(215 ILCS 5/147.1)
(from Ch. 73, par. 759.1)
Sale of insurance company shares.
(1) No shares of the capital stock of a domestic stock company shall be sold or
offered for sale to the public in this State by an issuer, underwriter,
dealer or controlling person in respect of such shares without first
procuring from the Director a permit so to do.
(2) Unless the context otherwise indicates the following terms as used
in this Section shall have the following meanings:
(a) The word "issuer" shall mean every company which shall have issued
or proposes to issue any such shares of capital stock,
(b) The word "underwriter" shall mean any person who has purchased such
shares of capital stock from an issuer or controlling person with a view
to, or sells such shares of capital stock for an issuer or a controlling
person in connection with, the distribution thereof, or participates or has
a participation in the direct or indirect underwriting of such
distribution; but such term shall not include a person whose interest is
limited to a commission or discount from an underwriter or dealer not in
excess of the usual and customary distributer's or seller's commission or
discount or not in excess of any applicable statutory maximum commission or
discount. An underwriter shall be deemed to be no longer an underwriter of
an issue of shares of capital stock after he has completely disposed of his
allotment of such shares or, if he did not purchase the shares, after he
has ceased to sell such shares for the issuer or controlling person.
(c) The word "dealer" shall mean any person other than an issuer, a
controlling person, a bank organized under the banking laws of this State
or of the United States, a trust company organized under the laws of this
State, an insurance company or a salesman, who engages in this State,
either for all or part of his time, directly or indirectly, as agent,
broker or principal, in the business of offering, selling, buying and
selling, or otherwise dealing or trading in shares of capital stock of
(d) The words "controlling person" shall mean any person selling such
shares of capital stock, or group of persons acting in concert in the sale
of such shares, owning beneficially (and in the absence of knowledge, or
reasonable grounds of belief, to the contrary, record ownership shall for
the purposes hereof be presumed to be beneficial ownership) either
(i) 25% Or more of the outstanding voting shares of the issuer of such
shares where no other person owns or controls a greater percentage of such
(ii) Such number of outstanding number of shares of the issuer as would
enable such person, or group of persons, to elect a majority of the Board
of Directors of such issuer.
(e) The word "salesman" shall mean an individual, other than an issuer,
an underwriter, a dealer or a controlling person, employed or appointed or
authorized by an issuer, an underwriter, a dealer or a controlling person
to sell such shares in this State. The partners or officers of an issuer,
an underwriter, a dealer or a controlling person shall not be deemed to be
a salesman within the meaning of this definition.
(3) The provisions of this Section shall not apply to any of the
(a) The sale in good faith, whether through a dealer or otherwise, of
such shares by a vendor who is not an issuer, underwriter, dealer or
controlling person in respect of such shares, and who, being the bona fide
owner of such shares deposes thereof for his own account; provided, that
such sale is not made directly or indirectly for the benefit of the issuer
or of an underwriter or controlling person.
(b) The sale, issuance or exchange by an issuer of its shares to or with
its own shareholders, if no commission or other remuneration is paid or
given directly or indirectly for or on account of the procuring or
soliciting of such sale or exchange (other than a fee paid to underwriters
based on their undertaking to purchase any shares not purchased by
shareholders in connection with such sale or exchange), or the issuance by
an issuer of its shares to a holder of convertible securities pursuant to a
conversion provision granted at the time of issuance of such convertible
securities, provided that no commission or other remuneration is paid or
given directly or indirectly thereon on account of the procuring or
soliciting of such conversion and no consideration from the holder in
addition to the surrender or cancellation of the convertible security is
required to effect the conversion.
(c) The sale of such shares to any corporation, bank, savings
institution, trust company, insurance company, building and loan
association, dealer, pension fund or pension trust, employees profit
sharing trust or to any association engaged as a substantial part of its
business or operations in purchasing or holding securities, or to any trust
in respect of which a bank or trust company is trustee or co-trustee.
(d) The sale of such shares by an executor, administrator, guardian, receiver
or trustee in insolvency or bankruptcy or at any
judicial sale or at a public sale by auction held at an advertised time and
place or the sale of such shares in good faith and not for the purpose of
avoiding the provisions of this Section by a pledgee of such shares pledged
for a bona fide debt.
(e) Such other transaction as may be declared by ruling of the Director
to be exempt from the provisions of this Section.
(4) Prior to the issuance of any permit under this Section, there shall
be delivered to the Director two copies of the following:
(a) the prospectus which is to be used in connection with the sale of
(b) the underwriting and selling agreements, if any;
(c) the subscription agreement;
(d) the depository agreement under which the subscription proceeds are
to be held;
(e) any and all other documents, agreements, contracts and other papers
of whatever nature which are to be used in connection with or relative to
the sale of such shares, which may be required by the Director.
(5) The Director shall within a reasonable time examine the documents
submitted to him and unless he finds from said documents that the sale of
said shares is inequitable or would work or tend to work a fraud or deceit
upon the purchasers thereof, he shall issue a permit authorizing the sale
of said shares.
(6) The Director shall have the power to prescribe such rules and
regulations relating to the sale, issuance, and offering of said shares as
will effectuate the purpose of this section to the end that no inequity,
fraud or deceit will be perpetrated upon the purchasers thereof.
(7) If the Director finds that any of the provisions of this Section or
of the rules and regulations adopted pursuant hereto have been violated or
that the sale, issuance or offering of any such shares is inequitable or
works or tends to work a fraud or deceit upon the purchasers thereof he may
refuse to issue a permit to sell, issue or offer such shares or may, after
notice and hearing, revoke such permit. The action of the Director in
refusing, after due application therefor in form prescribed by the
Director, or revoking, any such permit shall be subject to judicial review
in the manner prescribed by the insurance laws of this State.
(8) Any person who violates any of the provisions of this Section shall
be guilty of a business offense and, upon conviction thereof shall be fined
not less than $1,000 nor more than the greater of either $5,000 or twice
the whole amount, received upon the sale of shares in violation of this
Section and may in addition, if a natural person, be convicted of a Class A
(Source: P.A. 84-502.)