person providing services to such retirement
system or pension fund;
(iii) an employer, any of whose employees are covered by
such retirement system or pension fund;
(iv) an employee organization any of whose members are
covered by such retirement system or pension fund;
(v) a relative of any individual described in paragraph
(i) or (ii) above of this subsection (b); or
(vi) an employee, officer or director (or an individual
having powers or responsibilities similar to those of
officers or directors) of a person described in paragraphs
(ii), (iii) or (iv) above of this subsection (b), or of such
retirement system or pension fund.
(c) A person is an "Investment manager" with respect to
a retirement system or pension fund established under this
Code if such person:
(i) is a fiduciary appointed by the board of trustees of
a retirement system or pension fund in accordance with
Section 1-109.1;
(ii) has the power to manage, acquire or dispose of any
asset of the retirement system or pension fund;
(iii) is either -
(A) registered as an investment advisor under the
Investment Advisors Act of 1940 (15 U.S.C. 80b-1, et seq.);
(B) a bank, as defined in that Act; or
(C) an insurance company; and
(iv) has acknowledged in writing that he is a fiduciary
with respect to the retirement system or pension fund.
(Source: P.A. 82-960.)
(40 ILCS 5/1-101.2 new)
Sec. 1-101.2. Fiduciary. A person is a "fiduciary" with
respect to a pension fund or retirement system established
under this Code to the extent that the person:
(1) exercises any discretionary authority or
discretionary control respecting management of the
pension fund or retirement system, or exercises any
authority or control respecting management or disposition
of its assets;
(2) renders investment advice for a fee or other
compensation, direct or indirect, with respect to any
moneys or other property of the pension fund or
retirement system, or has any authority or responsibility
to do so; or
(3) has any discretionary authority or
discretionary responsibility in the administration of the
pension fund or retirement system.
(40 ILCS 5/1-101.3 new)
Sec. 1-101.3. Party in interest. A person is a "party in
interest" with respect to a pension fund or retirement system
established under this Code if the person is:
(1) a fiduciary, counsel, or employee of the
pension fund or retirement system, or a relative of such
a person;
(2) a person providing services to the pension fund
or retirement system, or a relative of such a person;
(3) an employer, any of whose employees are covered
by the pension fund or retirement system;
(4) an employee organization, any members of which
are covered by the pension fund or retirement system; or
(5) an employee, officer, or director (or an
individual having powers or responsibilities similar to
those of an officer or director) of the pension fund or
retirement system or of a person described under item
(2), (3), or (4) of this Section.
(40 ILCS 5/1-101.4 new)
Sec. 1-101.4. Investment adviser. A person is an
"investment adviser", "investment advisor", or "investment
manager" with respect to a pension fund or retirement system
established under this Code if the person:
(1) is a fiduciary appointed by the board of
trustees of the pension fund or retirement system in
accordance with Section 1-109.1;
(2) has the power to manage, acquire, or dispose of
any asset of the retirement system or pension fund;
(3) has acknowledged in writing that he or she is a
fiduciary with respect to the pension fund or retirement
system; and
(4) is at least one of the following: (i)
registered as an investment adviser under the federal
Investment Advisers Act of 1940 (15 U.S.C. 80b-1, et
seq.); (ii) registered as an investment adviser under the
Illinois Securities Law of 1953; (iii) a bank, as defined
in the Investment Advisers Act of 1940; or (iv) an
insurance company authorized to transact business in this
State.
(40 ILCS 5/1-113) (from Ch. 108 1/2, par. 1-113)
Sec. 1-113. Investment authority of certain pension
funds, not including those established under Article 3 or 4.
The investment authority of a board of trustees of a
retirement system or pension fund established under this Code
shall, if so provided in the Article establishing such
retirement system or pension fund, embrace the following
investments:
(1) Bonds, notes and other direct obligations of the
United States Government; bonds, notes and other obligations
of any United States Government agency or instrumentality,
whether or not guaranteed; and obligations the principal and
interest of which are guaranteed unconditionally by the
United States Government or by an agency or instrumentality
thereof.
(2) Obligations of the Inter-American Development Bank,
the International Bank for Reconstruction and Development,
the African Development Bank, the International Finance
Corporation, and the Asian Development Bank.
(3) Obligations of any state, or of any political
subdivision in Illinois, or of any county or city in any
other state having a population as shown by the last federal
census of not less than 30,000 inhabitants provided that such
political subdivision is not permitted by law to become
indebted in excess of 10% of the assessed valuation of
property therein and has not defaulted for a period longer
than 30 days in the payment of interest and principal on any
of its general obligations or indebtedness during a period of
10 calendar years immediately preceding such investment.
(4) Nonconvertible bonds, debentures, notes and other
corporate obligations of any corporation created or existing
under the laws of the United States or any state, district or
territory thereof, provided there has been no default on the
obligations of the corporation or its predecessor(s) during
the 5 calendar years immediately preceding the purchase.
(5) Obligations guaranteed by the Government of Canada,
or by any Province of Canada, or by any Canadian city with a
population of not less than 150,000 inhabitants, provided (a)
they are payable in United States currency and are exempt
from any Canadian withholding tax; (b) the investment in any
one issue of bonds shall not exceed 10% of the amount
outstanding; and (c) the total investments at book value in
Canadian securities shall be limited to 5% of the total
investment account of the board at book value.
(5.1) Direct obligations of the State of Israel for the
payment of money, or obligations for the payment of money
which are guaranteed as to the payment of principal and
interest by the State of Israel, or common or preferred stock
or notes issued by a bank owned or controlled in whole or in
part by the State of Israel, on the following conditions:
(a) The total investments in such obligations shall
not exceed 5% of the book value of the aggregate
investments owned by the board;
(b) The State of Israel shall not be in default in
the payment of principal or interest on any of its direct
general obligations on the date of such investment;
(c) The bonds, stock or notes, and interest thereon
shall be payable in currency of the United States;
(d) The bonds shall (1) contain an option for the
redemption thereof after 90 days from date of purchase or
(2) either become due 5 years from the date of their
purchase or be subject to redemption 120 days after the
date of notice for redemption;
(e) The investment in these obligations has been
approved in writing by investment counsel employed by the
board, which counsel shall be a national or state bank or
trust company authorized to do a trust business in the
State of Illinois, or an investment advisor qualified
under the federal Investment Advisors Act of 1940 and
registered under the Illinois Securities Act of 1953;
(f) The fund or system making the investment shall
have at least $5,000,000 of net present assets.
(6) Notes secured by mortgages under Sections 203, 207,
220 and 221 of the National Housing Act which are insured by
the Federal Housing Commissioner, or his successor assigns,
or debentures issued by such Commissioner, which are
guaranteed as to principal and interest by the Federal
Housing Administration, or agency of the United States
Government, provided the aggregate investment shall not
exceed 20% of the total investment account of the board at
book value, and provided further that the investment in such
notes under Sections 220 and 221 shall in no event exceed
one-half of the maximum investment in notes under this
paragraph.
(7) Loans to veterans guaranteed in whole or part by the
United States Government pursuant to Title III of the Act of
Congress known as the "Servicemen's Readjustment Act of
1944," 58 Stat. 284, 38 U.S.C. 693, as amended or
supplemented from time to time, provided such guaranteed
loans are liens upon real estate.
(8) Common and preferred stocks and convertible debt
securities authorized for investment of trust funds under the
laws of the State of Illinois, provided:
(a) the common stocks, except as provided in
subparagraph (g) (h), are listed on a national securities
exchange or board of trade, as defined in the federal
Securities Exchange Act of 1934, or quoted in the
National Association of Securities Dealers Automated
Quotation System (NASDAQ);
(b) the securities are of a corporation created or
existing under the laws of the United States or any
state, district or territory thereof;
(c) the corporation is not in arrears on payment of
dividends on its preferred stock;
(d) the total book value of all stocks and
convertible debt owned by any pension fund or retirement
system shall not exceed 40% of the aggregate book value
of all investments of such pension fund or retirement
system, except for that system governed by Article 17,
where the total of all stocks and convertible debt shall
not exceed 50% of the aggregate book value of all fund
investments;
(e) the book value of stock and convertible debt
investments in any one corporation shall not exceed 5% of
the total investment account at book value in which such
securities are held, determined as of the date of the
investment, and the investments in the stock of any one
corporation shall not exceed 5% of the total outstanding
stock of such corporation, and the investments in the
convertible debt of any one corporation shall not exceed
5% of the total amount of such debt that may be
outstanding;
(f) the straight preferred stocks or convertible
preferred stocks and convertible debt securities are
issued or guaranteed by a corporation whose common stock
qualifies for investment by the board; and
(g) that any common stocks not listed or quoted as
provided in subdivision 8(a) above be limited to the
following types of institutions: (a) any bank which is a
member of the Federal Deposit Insurance Corporation
having capital funds represented by capital stock,
surplus and undivided profits of at least $20,000,000;
(b) any life insurance company having capital funds
represented by capital stock, special surplus funds and
unassigned surplus totalling at least $50,000,000; and
(c) any fire or casualty insurance company, or a
combination thereof, having capital funds represented by
capital stock, net surplus and voluntary reserves of at
least $50,000,000.
(9) Withdrawable accounts of State chartered and federal
chartered savings and loan associations insured by the
Federal Savings and Loan Insurance Corporation; deposits or
certificates of deposit in State and national banks insured
by the Federal Deposit Insurance Corporation; and share
accounts or share certificate accounts in a State or federal
credit union, the accounts of which are insured as required
by the Illinois Credit Union Act or the Federal Credit Union
Act, as applicable.
No bank or savings and loan association shall receive
investment funds as permitted by this subsection (9), unless
it has complied with the requirements established pursuant to
Section 6 of the Public Funds Investment Act.
(10) Trading, purchase or sale of listed options on
underlying securities owned by the board.
(11) Contracts and agreements supplemental thereto
providing for investments in the general account of a life
insurance company authorized to do business in Illinois.
(12) Conventional mortgage pass-through securities which
are evidenced by interests in Illinois owner-occupied
residential mortgages, having not less than an "A" rating
from at least one national securities rating service. Such
mortgages may have loan-to-value ratios up to 95%, provided
that any amount over 80% is insured by private mortgage
insurance. The pool of such mortgages shall be insured by
mortgage guaranty or equivalent insurance, in accordance with
industry standards.
(13) Pooled or commingled funds managed by a national or
State bank which is authorized to do a trust business in the
State of Illinois, shares of registered investment companies
as defined in the federal Investment Company Act of 1940
which are registered under that Act, and separate accounts of
a life insurance company authorized to do business in
Illinois, where such pooled or commingled funds, shares, or
separate accounts are comprised of common or preferred
stocks, bonds, or money market instruments.
