HB1353 EngrossedLRB098 08603 OMW 38721 b

1    AN ACT concerning finance.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Public Funds Investment Act is amended by
5changing Section 2 as follows:
 
6    (30 ILCS 235/2)  (from Ch. 85, par. 902)
7    Sec. 2. Authorized investments.
8    (a) Any public agency may invest any public funds as
9follows:
10        (1) in bonds, notes, certificates of indebtedness,
11    treasury bills or other securities now or hereafter issued,
12    which are guaranteed by the full faith and credit of the
13    United States of America as to principal and interest;
14        (2) in bonds, notes, debentures, or other similar
15    obligations of the United States of America, its agencies,
16    and its instrumentalities;
17        (3) in interest-bearing savings accounts,
18    interest-bearing certificates of deposit or
19    interest-bearing time deposits or any other investments
20    constituting direct obligations of any bank as defined by
21    the Illinois Banking Act;
22        (4) in short term obligations of corporations
23    organized in the United States with assets exceeding

 

 

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1    $500,000,000 if (i) such obligations are rated at the time
2    of purchase at one of the 3 highest classifications
3    established by at least 2 standard rating services and
4    which mature not later than 270 days from the date of
5    purchase, (ii) such purchases do not exceed 10% of the
6    corporation's outstanding obligations and (iii) no more
7    than one-third of the public agency's funds may be invested
8    in short term obligations of corporations; or
9        (5) in money market mutual funds registered under the
10    Investment Company Act of 1940, provided that the portfolio
11    of any such money market mutual fund is limited to
12    obligations described in paragraph (1) or (2) of this
13    subsection and to agreements to repurchase such
14    obligations.
15    (a-1) In addition to any other investments authorized under
16this Act, a municipality, park district, forest preserve
17district, conservation district, or a county may invest its
18public funds in interest bearing bonds of any county, township,
19city, village, incorporated town, municipal corporation, or
20school district, of the State of Illinois, of any other state,
21or of any political subdivision or agency of the State of
22Illinois or of any other state, whether the interest earned
23thereon is taxable or tax-exempt under federal law. The bonds
24shall be registered in the name of the municipality, park
25district, forest preserve district, conservation district, or
26county or held under a custodial agreement at a bank. The bonds

 

 

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1shall be rated at the time of purchase within the 4 highest
2general classifications established by a rating service of
3nationally recognized expertise in rating bonds of states and
4their political subdivisions.
5    (b) Investments may be made only in banks which are insured
6by the Federal Deposit Insurance Corporation. Any public agency
7may invest any public funds in short term discount obligations
8of the Federal National Mortgage Association or in shares or
9other forms of securities legally issuable by savings banks or
10savings and loan associations incorporated under the laws of
11this State or any other state or under the laws of the United
12States. Investments may be made only in those savings banks or
13savings and loan associations the shares, or investment
14certificates of which are insured by the Federal Deposit
15Insurance Corporation. Any such securities may be purchased at
16the offering or market price thereof at the time of such
17purchase. All such securities so purchased shall mature or be
18redeemable on a date or dates prior to the time when, in the
19judgment of such governing authority, the public funds so
20invested will be required for expenditure by such public agency
21or its governing authority. The expressed judgment of any such
22governing authority as to the time when any public funds will
23be required for expenditure or be redeemable is final and
24conclusive. Any public agency may invest any public funds in
25dividend-bearing share accounts, share certificate accounts or
26class of share accounts of a credit union chartered under the

 

 

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1laws of this State or the laws of the United States; provided,
2however, the principal office of any such credit union must be
3located within the State of Illinois. Investments may be made
4only in those credit unions the accounts of which are insured
5by applicable law.
6    (c) For purposes of this Section, the term "agencies of the
7United States of America" includes: (i) the federal land banks,
8federal intermediate credit banks, banks for cooperative,
9federal farm credit banks, or any other entity authorized to
10issue debt obligations under the Farm Credit Act of 1971 (12
11U.S.C. 2001 et seq.) and Acts amendatory thereto; (ii) the
12federal home loan banks and the federal home loan mortgage
13corporation; and (iii) any other agency created by Act of
14Congress.
15    (d) Except for pecuniary interests permitted under
16subsection (f) of Section 3-14-4 of the Illinois Municipal Code
17or under Section 3.2 of the Public Officer Prohibited Practices
18Act, no person acting as treasurer or financial officer or who
19is employed in any similar capacity by or for a public agency
20may do any of the following:
21        (1) have any interest, directly or indirectly, in any
22    investments in which the agency is authorized to invest.
23        (2) have any interest, directly or indirectly, in the
24    sellers, sponsors, or managers of those investments.
25        (3) receive, in any manner, compensation of any kind
26    from any investments in which the agency is authorized to

 

 

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1    invest.
2    (e) Any public agency may also invest any public funds in a
3Public Treasurers' Investment Pool created under Section 17 of
4the State Treasurer Act. Any public agency may also invest any
5public funds in a fund managed, operated, and administered by a
6bank, subsidiary of a bank, or subsidiary of a bank holding
7company or use the services of such an entity to hold and
8invest or advise regarding the investment of any public funds.
9    (f) To the extent a public agency has custody of funds not
10owned by it or another public agency and does not otherwise
11have authority to invest such funds, the public agency may
12invest such funds as if they were its own. Such funds must be
13released to the appropriate person at the earliest reasonable
14time, but in no case exceeding 31 days, after the private
15person becomes entitled to the receipt of them. All earnings
16accruing on any investments or deposits made pursuant to the
17provisions of this Act shall be credited to the public agency
18by or for which such investments or deposits were made, except
19as provided otherwise in Section 4.1 of the State Finance Act
20or the Local Governmental Tax Collection Act, and except where
21by specific statutory provisions such earnings are directed to
22be credited to and paid to a particular fund.
23    (g) A public agency may purchase or invest in repurchase
24agreements of government securities having the meaning set out
25in the Government Securities Act of 1986, as now or hereafter
26amended or succeeded, subject to the provisions of said Act and