(14) Pooled or commingled funds managed by a national or
state bank which is authorized to do a trust business in the
State of Illinois, separate accounts managed by a life
insurance company authorized to do business in Illinois, and
commingled group trusts managed by an investment adviser
registered under the federal Investment Advisors Act of 1940
(15 U.S.C. 80b-1 et seq.) and under The Illinois Securities
Law of 1953, where such pooled or commingled funds, separate
accounts or commingled group trusts are comprised of real
estate or loans upon real estate secured by first or second
mortgages. The total investment in such pooled or commingled
funds, commingled group trusts and separate accounts shall
not exceed 10% of the aggregate book value of all investments
owned by the fund.
(15) Investment companies which (a) are registered as
such under the Investment Company Act of 1940, (b) are
diversified, open-end management investment companies and (c)
invest only in money market instruments.
(16) Up to 10% of the assets of the fund may be invested
in investments not included in paragraphs (1) through (15) of
this Section, provided that such investments comply with the
requirements and restrictions set forth in Sections 1-109,
1-109.1, 1-109.2, 1-110 and 1-111 of this Code.
The board shall have the authority to enter into such
agreements and to execute such documents as it determines to
be necessary to complete any investment transaction.
Any limitations herein set forth shall be applicable only
at the time of purchase and shall not require the liquidation
of any investment at any time.
All investments shall be clearly held and accounted for
to indicate ownership by such board. Such board may direct
the registration of securities in its own name or in the name
of a nominee created for the express purpose of registration
of securities by a national or state bank or trust company
authorized to conduct a trust business in the State of
Illinois.
Investments shall be carried at cost or at a book value
in accordance with accounting procedures approved by such
board. No adjustments shall be made in investment carrying
values for ordinary current market price fluctuations; but
reserves may be provided to account for possible losses or
unrealized gains as determined by such board.
The book value of investments held by any pension fund or
retirement system in one or more commingled investment
accounts shall be the cost of its units of participation in
such commingled account or accounts as recorded on the books
of such board.
(Source: P.A. 86-272; 87-575; 87-794; 87-895.)
(40 ILCS 5/1-113.1 new)
Sec. 1-113.1. Investment authority of pension funds
established under Article 3 or 4. The board of trustees of a
police pension fund established under Article 3 of this Code
or firefighter pension fund established under Article 4 of
this Code shall draw pension funds from the treasurer of the
municipality and, beginning January 1, 1998, invest any part
thereof in the name of the board in the items listed in
Sections 1-113.2 through 1-113.4 according to the limitations
and requirements of this Article. These investments shall be
made with the care, skill, prudence, and diligence that a
prudent person acting in like capacity and familiar with such
matters would use in the conduct of an enterprise of like
character with like aims.
Interest and any other income from the investments shall
be credited to the pension fund.
For the purposes of Sections 1-113.2 through 1-113.11,
the "net assets" of a pension fund include both the cash and
invested assets of the pension fund.
(40 ILCS 5/1-113.2 new)
Sec. 1-113.2. List of permitted investments for all
Article 3 or 4 pension funds. Any pension fund established
under Article 3 or 4 may invest in the following items:
(1) Interest bearing direct obligations of the United
States of America.
(2) Interest bearing obligations to the extent that they
are fully guaranteed or insured as to payment of principal
and interest by the United States of America.
(3) Interest bearing bonds, notes, debentures, or other
similar obligations of agencies of the United States of
America. For the purposes of this Section, "agencies of the
United States of America" includes: (i) the Federal National
Mortgage Association and the Student Loan Marketing
Association; (ii) federal land banks, federal intermediate
credit banks, federal farm credit banks, and any other entity
authorized to issue direct debt obligations of the United
States of America under the Farm Credit Act of 1971 or
amendments to that Act; (iii) federal home loan banks and the
Federal Home Loan Mortgage Corporation; and (iv) any agency
created by Act of Congress that is authorized to issue direct
debt obligations of the United States of America.
(4) Interest bearing savings accounts or certificates of
deposit, issued by federally chartered banks or savings and
loan associations, to the extent that the deposits are
insured by agencies or instrumentalities of the federal
government.
(5) Interest bearing savings accounts or certificates of
deposit, issued by State of Illinois chartered banks or
savings and loan associations, to the extent that the
deposits are insured by agencies or instrumentalities of the
federal government.
(6) Investments in credit unions, to the extent that the
investments are insured by agencies or instrumentalities of
the federal government.
(7) Interest bearing bonds of the State of Illinois.
(8) Pooled interest bearing accounts managed by the
Illinois Public Treasurer's Investment Pool in accordance
with the Deposit of State Moneys Act and interest bearing
funds or pooled accounts managed, operated, and administered
by banks, subsidiaries of banks, or subsidiaries of bank
holding companies in accordance with the laws of the State of
Illinois.
(9) Interest bearing bonds or tax anticipation warrants
of any county, township, or municipal corporation of the
State of Illinois.
(10) Direct obligations of the State of Israel, subject
to the conditions and limitations of item (5.1) of Section
1-113.
(11) Money market mutual funds managed by investment
companies that are registered under the federal Investment
Company Act of 1940 and the Illinois Securities Law of 1953
and are diversified, open-ended management investment
companies; provided that the portfolio of the money market
mutual fund is limited to the following:
(i) bonds, notes, certificates of indebtedness,
treasury bills, or other securities that are guaranteed
by the full faith and credit of the United States of
America as to principal and interest;
(ii) bonds, notes, debentures, or other similar
obligations of the United States of America or its
agencies; and
(iii) short term obligations of corporations
organized in the United States with assets exceeding
$400,000,000, provided that (A) the obligations mature no
later than 180 days from the date of purchase, (B) at the
time of purchase, the obligations are rated by at least 2
standard national rating services at one of their 3
highest classifications, and (C) the obligations held by
the mutual fund do not exceed 10% of the corporation's
outstanding obligations.
(12) General accounts of life insurance companies
authorized to transact business in Illinois.
(13) Any combination of the following, not to exceed 10%
of the pension fund's net assets:
(i) separate accounts that are managed by life
insurance companies authorized to transact business in
Illinois and are comprised of diversified portfolios
consisting of common or preferred stocks, bonds, or money
market instruments; and
(ii) separate accounts that are managed by
insurance companies authorized to transact business in
Illinois, and are comprised of real estate or loans upon
real estate secured by first or second mortgages.
(40 ILCS 5/1-113.3 new)
Sec. 1-113.3. List of additional permitted investments
for pension funds with net assets of $2,500,000 or more.
(a) In addition to the items in Section 3-113.2, a
pension fund established under Article 3 or 4 that has net
assets of at least $2,500,000 may invest a portion of its net
assets in the following items:
(1) Separate accounts that are managed by life insurance
companies authorized to transact business in Illinois and are
comprised of diversified portfolios consisting of common or
preferred stocks, bonds, or money market instruments.
(2) Mutual funds that meet the following requirements:
(i) the mutual fund is managed by an investment
company as defined and registered under the federal
Investment Company Act of 1940 and registered under the
Illinois Securities Law of 1953;
(ii) the mutual fund has been in operation for at
least 5 years;
(iii) the mutual fund has total net assets of $250
million or more; and
(iv) the mutual fund is comprised of diversified
portfolios of common or preferred stocks, bonds, or money
market instruments.
(b) A pension fund's total investment in the items
authorized under this Section shall not exceed 35% of the
market value of the pension fund's net present assets stated
in its most recent annual report on file with the Illinois
Department of Insurance.
(40 ILCS 5/1-113.4 new)
Sec. 1-113.4. List of additional permitted investments
for pension funds with net assets of $5,000,000 or more.
(a) In addition to the items in Sections 1-113.2 and
1-113.3, a pension fund established under Article 3 or 4 that
has net assets of at least $5,000,000 and has appointed an
investment adviser under Section 1-113.5 may, through that
investment adviser, invest a portion of its assets in common
and preferred stocks authorized for investments of trust
funds under the laws of the State of Illinois. The stocks
must meet all of the following requirements:
(1) The common stocks are listed on a national
securities exchange or board of trade (as defined in the
federal Securities Exchange Act of 1934 and set forth in
Section 3.G of the Illinois Securities Law of 1953) or
quoted in the National Association of Securities Dealers
Automated Quotation System National Market System (NASDAQ
NMS).
(2) The securities are of a corporation created or
existing under the laws of the United States or any
state, district, or territory thereof and the corporation
has been in existence for at least 5 years.
(3) The corporation has not been in arrears on
payment of dividends on its preferred stock during the
preceding 5 years.
(4) The market value of stock in any one
corporation does not exceed 5% of the cash and invested
assets of the pension fund, and the investments in the
stock of any one corporation do not exceed 5% of the
total outstanding stock of that corporation.
(5) The straight preferred stocks or convertible
preferred stocks are issued or guaranteed by a
corporation whose common stock qualifies for investment
by the board.
(6) The issuer of the stocks has been subject to
the requirements of Section 12 of the federal Securities
Exchange Act of 1934 and has been current with the filing
requirements of Sections 13 and 14 of that Act during the
preceding 3 years.
(b) A pension fund's total investment in the items
authorized under this Section and Section 1-113.3 shall not
exceed 35% of the market value of the pension fund's net
present assets stated in its most recent annual report on
file with the Illinois Department of Insurance.
(c) A pension fund that invests funds under this Section
shall electronically file with the Division any reports of
its investment activities that the Division may require, at
the times and in the format required by the Division.
(40 ILCS 5/1-113.5 new)
Sec. 1-113.5. Investment advisers and investment
services.
(a) The board of trustees of a pension fund may appoint
investment advisers as defined in Section 1-101.4. The board
of any pension fund investing in common or preferred stock
under Section 1-113.4 shall appoint an investment adviser
before making such investments.
The investment adviser shall be a fiduciary, as defined
in Section 1-101.2, with respect to the pension fund and
shall be one of the following:
(1) an investment adviser registered under the
federal Investment Advisers Act of 1940 and the Illinois
Securities Law of 1953;
(2) a bank or trust company authorized to conduct a
trust business in Illinois;
(3) a life insurance company authorized to transact
business in Illinois; or
(4) an investment company as defined and registered
under the federal Investment Company Act of 1940 and
registered under the Illinois Securities Law of 1953.
(b) All investment advice and services provided by an
investment adviser appointed under this Section shall be
rendered pursuant to a written contract between the
investment adviser and the board, and in accordance with the
board's investment policy.
The contract shall include all of the following:
(1) acknowledgement in writing by the investment
adviser that he or she is a fiduciary with respect to the
pension fund;
(2) the board's investment policy;
(3) full disclosure of direct and indirect fees,
commissions, penalties, and any other compensation that
may be received by the investment adviser, including
reimbursement for expenses; and
(4) a requirement that the investment adviser
submit periodic written reports, on at least a quarterly
basis, for the board's review at its regularly scheduled
meetings. All returns on investment shall be reported as
net returns after payment of all fees, commissions, and
any other compensation.
(c) Within 30 days after appointing an investment
adviser, the board shall submit a copy of the contract to the
Department of Insurance.
(d) Investment services provided by a person other than
an investment adviser appointed under this Section, including
but not limited to services provided by the kinds of persons
listed in items (1) through (4) of subsection (a), shall be
rendered only after full written disclosure of direct and
indirect fees, commissions, penalties, and any other
compensation that shall or may be received by the person
rendering those services.
(e) The board of trustees of each pension fund shall
retain records of investment transactions in accordance with
the rules of the Department of Insurance.
(40 ILCS 5/1-113.6 new)
Sec. 1-113.6. Investment policies. Every board of
trustees of a pension fund shall adopt a written investment
policy and file a copy of that policy with the Department of
Insurance within 30 days after its adoption. Whenever a
board changes its investment policy, it shall file a copy of
the new policy with the Department within 30 days.
(40 ILCS 5/1-113.7 new)
Sec. 1-113.7. Registration of investments; custody and
safekeeping. The board of trustees may register the
investments of its pension fund in the name of the pension
fund, in the nominee name of a bank or trust company
authorized to conduct a trust business in Illinois, or in the
nominee name of the Illinois Public Treasurer's Investment
Pool.
The assets of the pension fund and ownership of its
investments shall be protected through third-party custodial
safekeeping. The board of trustees may appoint as custodian
of the investments of its pension fund the treasurer of the
municipality, a bank or trust company authorized to conduct a
trust business in Illinois, or the Illinois Public
Treasurer's Investment Pool.
A dealer may not maintain possession of or control over
securities of a pension fund subject to the provisions of
this Section unless it is registered as a broker-dealer with
the U.S. Securities and Exchange Commission and is a member
in good standing of the National Association of Securities
Dealers, and (1) with respect to securities that are not
issued only in book-entry form, (A) all such securities of
each fund are either held in safekeeping in a place
reasonably free from risk of destruction or held in custody
by a securities depository that is a "clearing agency"
registered with the U.S. Securities and Exchange Commission,
(B) the dealer is a member of the Securities Investor
Protection Corporation, (C) the dealer sends to each fund, no
less frequently than each calendar quarter, an itemized
statement showing the moneys and securities in the custody or
possession of the dealer at the end of such period, and (D)
an independent certified public account conducts an audit, no
less frequently than each calendar year, that reviews the
dealer's internal accounting controls and procedures for
safeguarding securities; and (2) with respect to securities
that are issued only in book-entry form, (A) all such
securities of each fund are held either in a securities
depository that is a "clearing agency" registered with the
U.S. Securities and Exchange Commission or in a bank that is
a member of the Federal Reserve System, (B) the dealer
records the ownership interest of the funds in such
securities on the dealer's books and records, (C) the dealer
is a member of the Securities Investor Protection
Corporation, (D) the dealer sends to each fund, no less
frequently than each calendar quarter, an itemized statement
showing the moneys and securities in the custody or
possession of the dealer at the end of such period, and (E)
the dealer's financial statement (which shall contain among
other things a statement of the dealer's net capital and its
required net capital computed in accordance with Rule 15c3-1
under the Securities Exchange Act of 1934) is audited
annually by an independent certified public accountant, and
the dealer's most recent audited financial statement is
furnished to the fund. No broker-dealer serving as a
custodian for any public pension fund as provided by this Act
shall be authorized to serve as an investment advisor for
that same public pension fund as described in Section 1-101.4
of this Code, to the extent that the investment advisor
acquires or disposes of any asset of that same public pension
fund. Notwithstanding the foregoing, in no event may a
broker or dealer that is a natural person maintain possession
of or control over securities or other assets of a pension
fund subject to the provisions of this Section. In
maintaining securities of a pension fund subject to the
provisions of this Section, each dealer must maintain those
securities in conformity with the provisions of Rule
15c3-3(b) of the Securities Exchange Act of 1934 (Physical
Possession or Control of Securities). The Director of the
Department of Insurance may adopt such rules and regulations
as shall be necessary and appropriate in his or her judgment
to effectuate the purposes of this Section.
A bank or trust company authorized to conduct a trust
business in Illinois shall register, deposit, or hold
investments for safekeeping, all in accordance with the
obligations and subject to the limitations of the Securities
in Fiduciary Accounts Act.
(40 ILCS 5/1-113.8 new)
Sec. 1-113.8. Limitations on banks and savings and loan
associations. A bank or savings and loan association shall
not receive investment funds from a pension fund established
under Article 3 or 4 of this Code, unless it has complied
with the requirements established under Section 6 of the
Public Funds Investment Act. The limitations set forth in
that Section 6 are applicable only at the time of investment
and do not require the liquidation of any investment at any
time.
(40 ILCS 5/1-113.9 new)
Sec. 1-113.9. Illegal investments. A person registered
as a dealer, salesperson, or investment adviser under the
Illinois Securities Law of 1953 who sells a pension fund a
security, or engages in a transaction with a pension fund,
that is not authorized by this Code, shall be subject to the
penalty provisions of Subsection E of Section 8 of the
Illinois Securities Law of 1953, if (1) the dealer,
salesperson, or investment adviser has discretionary
authority or control over the fund's assets and has
acknowledged in writing that it is acting in a fiduciary
capacity for the fund, (2) the fund has requested the
investment advice of the dealer, salesperson, or investment
adviser and has provided the dealer, salesperson, or
investment adviser with its investment policy, and the
dealer, salesperson, or investment adviser acknowledges in
writing that the fund is relying primarily on the investment
advice of that dealer, salesperson, or investment adviser, or
(3) the dealer, salesperson, or investment adviser knows or
has reason to know that the fund is not capable of
independently evaluating investment risk or exercising
independent judgment with respect to a particular securities
transaction, and nonetheless recommends that the fund engage
in that transaction.
A bank or trust company authorized to conduct a trust
business in Illinois or a broker-dealer, and any officer,
director, or employee thereof, that advises or causes a
pension fund to make an investment or engages in a
transaction not authorized by this Code is subject to the
penalty provisions of Article V of the Corporate Fiduciary
Act.
(40 ILCS 5/1-113.10 new)
Sec. 1-113.10. Legality at time of investment. The
investment limitations set forth in this Article are
applicable only at the time of investment and do not require
the liquidation of any investment at any time. However, no
additional pension funds may be invested in any investment
item while the market value of the pension fund's investments
in that item meets or exceeds the applicable limitation.
(40 ILCS 5/1-113.11 new)
Sec. 1-113.11. Rules. The Department of Insurance is
authorized to promulgate rules that are necessary or useful
for the administration and enforcement of Sections 1-113.1
through 1-113.10 of this Article.
(40 ILCS 5/1-113.12 new)
Sec. 1-113.12. Application. Sections 1-113.1 through
1-113.10 apply only to pension funds established under
Article 3 or 4 of this Code.
(40 ILCS 5/Art. 1A heading new)
ARTICLE 1A. REGULATION OF PUBLIC PENSION FUNDS
(40 ILCS 5/1A-101 new)
Sec. 1A-101. Creation of Public Pension Division. There
is created in the Department of Insurance a Public Pension
Division which, under the supervision and direction of the
Director of Insurance, shall exercise the powers and perform
the duties and functions prescribed under this Code. The
Division shall consist of an administrator, a supervisor, a
technical staff trained in the fundamentals of public pension
fund planning, operations, administration, and investment of
public pension funds, and such other personnel as may be
necessary properly and effectively to discharge the functions
of the Division.
(40 ILCS 5/1A-102 new)
Sec. 1A-102. Definitions. As used in this Article, the
following terms have the meanings ascribed to them in this
Section, unless the context otherwise requires:
"Accrued liability" means the actuarial present value of
future benefit payments and appropriate administrative
expenses under a plan, reduced by the actuarial present value
of all future normal costs (including any participant
contributions) with respect to the participants included in
the actuarial valuation of the plan.
"Actuarial present value" means the single amount, as of
a given valuation date, that results from applying actuarial
assumptions to an amount or series of amounts payable or
receivable at various times.
"Actuarial value of assets" means the value assigned by
the actuary to the assets of a plan for the purposes of an
actuarial valuation.
"Basis point" means 1/100th of one percent.
"Beneficiary" means a person eligible for or receiving
benefits from a pension fund as provided in the Article of
this Code under which the fund is established.
"Credited projected benefit" means that portion of a
participant's projected benefit based on an allocation taking
into account service to date determined in accordance with
the terms of the plan based on anticipated future
compensation.
"Current value" means the fair market value when
available; otherwise, the fair value as determined in good
faith by a trustee, assuming an orderly liquidation at the
time of the determination.
"Department" means the Department of Insurance of the
State of Illinois.
"Director" means the Director of the Department of
Insurance.
"Division" means the Public Pension Division of the
Department of Insurance.
"Governmental unit" means the State of Illinois, any
instrumentality or agency thereof (except transit authorities
or agencies operating within or within and without cities
with a population over 3,000,000), and any political
subdivision or municipal corporation that establishes and
maintains a public pension fund.
"Normal cost" means that part of the actuarial present
value of all future benefit payments and appropriate
administrative expenses assigned to the current year under
the actuarial valuation method used by the plan (excluding
any amortization of the unfunded accrued liability).
"Participant" means a participating member or deferred
pensioner or annuitant of a pension fund as provided in the
Article of this Code under which the pension fund is
established, or a beneficiary thereof.
"Pension fund" means any public pension fund, annuity and
benefit fund, or retirement system established under this
Code.
"Plan year" means the calendar or fiscal year on which
the records of a given plan are kept.
"Projected benefits" means benefit amounts under a plan
which are expected to be paid at various future times under a
particular set of actuarial assumptions, taking into account,
as applicable, the effect of advancement in age and past and
anticipated future compensation and service credits.
"Supplemental annual cost" means that portion of the
unfunded accrued liability assigned to the current year under
one of the following bases:
(1) interest only on the unfunded accrued
liability;
(2) the level annual amount required to amortize
the unfunded accrued liability over a period not
exceeding 40 years;
(3) the amount required for the current year to
amortize the unfunded accrued liability over a period not
exceeding 40 years as a level percentage of payroll.
"Total annual cost" means the sum of the normal cost plus
the supplemental annual cost.
"Unfunded accrued liability" means the excess of the
accrued liability over the actuarial value of the assets of a
plan.
"Vested pension benefit" means an interest obtained by a
participant or beneficiary in that part of an immediate or
deferred benefit under a plan which arises from the
participant's service and is not conditional upon the
participant's continued service for an employer any of whose
employees are covered under the plan, and which has not been
forfeited under the terms of the plan.
(40 ILCS 5/1A-103 new)
Sec. 1A-103. Rules. The Department is authorized to
promulgate rules necessary for the administration and
enforcement of this Code. Except as otherwise provided under
this Code, these rules shall apply only to pension funds
established under Article 3 or Article 4 of this Code. Rules
adopted pursuant to this Section shall govern where conflict
with local rules and regulations exists.
(40 ILCS 5/1A-104 new)
Sec. 1A-104. Examinations and investigations.