 

 

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1the regulations issued thereunder. The government securities,
2unless registered or inscribed in the name of the public
3agency, shall be purchased through banks or trust companies
4authorized to do business in the State of Illinois.
5    (h) Except for repurchase agreements of government
6securities which are subject to the Government Securities Act
7of 1986, as now or hereafter amended or succeeded, no public
8agency may purchase or invest in instruments which constitute
9repurchase agreements, and no financial institution may enter
10into such an agreement with or on behalf of any public agency
11unless the instrument and the transaction meet the following
12requirements:
13        (1) The securities, unless registered or inscribed in
14    the name of the public agency, are purchased through banks
15    or trust companies authorized to do business in the State
16    of Illinois.
17        (2) An authorized public officer after ascertaining
18    which firm will give the most favorable rate of interest,
19    directs the custodial bank to "purchase" specified
20    securities from a designated institution. The "custodial
21    bank" is the bank or trust company, or agency of
22    government, which acts for the public agency in connection
23    with repurchase agreements involving the investment of
24    funds by the public agency. The State Treasurer may act as
25    custodial bank for public agencies executing repurchase
26    agreements. To the extent the Treasurer acts in this

 

 

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1    capacity, he is hereby authorized to pass through to such
2    public agencies any charges assessed by the Federal Reserve
3    Bank.
4        (3) A custodial bank must be a member bank of the
5    Federal Reserve System or maintain accounts with member
6    banks. All transfers of book-entry securities must be
7    accomplished on a Reserve Bank's computer records through a
8    member bank of the Federal Reserve System. These securities
9    must be credited to the public agency on the records of the
10    custodial bank and the transaction must be confirmed in
11    writing to the public agency by the custodial bank.
12        (4) Trading partners shall be limited to banks or trust
13    companies authorized to do business in the State of
14    Illinois or to registered primary reporting dealers.
15        (5) The security interest must be perfected.
16        (6) The public agency enters into a written master
17    repurchase agreement which outlines the basic
18    responsibilities and liabilities of both buyer and seller.
19        (7) Agreements shall be for periods of 330 days or
20    less.
21        (8) The authorized public officer of the public agency
22    informs the custodial bank in writing of the maturity
23    details of the repurchase agreement.
24        (9) The custodial bank must take delivery of and
25    maintain the securities in its custody for the account of
26    the public agency and confirm the transaction in writing to

 

 

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1    the public agency. The Custodial Undertaking shall provide
2    that the custodian takes possession of the securities
3    exclusively for the public agency; that the securities are
4    free of any claims against the trading partner; and any
5    claims by the custodian are subordinate to the public
6    agency's claims to rights to those securities.
7        (10) The obligations purchased by a public agency may
8    only be sold or presented for redemption or payment by the
9    fiscal agent bank or trust company holding the obligations
10    upon the written instruction of the public agency or
11    officer authorized to make such investments.
12        (11) The custodial bank shall be liable to the public
13    agency for any monetary loss suffered by the public agency
14    due to the failure of the custodial bank to take and
15    maintain possession of such securities.
16    (i) Notwithstanding the foregoing restrictions on
17investment in instruments constituting repurchase agreements
18the Illinois Housing Development Authority may invest in, and
19any financial institution with capital of at least $250,000,000
20may act as custodian for, instruments that constitute
21repurchase agreements, provided that the Illinois Housing
22Development Authority, in making each such investment,
23complies with the safety and soundness guidelines for engaging
24in repurchase transactions applicable to federally insured
25banks, savings banks, savings and loan associations or other
26depository institutions as set forth in the Federal Financial

 

 

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1Institutions Examination Council Policy Statement Regarding
2Repurchase Agreements and any regulations issued, or which may
3be issued by the supervisory federal authority pertaining
4thereto and any amendments thereto; provided further that the
5securities shall be either (i) direct general obligations of,
6or obligations the payment of the principal of and/or interest
7on which are unconditionally guaranteed by, the United States
8of America or (ii) any obligations of any agency, corporation
9or subsidiary thereof controlled or supervised by and acting as
10an instrumentality of the United States Government pursuant to
11authority granted by the Congress of the United States and
12provided further that the security interest must be perfected
13by either the Illinois Housing Development Authority, its
14custodian or its agent receiving possession of the securities
15either physically or transferred through a nationally
16recognized book entry system.
17    (j) In addition to all other investments authorized under
18this Section, a community college district may invest public
19funds in any mutual funds that invest primarily in corporate
20investment grade or global government short term bonds.
21Purchases of mutual funds that invest primarily in global
22government short term bonds shall be limited to funds with
23assets of at least $100 million and that are rated at the time
24of purchase as one of the 10 highest classifications
25established by a recognized rating service. The investments
26shall be subject to approval by the local community college

 

 

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1board of trustees. Each community college board of trustees
2shall develop a policy regarding the percentage of the
3college's investment portfolio that can be invested in such
4funds.
5    Nothing in this Section shall be construed to authorize an
6intergovernmental risk management entity to accept the deposit
7of public funds except for risk management purposes.
8(Source: P.A. 96-741, eff. 8-25-09; 97-129, eff. 7-14-11.)
 
9    Section 99. Effective date. This Act takes effect upon
10becoming law.