(a) The Division shall make periodic examinations and
investigations of all pension funds established under this
Code and maintained for the benefit of employees and officers
of governmental units in the State of Illinois. However, in
lieu of making an examination and investigation, the Division
may accept and rely upon a report of audit or examination of
any pension fund made by an independent certified public
accountant pursuant to the provisions of the Article of this
Code governing the pension fund. The acceptance of the
report of audit or examination does not bar the Division from
making a further audit, examination, and investigation if
deemed necessary by the Division.
The Department may implement a flexible system of
examinations under which it directs resources as it deems
necessary or appropriate. In consultation with the pension
fund being examined, the Division may retain attorneys,
independent actuaries, independent certified public
accountants, and other professionals and specialists as
examiners, the cost of which (except in the case of pension
funds established under Article 3 or 4) shall be borne by the
pension fund that is the subject of the examination.
(b) The Division shall examine or investigate each
pension fund established under Article 3 or Article 4 of this
Code.
Each examination shall include the following:
(1) an audit of financial transactions, investment
policies, and procedures;
(2) an examination of books, records, documents,
files, and other pertinent memoranda relating to
financial, statistical, and administrative operations;
(3) a review of policies and procedures maintained
for the administration and operation of the pension fund;
(4) a determination of whether or not full effect
is being given to the statutory provisions governing the
operation of the pension fund;
(5) a determination of whether or not the
administrative policies in force are in accord with the
purposes of the statutory provisions and effectively
protect and preserve the rights and equities of the
participants; and
(6) a determination of whether or not proper
financial and statistical records have been established
and adequate documentary evidence is recorded and
maintained in support of the several types of annuity and
benefit payments being made.
In addition, the Division may conduct investigations,
which shall be identified as such and which may include one
or more of the items listed in this subsection.
A copy of the report of examination or investigation as
prepared by the Division shall be submitted to the secretary
of the board of trustees of the pension fund examined or
investigated. The Director, upon request, shall grant a
hearing to the officers or trustees of the pension fund or
their duly appointed representatives, upon any facts
contained in the report of examination. The hearing shall be
conducted before filing the report or making public any
information contained in the report. The Director may
withhold the report from public inspection for up to 60 days
following the hearing.
(40 ILCS 5/1A-105 new)
Sec. 1A-105. Examination and subpoena of records and
witnesses. The Director may administer oaths and
affirmations and summon and compel the attendance before him
or her and examine under oath any officer, trustee, agent,
actuary, attorney, or employee connected either directly or
indirectly with any pension fund, or any other person having
information regarding the condition, affairs, management,
administration, or methods of conducting a pension fund. The
Director may require any person having possession of any
record, book, paper, contract, or other document pertaining
to a pension fund to surrender it or to otherwise afford the
Director access to it and for failure so to do the Director
may attach the same.
Should any person fail to obey the summons of the
Director or refuse to surrender to him or her or afford him
or her access to any such record, book, paper, contract, or
other document, the Director may apply to the circuit court
of the county in which the principal office of the pension
fund involved is located, and the court, if it finds that the
Director has not exceeded his or her authority in the matter,
may, by order duly entered, require the attendance of
witnesses and the production of all relevant documents
required by the Director in carrying out his or her
responsibilities under this Code. Upon refusal or neglect to
obey the order of the court, the court may compel obedience
by proceedings for contempt of court.
(40 ILCS 5/1A-106 new)
Sec. 1A-106. Advisory services. The Division shall
render advisory services to the pension funds on all matters
pertaining to their operations and shall recommend any
corrective or clarifying legislation that it may deem
necessary. These recommendations shall be made in the report
of examination of the particular pension fund and in the
biennial report to the General Assembly under Section 1A-108.
The recommendations may embrace all substantive legislative
and administrative policies, including, but not limited to,
matters dealing with the payment of annuities and benefits,
the investment of funds, and the condition of the books,
records, and accounts of the pension fund.
(40 ILCS 5/1A-107 new)
Sec. 1A-107. Automation of services. The Division shall
automate its operations, services, and communications to the
fullest practical extent. This automation shall include, but
need not be limited to, the acquisition, use, and maintenance
of electronic data processing technology to (i) automate
Division operations as necessary to carry out its duties and
responsibilities under this Code, (ii) provide by FY 2000
electronic exchange of information between the Division and
pension funds subject to this Code, (iii) provide to pension
funds and the general public and receive from pension funds
and the general public data on computer processible media,
and (iv) control access to information when necessary to
protect the confidentiality of persons identified in the
information.
The Division shall ensure that this automation is
designed so as to protect any confidential data it may
receive from a pension fund. This Section does not authorize
the Division or the Department of Insurance to disclose any
information identifying specific pension fund participants or
relating to an identifiable pension fund participant.
(40 ILCS 5/1A-108 new)
Sec. 1A-108. Report to the Governor and General Assembly.
On or before October 1 following the convening of a regular
session of the General Assembly, the Division shall submit a
report to the Governor and General Assembly setting forth the
latest financial statements on the pension funds operating in
the State of Illinois, a summary of the current provisions
underlying these funds, and a report on any changes that have
occurred in these provisions since the date of the last such
report submitted by the Division.
The report shall also include the results of examinations
made by the Division of any pension fund and any specific
recommendations for legislative and administrative correction
that the Division deems necessary. The report may embody
general recommendations concerning desirable changes in any
existing pension, annuity, or retirement laws designed to
standardize and establish uniformity in their basic
provisions and to bring about an improvement in the financial
condition of the pension funds. The purposes of these
recommendations and the objectives sought shall be clearly
expressed in the report.
The requirement for reporting to the General Assembly
shall be satisfied by filing copies of the report with the
Speaker, the Minority Leader, and the Clerk of the House of
Representatives, the President, the Minority Leader, and the
Secretary of the Senate, and the Legislative Research Unit,
as required by Section 3.1 of the General Assembly
Organization Act, and filing additional copies with the State
Government Report Distribution Center for the General
Assembly as required under paragraph (t) of Section 7 of the
State Library Act.
Upon request, the Division shall distribute additional
copies of the report at no charge to the secretary of each
pension fund established under Article 3 or 4, the treasurer
or fiscal officer of each municipality with an established
police or firefighter pension fund, the executive director of
every other pension fund established under this Code, and to
public libraries, State agencies, and police, firefighter,
and municipal organizations active in the public pension
area.
(40 ILCS 5/1A-109 new)
Sec. 1A-109. Annual statements by pension funds. Each
pension fund shall furnish to the Division an annual
statement in a format prepared by the Division. The Division
shall design the form and prescribe the content of the annual
statement and, at least 60 days prior to the filing date,
shall furnish the form to each pension fund for completion.
The annual statement shall be prepared by each fund, properly
certified by its officers, and submitted to the Division
within 6 months following the close of the fiscal year of the
pension fund.
The annual statement shall include, but need not be
limited to, the following:
(1) a financial balance sheet as of the close of
the fiscal year;
(2) a statement of income and expenditures;
(3) an actuarial balance sheet;
(4) statistical data reflecting age, service, and
salary characteristics concerning all participants;
(5) special facts concerning disability or other
claims;
(6) details on investment transactions that
occurred during the fiscal year covered by the report;
(7) details on administrative expenses; and
(8) such other supporting data and schedules as in
the judgement of the Division may be necessary for a
proper appraisal of the financial condition of the
pension fund and the results of its operations. The
annual statement shall also specify the actuarial and
interest tables used in the operation of the pension
fund.
A pension fund that fails to file its annual statement
within the time prescribed under this Section is subject to
the penalty provisions of Section 1A-113.
(40 ILCS 5/1A-110 new)
Sec. 1A-110. Actuarial statements by pension funds
established under Articles other than 3 or 4.
(a) Each pension fund established under an Article of
this Code other than Article 3 or 4 shall include as part of
its annual statement a complete actuarial statement
applicable to the plan year.
The actuarial statement shall be filed with the Division
within 9 months after the close of the fiscal year of the
pension fund. Any pension fund that fails to file within
that time is subject to the penalty provisions of Section
1A-113.
The board of trustees of each pension fund subject to
this Section, on behalf of all its participants, shall engage
an enrolled actuary who shall be responsible for the
preparation of the materials comprising the actuarial
statement. The enrolled actuary shall utilize such
assumptions and methods as are necessary for the contents of
the matters reported in the actuarial statement to be
reasonably related to the experience of the plan and to
reasonable expectations, and to represent in the aggregate
the actuary's best estimate of anticipated experience under
the plan.
The actuarial statement shall include a description of
the actuarial assumptions and methods used to determine the
actuarial values in the statement and shall disclose the
impact of significant changes in the actuarial assumptions
and methods, plan provisions, and other pertinent factors on
the actuarial position of the plan.
The actuarial statement shall include a statement by the
enrolled actuary that to the best of his or her knowledge the
actuarial statement is complete and accurate and has been
prepared in accordance with generally accepted actuarial
principles and practice.
For the purposes of this Section, "enrolled actuary"
means an actuary who (1) is a member of the Society of
Actuaries or the American Academy of Actuaries and (2) either
is enrolled under Subtitle C of Title III of the Employee
Retirement Income Security Act of 1974 or was engaged in
providing actuarial services to a public retirement plan in
Illinois on July 1, 1983.
(b) The actuarial statement referred to in subsection
(a) shall include all of the following:
(1) The dates of the plan year and the date of the
actuarial valuation applicable to the plan year for which
the actuarial statement is filed.
(2) The amount of (i) the contributions made by the
participants, and (ii) all other contributions, including
those made by the employer or employers.
(3) The total estimated amount of the covered
compensation with respect to active participants for the
plan year for which the statement is filed.
(4) The number of (i) active participants, (ii)
terminated participants currently eligible for deferred
vested pension benefits or the return of contributions
made by those participants, and (iii) all other
participants and beneficiaries included in the actuarial
valuation.
(5) The following values as of the date of the
actuarial valuation applicable to the plan year for which
the statement is filed:
(i) The current value of assets accumulated in
the plan.
(ii) The unfunded accrued liability. The
major factors that have resulted in the change in
the unfunded accrued liability from the previous
year shall be identified. Effects that are
individually significant shall be separately
identified. As a minimum, the effect of the
following shall be shown: plan amendments; changes
in actuarial assumptions; experience less (or more)
favorable than that assumed; and contributions less
(or more) than the normal cost plus interest on the
unfunded accrued liability.
(iii) The amount of accumulated contributions
for active participants (including interest, if
any).
(iv) The actuarial present value of credited
projected benefits for vested participants currently
receiving benefits, other vested participants, and
non-vested participants.
(6) The actuarial value of assets.
(7) Any other information that is necessary to
fully and fairly disclose the actuarial position of the
plan and any other information the enrolled actuary may
present.
(8) Any other information regarding the plan that
the Division may by rule request.
(40 ILCS 5/1A-111 new)
Sec. 1A-111. Actuarial statements by pension funds
established under Article 3 or 4.
(a) Each pension fund established under Article 3 or 4
of this Code shall include as part of its annual statement a
complete actuarial statement applicable to the plan year.
If the actuarial statement is prepared by a person other
than the Department, it shall be filed with the Division
within 9 months after the close of the fiscal year of the
pension fund. Any pension fund that fails to file within
that time shall be subject to the penalty provisions of
Section 1A-113. The statement shall be prepared by or under
the supervision of a qualified actuary, signed by the
qualified actuary, and contain such information as the
Division may by rule require.
(b) For the purposes of this Section, "qualified
actuary" means (i) a member of the American Academy of
Actuaries, or (ii) an individual who has demonstrated to the
satisfaction of the Director that he or she has the
educational background necessary for the practice of
actuarial science and has at least 7 years of actuarial
experience.
(40 ILCS 5/1A-112 new)
Sec. 1A-112. Fees.
(a) Every pension fund that is required to file an
annual statement under Section 1A-109 shall pay to the
Department an annual compliance fee. In the case of a
pension fund under Article 3 or 4 of this Code, the annual
compliance fee shall be 0.007% (0.7 basis points) of the
total assets of the pension fund, as reported in the most
current annual statement of the fund, but not more than
$6,000. In the case of all other pension funds and
retirement systems, the annual compliance fee shall be
$6,000.
(b) The annual compliance fee shall be due on June 30
for the following State fiscal year, except that the fee
payable in 1997 for fiscal year 1998 shall be due no earlier
than 30 days following the effective date of this amendatory
Act of 1997.
(c) Any information obtained by the Division that is
available to the public under the Freedom of Information Act
and is either compiled in published form or maintained on a
computer processible medium shall be furnished upon the
written request of any applicant and the payment of a
reasonable information services fee established by the
Director, sufficient to cover the total cost to the Division
of compiling, processing, maintaining, and generating the
information. The information may be furnished by means of
published copy or on a computer processed or computer
processible medium.
No fee may be charged to any person for information that
the Division is required by law to furnish to that person.
(d) Except as otherwise provided in this Section, all
fees and penalties collected by the Department under this
Code shall be deposited into the Public Pension Regulation
Fund.
(e) Fees collected under subsection (c) of this Section
and money collected under Section 1A-107 shall be deposited
into the Department's Statistical Services Revolving Fund and
credited to the account of the Public Pension Division. This
income shall be used exclusively for the purposes set forth
in Section 1A-107. Notwithstanding the provisions of Section
408.2 of the Illinois Insurance Code, no surplus funds
remaining in this account shall be deposited in the Insurance
Financial Regulation Fund. All money in this account that
the Director certifies is not needed for the purposes set
forth in Section 1A-107 of this Code shall be transferred to
the Public Pension Regulation Fund.
(f) Nothing in this Code prohibits the General Assembly
from appropriating funds from the General Revenue Fund to the
Department for the purpose of administering or enforcing this
Code.
(40 ILCS 5/1A-113 new)
Sec. 1A-113. Penalties.
(a) A pension fund that fails, without just cause, to
file its annual statement within the time prescribed under
Section 1A-109 shall pay to the Department a penalty to be
determined by the Department, which shall not exceed $100 for
each day's delay.
(b) A pension fund that fails, without just cause, to
file its actuarial statement within the time prescribed under
Section 1A-110 or 1A-111 shall pay to the Department a
penalty to be determined by the Department, which shall not
exceed $100 for each day's delay.
(c) A pension fund that fails to pay a fee within the
time prescribed under Section 1A-112 shall pay to the
Department a penalty of 5% of the amount of the fee for each
month or part of a month that the fee is late. The entire
penalty shall not exceed 25% of the fee due.
(d) This subsection applies to any governmental unit, as
defined in Section 1A-102, that is subject to any law
establishing a pension fund or retirement system for the
benefit of employees of the governmental unit.
Whenever the Division determines by examination,
investigation, or in any other manner that the governing body
or any elected or appointed officer or official of a
governmental unit has failed to comply with any provision of
that law:
(1) The Director shall notify in writing the
governing body, officer, or official of the specific
provision or provisions of the law with which the person
has failed to comply.
(2) Upon receipt of the notice, the person notified
shall take immediate steps to comply with the provisions
of law specified in the notice.
(3) If the person notified fails to comply within a
reasonable time after receiving the notice, the Director
may hold a hearing at which the person notified may show
cause for noncompliance with the law.
(4) If upon hearing the Director determines that
good and sufficient cause for noncompliance has not been
shown, the Director may order the person to submit
evidence of compliance within a specified period of not
less than 30 days.
(5) If evidence of compliance has not been
submitted to the Director within the period of time
prescribed in the order and no administrative appeal from
the order has been initiated, the Director may assess a
civil penalty of up to $2,000 against the governing body,
officer, or official for each noncompliance with an order
of the Director.
The Director shall develop by rule, with as much
specificity as practicable, the standards and criteria to be
used in assessing penalties and their amounts. The standards
and criteria shall include, but need not be limited to,
consideration of evidence of efforts made in good faith to
comply with applicable legal requirements. This rulemaking
is subject to the provisions of the Illinois Administrative
Procedure Act.
If a penalty is not paid within 30 days of the date of
assessment, the Director without further notice shall report
the act of noncompliance to the Attorney General of this
State. It shall be the duty of the Attorney General or, if
the Attorney General so designates, the State's Attorney of
the county in which the governmental unit is located to apply
promptly by complaint on relation of the Director of
Insurance in the name of the people of the State of Illinois,
as plaintiff, to the circuit court of the county in which the
governmental unit is located for enforcement of the penalty
prescribed in this subsection or for such additional relief
as the nature of the case and the interest of the employees
of the governmental unit or the public may require.
(e) Whoever knowingly makes a false certificate, entry,
or memorandum upon any of the books or papers pertaining to
any pension fund or upon any statement, report, or exhibit
filed or offered for file with the Division or the Director
of Insurance in the course of any examination, inquiry, or
investigation, with intent to deceive the Director, the
Division, or any of its employees is guilty of a Class A
misdemeanor.
(40 ILCS 5/3-102) (from Ch. 108 1/2, par. 3-102)
Sec. 3-102. Terms defined. The terms used in this
Article have the meanings ascribed to them in Sections 3-103
through 3-108.3 3-108.1, except when the context otherwise
requires.
(Source: P.A. 83-1440.)
(40 ILCS 5/3-108.2 new)
Sec. 3-108.2. Participant. "Participant": A police
officer or deferred pensioner of a pension fund, or a
beneficiary of the pension fund.
(40 ILCS 5/3-108.3 new)
Sec. 3-108.3. Beneficiary. "Beneficiary": A person
receiving benefits from a pension fund, including, but not
limited to, retired pensioners, disabled pensioners, their
surviving spouses, minor children, disabled children, and
dependent parents.
(40 ILCS 5/3-132) (from Ch. 108 1/2, par. 3-132)
Sec. 3-132. To control and manage the Pension Fund. In
accordance with the applicable provisions of Articles 1 and
1A and this Article, to control and manage, exclusively, the
following:
(1) the pension fund,
(2) investment expenditures and income, including
interest dividends, capital gains and other distributions
on the investments, and
(3) all money donated, paid, or assessed, or
provided by law for the pensioning of disabled and
retired police officers, their surviving spouses, minor
children, and dependent parents.
All money received or collected shall be credited by the
treasurer of the municipality such moneys shall be placed by
the treasurer of the municipality to the account credit of
the pension fund, and held by the treasurer of the
municipality subject to the order and control of the board.
The treasurer of the municipality shall maintain a record of
all money received, transferred, and held for the account of
the board.
(Source: P.A. 83-1440.)
(40 ILCS 5/3-135) (from Ch. 108 1/2, par. 3-135)
Sec. 3-135. To draw and invest funds. Beginning January
1, 1998, the board shall invest funds in accordance with
Sections 1-113.1 through 1-113.10 of this Code. To draw
pension funds from the treasurer of the municipality, and
invest any part thereof in the name of the board in: (1)
interest bearing bonds or tax anticipation warrants of the
United States, of the State of Illinois, or of any county,
township or municipal corporation of the State of Illinois;
(2) insured withdrawable capital accounts of State chartered
savings and loan associations; (3) insured withdrawable
capital accounts of federal chartered federal savings and
loan associations if the withdrawable capital accounts are
insured by the Federal Savings and Loan Insurance
Corporation; (4) insured investments in credit unions if the
investments are insured by the National Credit Union
Administration; (5) savings accounts or certificates of
deposit of a national or State bank; (6) securities described
in item 5.1 of Section 1-113 of this Code, but only subject
to the conditions therein set forth; (7) contracts and
agreements supplemental thereto providing for investments in
the general account of a life insurance company authorized to
do business in Illinois; (8) separate accounts of a life
insurance company authorized to do business in Illinois,
comprised of common or preferred stocks, bonds, or money
market instruments; and (9) separate accounts managed by a
life insurance company authorized to do business in Illinois,
comprised of real estate or loans upon real estate secured by
first or second mortgages. The total investment in such
separate accounts shall not exceed 10% of the aggregate book
value of all investments owned by the fund. All securities
shall be deposited with the treasurer of the municipality,
and be subject to the order of the board. Interest on the
investments shall be credited to the pension fund.
No bank or savings and loan association shall receive
investment funds as permitted by this Section, unless it has
complied with the requirements established pursuant to
Section 6 of "An Act relating to certain investments of
public funds by public agencies", approved July 23, 1943, as
now or hereafter amended. The limitations set forth in such
Section 6 shall be applicable only at the time of investment
and shall not require the liquidation of any investment at
any time.
(Source: P.A. 84-1472.)
(40 ILCS 5/3-143) (from Ch. 108 1/2, par. 3-143)
Sec. 3-143. Report by board. The board shall report
annually to the city council or board of trustees of the
municipality on the condition of the pension fund at the end
of its most recently completed fiscal year. The report shall
be made prior to the council or board meeting held for the
levying of taxes for the year for which the report is made.
The board shall certify:
(1) the assets of the fund in its custody at the
end of the fiscal year such time;
(2) the estimated receipts during the next
succeeding fiscal calendar year from deductions from the
salaries of police officers, and from all other sources;
and
(3) the estimated amount required during the next
succeeding fiscal said calendar year to (a) pay all
pensions and other obligations provided in this Article,
and (b) to meet the annual requirements of the fund as
provided in Sections Section 3-125 and 3-127; and
(4) the total net income received from investment
of assets, compared to such income received during the
preceding fiscal year.
Before the board makes its report, the municipality shall
have the assets of the fund and their current market value
verified by an independent certified public accountant of its
choice.
(Source: P.A. 83-1440.)
(40 ILCS 5/4-105c new)
Sec. 4-105c. Participant. "Participant": A firefighter
or deferred pensioner of a pension fund, or a beneficiary of
the pension fund.
(40 ILCS 5/4-105d new)
Sec. 4-105d. Beneficiary. "Beneficiary": A person
receiving benefits from a pension fund, including, but not
limited to, retired pensioners, disabled pensioners, their
surviving spouses, minor children, disabled children, and
dependent parents.
(40 ILCS 5/4-123) (from Ch. 108 1/2, par. 4-123)
Sec. 4-123. To control and manage the Pension Fund. In
accordance with the applicable provisions of Articles 1 and
1A and this Article, to control and manage, exclusively, the
following:
(1) the pension fund,
(2) investment expenditures and income, including
interest dividends, capital gains, and other
distributions on the investments, and
(3) all money donated, paid, assessed, or provided
by law for the pensioning of disabled and retired
firefighters, their surviving spouses, minor children,
and dependent parents.
All money received or collected shall be credited by the
treasurer of the municipality to the account of the pension
fund and held by the treasurer of the municipality subject to
the order and control of the board. The treasurer of the
municipality shall maintain a record of all money received,
transferred, and held for the account of the board.
(Source: P.A. 83-1440.)
(40 ILCS 5/4-128) (from Ch. 108 1/2, par. 4-128)
Sec. 4-128. To invest funds. Beginning January 1, 1998,
the board shall invest funds in accordance with Sections
1-113.1 through 1-113.10 of this Code. To invest the money
of the pension fund only in: (1) interest bearing bonds of
the United States, or of the State of Illinois, or of any
county, city, township, village, incorporated town, municipal
corporation or school district in this State; (2) tax
anticipation warrants issued by any city, township, village,
incorporated town, or fire protection district included
within this Article; (3) notes, bonds, debentures or other
similar obligations which are guaranteed as to principal and
interest by the United States; (4) insured withdrawable
capital accounts of State chartered savings and loan
associations; (5) insured withdrawable capital accounts of
federal chartered federal savings and loan associations if
the withdrawable capital accounts are insured by the Federal
Savings and Loan Insurance Corporation; (6) insured
investments in credit unions if the investments are insured
by the National Credit Union Administration; and (7) savings
accounts or certificates of deposit of a national or State
bank; (8) securities described in item 5.1 of Section 1-113
of this Code, but only subject to the conditions therein set
forth; (9) contracts and agreements supplemental thereto
providing for investments in the general account of a life
insurance company authorized to do business in Illinois; (10)
separate accounts of a life insurance company authorized to
do business in Illinois, comprised of common or preferred
stocks, bonds, or money market instruments; and (11) separate
accounts managed by a life insurance company authorized to do
business in Illinois, comprised of real estate or loans upon
real estate secured by first or second mortgages. The total
investment in such separate accounts shall not exceed 10% of
the aggregate book value of all investments owned by the
fund.
Bonds purchased hereunder shall be registered in the name
of the board or held under custodial agreement at a bank.
No bank or savings and loan association shall receive
investment funds as permitted by this Section, unless it has
complied with the requirements established pursuant to
Section 6 of "An Act relating to certain investments of
public funds by public agencies", approved July 23, 1943, as
now or hereafter amended. The limitations set forth in such
Section 6 shall be applicable only at the time of investment
and shall not require the liquidation of any investment at
any time.
(Source: P.A. 84-1472.)
(40 ILCS 5/4-134) (from Ch. 108 1/2, par. 4-134)
Sec. 4-134. Report for tax levy. The board shall report
to the city council or board of trustees of the municipality
on the condition of the pension fund at the end of its most
recently completed fiscal year. The report shall be made
prior to the council or board meeting held for appropriating
and levying taxes for the year for which the report is made.
The board in the report shall certify:
(1) the assets of the fund and their current market
value in its custody at such time;
(2) the estimated receipts during the next
succeeding fiscal year (from January 1 to December 31)
from deductions from the salaries or wages of
firefighters firemen, and from all other sources;
(3) the estimated amount necessary during the
fiscal year such period to meet the annual actuarial
requirements of the pension fund as provided in Sections
Section 4-118 and 4-120; and
(4) the total net income received from investment
of assets, compared to such income received during the
preceding fiscal year.
Before the board makes its report, the municipality shall
have the assets of the fund and their current market value
verified by an independent certified public accountant of its
choice.
(Source: P.A. 85-293.)
Section 5. The Illinois Pension Code is amended by
changing Section 18-123 as follows:
(40 ILCS 5/18-123) (from Ch. 108 1/2, par. 18-123)
Sec. 18-123. Participation in survivor's annuity. A
participant in active service as a judge after July 26, 1949,
is eligible to participate in the survivor's annuity provided
under this Article. A married participant who was in service
on July 27, 1949 is subject to the provisions relating to
survivor's annuities unless he or she filed with the Board
written notice not to participate in such annuity within 30
days of that date.
A married judge who becomes a participant after July 27,
1949, an unmarried judge who becomes a participant after
December 31, 1992, and a judge who marries after becoming a
participant shall be subject to the provisions relating to
survivor's annuities unless he or she files with the Board
written notice of his or her election not to participate in
the survivor's annuity within 30 days of the date of being
notified of the option by the System. Once the election
period has expired, a judge may not withdraw from
participation under this Section except as provided in
Section 18-129.
A person who became a participant before January 1, 1997
1993 and who is not contributing for survivor's annuity may
elect to make contributions for survivor's annuity by filing
written notice of the election with the Board no later than
April 1, 1998 1993. Such an election may not be rescinded.
A person who has so elected shall be entitled only to partial
credit for survivor's annuity under subsection (g) of Section
18-129 unless all of the payments required under subsection
(f) of that Section have been made.
A married participant who elects not to participate in
the survivor's annuity provisions shall thereafter be
ineligible to participate in the survivor's annuity unless
the election is rescinded as provided herein.
A married participant who elected not to participate in
the survivor's annuity provisions and who is still a judge,
may elect to participate therein by filing with the Board
before April 1, 1998 1993 a written recision of the election
not to participate. The participant and his or her spouse
shall be entitled to all the rights of the survivor's
annuity, except as limited in Section 18-129, upon paying the
System for the survivor's annuity 1 1/2% of each payment of
salary earned between July 27, 1949 and July 12, 1953, and 2
1/2% of each payment of salary earned after July 12, 1953,
together with interest at 4% per annum, compounded annually
from the date the contributions would have been due to the
date of payment. The time and manner of paying the required
contributions and interest shall be prescribed by the Board.
(Source: P.A. 86-1488; 87-1265.)
(40 ILCS 5/Art. 22, Div. 5 rep.)
Section 10. Division 5 of Article 22 of the Illinois
Pension Code is repealed.
Section 15. The Illinois Securities Law of 1953 is
amended by changing Section 8 as follows:
(815 ILCS 5/8) (from Ch. 121 1/2, par. 137.8)
Sec. 8. Registration of dealers, salespersons and
investment advisers.
A. Except as otherwise provided in this subsection A,
every dealer, salesperson and investment adviser shall be
registered as such with the Secretary of State. No dealer or
salesperson need be registered as such when offering or
selling securities in transactions believed in good faith to
be exempted by subsection A, B, C, E, G, H, I, J, K, M, O, P,
Q, R or S of Section 4 of this Act, provided that such dealer
or salesperson is not regularly engaged in the business of
offering or selling securities in reliance upon the exemption
set forth in subsection G or M of Section 4 of this Act. No
dealer, issuer or controlling person shall employ a
salesperson unless such salesperson is registered as such
with the Secretary of State or is employed for the purpose of
offering or selling securities solely in transactions
believed in good faith to be exempted by subsection A, B, C,
D, E, G, H, I, J, K, L, M, O, P, Q, R or S of Section 4 of
this Act; provided that such salesperson need not be
registered when engaged in the offer or sale of securities in
respect of which he or she has beneficial ownership and is a
controlling person. The Secretary of State may, by rule,
regulation or order and subject to such terms, conditions as
fees as may be prescribed in such rule, regulation or order,
exempt from the registration requirements of this Section 8
any investment adviser, if the Secretary of State shall find
that such registration is not necessary in the public
interest by reason of the small number of clients or
otherwise limited character of operation of such investment
adviser.
B. An application for registration as a dealer,
executed, verified, or authenticated by or on behalf of the
applicant, shall be filed with the Secretary of State, in
such form as the Secretary of State may by rule, regulation
or order prescribe, setting forth or accompanied by:
(1) The name and address of the applicant, the
location of its principal business office and all branch
offices, if any, and the date of its organization;
(2) A statement of any other Federal or state
licenses or registrations which have been granted the
applicant and whether any such licenses or registrations
have ever been refused, cancelled, suspended, revoked or
withdrawn;
(3) The assets and all liabilities, including
contingent liabilities of the applicant, as of a date not
more than 60 days prior to the filing of the application;
(4) (a) A brief description of any civil or
criminal proceeding of which fraud is an essential
element pending against the applicant and whether the
applicant has ever been convicted of a felony, or of any
misdemeanor of which fraud is an essential element;
(b) A list setting forth the name, residence and
business address and a 10 year occupational statement of
each principal of the applicant and a statement
describing briefly any civil or criminal proceedings of
which fraud is an essential element pending against any
such principal and the facts concerning any conviction of
any such principal of a felony, or of any misdemeanor of
which fraud is an essential element;
(5) If the applicant is a corporation: a copy of
its articles of incorporation in their most current form,
unless they are already on file in the office of the
Secretary of State; a list of its officers and directors
setting forth the residence and business address of each;
a 10-year occupational statement of each such officer or
director; and a statement describing briefly any civil or
criminal proceedings of which fraud is an essential
element pending against each such officer or director and
the facts concerning any conviction of any officer or
director of a felony, or of any misdemeanor of which
fraud is an essential element;
(6) If the applicant is a sole proprietorship, a
partnership, limited liability company, an unincorporated
association or any similar form of business organization:
the name, residence and business address of the
proprietor or of each partner, member, officer, director,
trustee or manager; the limitations, if any, of the
liability of each such individual; a 10-year occupational
statement of each such individual; a statement describing
briefly any civil or criminal proceedings of which fraud
is an essential element pending against each such
individual and the facts concerning any conviction of any
such individual of a felony, or of any misdemeanor of
which fraud is an essential element;
(7) Such additional information as the Secretary of
State may by rule or regulation prescribe as necessary to
determine the applicant's financial responsibility,
business repute and qualification to act as a dealer.
(8) (a) No applicant shall be registered or
re-registered as a dealer under this Section unless and
until each principal of the dealer has passed an
examination conducted by the Secretary of State or a
self-regulatory organization of securities dealers or
similar person, which examination has been designated by
the Secretary of State by rule, regulation or order to
be satisfactory for purposes of determining whether the
applicant has sufficient knowledge of the securities
business and laws relating thereto to act as a registered
dealer. Any dealer who was registered on September 30,
1963, and has continued to be so registered; and any
principal of any registered dealer, who was acting in
such capacity on and continuously since September 30,
1963; and any individual who has previously passed a
securities dealer examination administered by the
Secretary of State or any examination designated by the
Secretary of State to be satisfactory for purposes of
determining whether the applicant has sufficient
knowledge of the securities business and laws relating
thereto to act as a registered dealer by rule, regulation
or order, shall not be required to pass an examination in
order to continue to act in such capacity. The Secretary
of State may by order waive the examination requirement
for any principal of an applicant for registration under
this subsection B who has had such experience or
education relating to the securities business as may be
determined by the Secretary of State to be the equivalent
of such examination. Any request for such a waiver shall
be filed with the Secretary of State in such form as may
be prescribed by rule or regulation.
(b) Unless an applicant is a member of the body
corporate known as the Securities Investor Protection
Corporation established pursuant to the Act of Congress
of the United States known as the Securities Investor
Protection Act of 1970, as amended, or a member of an
association of dealers registered as a national
securities association pursuant to Section 15A of the
Federal 1934 Act, an applicant shall not be registered or
re-registered unless and until there is filed with the
Secretary of State evidence that such applicant has in
effect insurance or other equivalent protection for each
client's cash or securities held by such applicant, and
an undertaking that such applicant will continually
maintain such insurance or other protection during the
period of registration or re-registration. Such
insurance or other protection shall be in a form and
amount reasonably prescribed by the Secretary of State by
rule or regulation.
(9) The application for the registration of a
dealer shall be accompanied by a filing fee and a fee
for each branch office in this State, in each case in the
amount established pursuant to Section 11a of this Act,
which fees shall not be returnable in any event.
(10) The Secretary of State shall notify the dealer
by written notice (which may be by electronic,
telegraphic, or facsimile transmission) of the
effectiveness of the registration as a dealer in this
State.
(11) Any change which renders no longer accurate
any information contained in any application for
registration or re-registration of a dealer shall be
reported to the Secretary of State within 10 business
days after the occurrence of such change; but in respect
to assets and liabilities only materially adverse changes
need be reported.
C. Any registered dealer, issuer, or controlling person
desiring to register a salesperson shall file an application
with the Secretary of State, in such form as the Secretary of
State may by rule or regulation prescribe, which the
salesperson is required by this Section to provide to the
dealer, issuer, or controlling person, executed, verified, or
authenticated by the salesperson setting forth or accompanied
by:
(1) The name, residence and business address of the
salesperson;
(2) Whether any federal or State license or
registration as dealer or salesperson has ever been
refused the salesperson or cancelled, suspended,
revoked, or withdrawn;
(3) The nature of employment with, and names and
addresses of, employers of the salesperson for the 10
years immediately preceding the date of application;
(4) A brief description of any civil or criminal
proceedings of which fraud is an essential element
pending against the salesperson, and whether the
salesperson has ever been convicted of a felony, or of
any misdemeanor of which fraud is an essential element;
(5) Such additional information as the Secretary of
State may by rule, regulation or order prescribe as
necessary to determine the salesperson's business repute
and qualification to act as a salesperson; and
(6) No individual shall be registered or
re-registered as a salesperson under this Section unless
and until such individual has passed an examination
conducted by the Secretary of State or a self-regulatory
organization of securities dealers or similar person,
which examination has been designated by the Secretary of
State by rule, regulation or order to be satisfactory for
purposes of determining whether the applicant has
sufficient knowledge of the securities business and laws
relating thereto to act as a registered salesperson.
Any salesperson who was registered prior to
September 30, 1963, and has continued to be so
registered, and any individual who has passed a
securities salesperson examination administered by the
Secretary of State or an examination designated by the
Secretary of State by rule, regulation or order to be
satisfactory for purposes of determining whether the
applicant has sufficient knowledge of the securities
business and laws relating thereto to act as a registered
salesperson, shall not be required to pass an examination
in order to continue to act as a salesperson. The
Secretary of State may by order waive the examination
requirement for any applicant for registration under this
subsection C who has had such experience or education
relating to the securities business as may be determined
by the Secretary of State to be the equivalent of such
examination. Any request for such a waiver shall be
filed with the Secretary of State in such form as may be
prescribed by rule, regulation or order.
(7) The application for registration of a
salesperson shall be accompanied by a filing fee and a
Securities Audit and Enforcement Fund fee, each in the
amount established pursuant to Section 11a of this Act,
which shall not be returnable in any event.
(8) Any change which renders no longer accurate any
information contained in any application for registration
or re-registration as a salesperson shall be reported to
the Secretary of State within 10 business days after the
occurrence of such change. If the activities are
terminated which rendered an individual a salesperson for
the dealer, issuer or controlling person, the dealer,
issuer or controlling person, as the case may be, shall
notify the Secretary of State, in writing, within 30 days
of the salesperson's cessation of activities, using the
appropriate termination notice form.
(9) A registered salesperson may transfer his or
her registration under this Section 8 for the unexpired
term thereof from one registered dealer to another by the
giving of notice of the transfer by the new registered
dealer to the Secretary of State in such form and subject
to such conditions as the Secretary of State shall by
rule or regulation prescribe. The new registered dealer
shall promptly file an application for registration of
such salesperson as provided in this subsection C,
accompanied by the filing fee prescribed by paragraph (7)
of this subsection C.
D. An application for registration as an investment
adviser, executed, verified, or authenticated by or on behalf
of the applicant, shall be filed with the Secretary of State,
in such form as the Secretary of State may by rule or
regulation prescribe, setting forth or accompanied by:
(1) The name and form of organization under which
the investment adviser engages or intends to engage in
business; the state or country and date of its
organization; the location of the adviser's principal
business office and branch offices, if any; the names and
addresses of the adviser's principal, partners, officers,
directors, and persons performing similar functions or,
if the investment adviser is an individual, of the
individual; and the number of the adviser's employees who
perform investment advisory functions;
(2) The education, the business affiliations for
the past 10 years, and the present business affiliations
of the investment adviser and of the adviser's principal,
partners, officers, directors, and persons performing
similar functions and of any person controlling the
investment adviser;
(3) The nature of the business of the investment
adviser, including the manner of giving advice and
rendering analyses or reports;
(4) The nature and scope of the authority of the
investment adviser with respect to clients' funds and
accounts;
(5) The basis or bases upon which the investment
adviser is compensated;
(6) Whether the investment adviser or any
principal, partner, officer, director, person performing
similar functions or person controlling the investment
adviser (i) within 10 years of the filing of the
application has been convicted of a felony, or of any
misdemeanor of which fraud is an essential element, or
(ii) is permanently or temporarily enjoined by order or
judgment from acting as an investment adviser,
underwriter, dealer, principal or salesperson, or from
engaging in or continuing any conduct or practice in
connection with any such activity or in connection with
the purchase or sale of any security, and in each case
the facts relating to the conviction, order or judgment;
(7) (a) A statement as to whether the investment
adviser is engaged or is to engage primarily in the
business of rendering investment supervisory services;
and
(b) A statement that the investment adviser will
furnish his, her, or its clients with such information as
the Secretary of State deems necessary in the form
prescribed by the Secretary of State by rule or
regulation;
(8) Such additional information as the Secretary of
State may, by rule, regulation or order prescribe as
necessary to determine the applicant's financial
responsibility, business repute and qualification to act
as an investment adviser.
(9) No applicant shall be registered or
re-registered as an investment adviser under this Section
unless and until each principal of the applicant who is
actively engaged in the conduct and management of the
applicant's advisory business in this State has passed an
examination or completed an educational program conducted
by the Secretary of State or an association of investment
advisers or similar person, which examination or
educational program has been designated by the Secretary
of State by rule, regulation or order to be satisfactory
for purposes of determining whether the applicant has
sufficient knowledge of the securities business and laws
relating thereto to conduct the business of a registered
investment adviser.
Any person who was a registered investment adviser
prior to September 30, 1963, and has continued to be so
registered, and any individual who has passed an
investment adviser examination administered by the
Secretary of State, or passed an examination or completed
an educational program designated by the Secretary of
State by rule, regulation or order to be satisfactory for
purposes of determining whether the applicant has
sufficient knowledge of the securities business and laws
relating thereto to conduct the business of a registered
investment adviser, shall not be required to pass an
examination or complete an educational program in order
to continue to act as an investment adviser. The
Secretary of State may by order waive the examination or
educational program requirement for any applicant for
registration under this subsection D if the principal of
the applicant who is actively engaged in the conduct and
management of the applicant's advisory business in this
State has had such experience or education relating to
the securities business as may be determined by the
Secretary of State to be the equivalent of the
examination or educational program. Any request for a
waiver shall be filed with the Secretary of State in such
form as may be prescribed by rule or regulation.
(10) No applicant shall be registered or
re-registered as an investment adviser under this Section
8 unless (i) the application for registration or
re-registration is accompanied by a list of all persons
acting as investment adviser representatives on behalf of
the adviser and (ii) a Securities Audit and Enforcement
Fund fee that shall not be returnable in any event is
paid with respect to each investment adviser
representative. No fee, however, shall be required under
this paragraph if the investment adviser representative
is also registered as a salesperson and the Securities
Audit and Enforcement Fund fee required under subsection
C or subsection H of this Section has been paid to the
Secretary of State.
(11) The application for registration of an
investment adviser shall be accompanied by a filing fee
and a fee for each branch office in this State, in each
case in the amount established pursuant to Section 11a of
this Act, which fees shall not be returnable in any
event.
(12) The Secretary of State shall notify the
investment adviser by written notice (which may be by
electronic, telegraphic, or facsimile transmission) of
the effectiveness of the registration as an investment
adviser in this State.
(13) Any change which renders no longer accurate
any information contained in any application for
registration or re-registration of an investment adviser
shall be reported to the Secretary of State within 10
business days after the occurrence of the change. In
respect to assets and liabilities of an investment
adviser that retains custody of clients' cash or
securities or accepts pre-payment of fees in excess of
$500 per client and 6 or more months in advance only
materially adverse changes need be reported by written
notice (which may be by telegraphic or facsimile
transmission) no later than the close of business on the
second business day following the discovery thereof.
(14) Each application for registration as an
investment adviser shall become effective automatically
on the 45th day following the filing of the application,
required documents or information, and payment of the
required fee unless (i) the Secretary of State has
registered the investment adviser prior to that date or
(ii) an action with respect to the applicant is pending
under Section 11 of this Act.
E. (1) Subject to the provisions of subsection F of
Section 11 of this Act, the registration of a dealer,
salesperson or investment adviser may be denied, suspended or
revoked if the Secretary of State finds that the dealer,
salesperson or investment adviser or any officer, director,
partner, member, trustee, manager or any person who performs
a similar function of the dealer or investment adviser:
(a) Has been convicted of any felony, or of any
misdemeanor of which fraud is an essential element;
(b) Has engaged in any inequitable practice in the
offer or sale of securities or in any fraudulent business
practice;
(c) Has failed to account for any money or
property, or has failed to deliver any security, to any
person entitled thereto when due or within a reasonable
time thereafter;
(d) In the case of a dealer or investment adviser,
is insolvent;
(e) In the case of a dealer (i) has failed
reasonably to supervise the securities activities of any
of its salespersons and the failure has permitted or
facilitated a violation of Section 12 of this Act or (ii)
is offering or selling or has offered or sold securities
in this State through a salesperson other than a
registered salesperson, or, in the case of a salesperson,
is selling or has sold securities in this State for a
dealer, issuer or controlling person with knowledge that
the dealer, issuer or controlling person has not complied
with the provisions of this Act;
(f) In the case of an investment adviser, has
failed reasonably to supervise the advisory activities of
any of its employees and the failure has permitted or
facilitated a violation of Section 12 of this Act;
(g) Has violated any of the provisions of this Act;
(h) Has made any material misrepresentation to the
Secretary of State in connection with any information
deemed necessary by the Secretary of State to determine a
dealer's or investment adviser's financial responsibility
or a dealer's, investment adviser's or salesperson's
business repute or qualifications, or has refused to
furnish any such information requested by the Secretary
of State;
(i) Has had a license or registration under any
Federal or State law regulating the offer or sale of
securities or commodity futures contracts, refused,
cancelled, suspended or withdrawn;
(j) Has been suspended or expelled from or refused
membership in or association with or limited in any
capacity by any self-regulatory organization registered
under the Federal 1934 Act or the Federal 1974 Act
arising from any fraudulent or deceptive act or a
practice in violation of any rule, regulation or standard
duly promulgated by the self-regulatory organization;
(k) Has had any order entered against it after
notice and opportunity for hearing by a securities agency
of any state, any foreign government or agency thereof,
the Securities and Exchange Commission, or the Federal
Commodities Futures Trading Commission arising from any
fraudulent or deceptive act or a practice in violation of
any statute, rule or regulation administered or
promulgated by the agency or commission;
(l) In the case of a dealer, fails to maintain a
minimum net capital in an amount which the Secretary of
State may by rule or regulation require;
(m) Has conducted a continuing course of dealing of
such nature as to demonstrate an inability to properly
conduct the business of the dealer, salesperson or
investment adviser;
(n) Has had, after notice and opportunity for
hearing, any injunction or order entered against it or
license or registration refused, cancelled, suspended,
revoked, withdrawn or limited by any state or federal
body, agency or commission regulating banking, insurance,
finance or small loan companies, real estate or mortgage
brokers or companies, if the action resulted from any act
found by the body, agency or commission to be a
fraudulent or deceptive act or practice in violation of
any statute, rule or registration administered or
promulgated by the body, agency or commission;
(o) Has failed to file a return, or to pay the tax,
penalty or interest shown in a filed return, or to pay
any final assessment of tax, penalty or interest, as
required by any tax Act administered by the Illinois
Department of Revenue, until such time as the
requirements of that tax Act are satisfied;
(p) In the case of a natural person who is a
dealer, salesperson or investment adviser, has defaulted
on an educational loan guaranteed by the Illinois Student
Assistance Commission, until the natural person has
established a satisfactory repayment record as determined
by the Illinois Student Assistance Commission;
(q) Has failed to maintain the books and records
required under this Act or rules or regulations
promulgated under this Act within a reasonable time after
receiving notice of any deficiency;
(r) Has refused to allow or otherwise impeded
designees of the Secretary of State from conducting an
audit, examination, inspection, or investigation provided
for under Section 8 or 11 of this Act;
(s) Has failed to maintain any minimum net capital
or bond requirement set forth in this Act or any rule or
regulation promulgated under this Act;
(t) Has refused the Secretary of State or his or
her designee access to any office or location within an
office to conduct an investigation, audit, examination,
or inspection;
(u) Has advised or caused a public pension fund or
retirement system established under the Illinois Pension
Code to make an investment or engage in a transaction not
authorized by that Code.
(2) If the Secretary of State finds that any registrant
or applicant for registration is no longer in existence or
has ceased to do business as a dealer, salesperson or
investment adviser, or is subject to an adjudication as a
person under legal disability or to the control of a
guardian, or cannot be located after reasonable search, or
has failed after written notice to pay to the Secretary of
State any additional fee prescribed by this Section or
specified by rule or regulation, or if a natural person, has
defaulted on an educational loan guaranteed by the Illinois
Student Assistance Commission, the Secretary of State may by
order cancel the registration or application.
(3) Withdrawal of an application for registration or
withdrawal from registration as a dealer, salesperson or
investment adviser becomes effective 30 days after receipt of
an application to withdraw or within such shorter period of
time as the Secretary of State may determine, unless any
proceeding is pending under Section 11 of this Act when the
application is filed or a proceeding is instituted within 30
days after the application is filed. If a proceeding is
pending or instituted, withdrawal becomes effective at such
time and upon such conditions as the Secretary of State by
order determines. If no proceeding is pending or instituted
and withdrawal automatically becomes effective, the Secretary
of State may nevertheless institute a revocation or
suspension proceeding within one year after withdrawal became
effective and enter a revocation or suspension order as of
the last date on which registration was effective.
F. The Secretary of State shall make available upon
request the date that each dealer, investment adviser or
salesperson was granted registration, together with the name
and address of the dealer or issuer on whose behalf the
salesperson is registered, and all orders of the Secretary of
State denying or abandoning an application, or suspending or
revoking registration, or censuring the persons. The
Secretary of State may designate by rule, regulation or order
the statements, information or reports submitted to or filed
with him or her pursuant to this Section 8 which the
Secretary of State determines are of a sensitive nature and
therefore should be exempt from public disclosure. Any such
statement, information or report shall be deemed confidential
and shall not be disclosed to the public except upon the
consent of the person filing or submitting the statement,
information or report or by order of court or in court
proceedings.
G. The registration or re-registration of a dealer and
of all salespersons registered upon application of the dealer
shall expire on the next succeeding anniversary date of the
registration or re-registration of the dealer; and the
registration or re-registration of an investment adviser
shall expire on the next succeeding anniversary date of the
registration of the investment adviser; provided, that the
Secretary of State may by rule or regulation prescribe an
alternate date which any dealer registered under the Federal
1934 Act or a member of any self-regulatory association
approved pursuant thereto, or any investment adviser
registered under the Federal 1940 Investment Advisers Act may
elect as the expiration date of its dealer and salesperson
registrations, or the expiration date of its investment
adviser registration, as the case may be. A registration of
a salesperson registered upon application of an issuer or
controlling person shall expire on the next succeeding
anniversary date of the registration, or upon termination or
expiration of the registration of the securities, if any,
designated in the application for his or her registration or
the alternative date as the Secretary may prescribe by rule
or regulation. Subject to paragraph (9) of subsection C of
this Section 8, a salesperson's registration also shall
terminate upon cessation of his or her employment, or
termination of his or her appointment or authorization, in
each case by the person who applied for the salesperson's
registration, provided that the Secretary of State may by
rule or regulation prescribe an alternate date for the
expiration of the registration.
H. Applications for re-registration of dealers,
salespersons and investment advisers shall be filed with the
Secretary of State not less than 7 days preceding the
expiration of the then current registration and shall contain
such information as may be required by the Secretary of State
upon initial application with such omission therefrom or
addition thereto as the Secretary of State may authorize or
prescribe. Each application for re-registration of a dealer
or investment adviser shall be accompanied by a filing fee
and each application for re-registration as a salesperson
shall be accompanied by a filing fee and a Securities Audit
and Enforcement Fund fee established pursuant to Section 11a
of this Act, which shall not be returnable in any event.
Notwithstanding the foregoing, (1) applications for
re-registration of dealers and investment advisers may be
filed within the 6 days next preceding the expiration of the
then current registration provided that the applicant pays
the annual registration fee for the year with respect to
which the re-registration is applicable together with an
additional amount equal to the annual registration fee; and
(2) applications for re-registration of dealers and
investment advisers may be filed within 30 days following the
expiration of the registration provided that the applicant
pays the annual registration fee together with an additional
amount equal to 2 times the annual registration fee and files
any other information or documents that the Secretary of
State may prescribe by rule or regulation or order. Any
application filed within 30 days following the expiration of
the registration shall be automatically effective as of the
time of the earlier expiration provided that the proper fee
has been paid to the Secretary of State.
Each registered dealer or investment adviser shall
continue to be registered if the registrant changes his, her,
or its form of organization provided that the dealer or
investment adviser files an amendment to his, her, or its
application not later than 30 days following the occurrence
of the change and pays the Secretary of State a fee in the
amount established under Section 11a of this Act.
I. (1) Every registered dealer and investment adviser
shall make and keep for such periods, such accounts,
correspondence, memoranda, papers, books and records as the
Secretary of State may by rule or regulation prescribe. All
records so required shall be preserved for 3 years unless the
Secretary of State by rule, regulation or order prescribes
otherwise for particular types of records.
(2) Every registered dealer and investment adviser shall
file such financial reports as the Secretary of State may by
rule or regulation prescribe.
(3) All the books and records referred to in paragraph
(1) of this subsection I are subject at any time or from time
to time to such reasonable periodic, special or other audits,
examinations, or inspections by representatives of the
Secretary of State, within or without this State, as the
Secretary of State deems necessary or appropriate in the
public interest or for the protection of investors.
(4) At the time of an audit, examination, or inspection,
the Secretary of State, by his or her designees, may conduct
an interview of any person employed or appointed by or
affiliated with a registered dealer or investment advisor,
provided that the dealer or investment advisor shall be given
reasonable notice of the time and place for the interview.
At the option of the dealer or investment advisor, a
representative of the dealer or investment advisor with
supervisory responsibility over the individual being
interviewed may be present at the interview.
J. The Secretary of State may require by rule or
regulation the payment of an additional fee for the filing of
information or documents required to be filed by this Section
which have not been filed in a timely manner. The Secretary
of State may also require by rule or regulation the payment
of an examination fee for administering any examination which
it may conduct pursuant to subsection B, C or D of this
Section 8.
K. The Secretary of State may declare any application
for registration under this Section 8 abandoned by order if
the applicant fails to pay any fee or file any information or
document required under this Section 8 or by rule or
regulation for more than 30 days after the required payment
or filing date. The applicant may petition the Secretary of
State for a hearing within 15 days after the applicant's
receipt of the order of abandonment, provided that the
petition sets forth the grounds upon which the applicant
seeks a hearing.
L. Any document being filed pursuant to this Section 8
shall be deemed filed, and any fee being paid pursuant to
this Section 8 shall be deemed paid, upon the date of actual
receipt thereof by the Secretary of State or his or her
designee.
M. The Secretary of State shall provide to the Illinois
Student Assistance Commission annually or at mutually agreed
periodic intervals the names and social security numbers of
natural persons registered under subsections B, C, and E of
this Section. The Illinois Student Assistance Commission
shall determine if any student loan defaulter is registered
as a dealer, salesperson, or investment adviser under this
Act and report its determination to the Secretary of State or
his or her designee.
(Source: P.A. 88-494; 89-209, eff. 1-1-96; 89-626, eff.
8-9-96.)
Section 99. Effective date. This Act takes effect upon
becoming law.