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90_HB0563 SEE INDEX Amends the Illinois Pension Code. Adopts provisions relating to fiduciaries and investment advisers. Expands the investment authority of downstate police and fire pension funds. Creates a new Article 1A relating to the powers of the Public Pension Division of the Department of Insurance, substantially incorporating the provisions of current Article 22, Division 5 (with numerous substantive and technical changes); repeals Article 22, Division 5 of the Code. Amends the State Finance Act to create the Public Pension Regulation Fund. Amends the Public Funds Investment Act to exclude downstate police and fire pension funds. Amends the Illinois Securities Law of 1953 to specify that dealers, salespersons, and investment advisers may be disciplined for causing or advising a public pension fund to make an investment or engage in a transaction not authorized under the Illinois Pension Code. Effective immediately. LRB9002742EGfg LRB9002742EGfg 1 AN ACT in relation to public employee pensions, amending 2 named Acts. 3 Be it enacted by the People of the State of Illinois, 4 represented in the General Assembly: 5 Section 5. The State Finance Act is amended by adding 6 Section 8f as follows: 7 (30 ILCS 105/8f new) 8 Sec. 8f. Public Pension Regulation Fund. The Public 9 Pension Regulation Find is created in the State Treasury. 10 Except as otherwise provided in the Illinois Pension Code, 11 all money received by the Illinois Department of Insurance 12 under the Illinois Pension Code shall be paid into the Fund. 13 The State Treasurer promptly shall invest the money in the 14 Fund, and all earnings that accrue on the money in the Fund 15 shall be credited to the Fund. No money may be transferred 16 from this Fund to any other fund. The General Assembly may 17 make appropriations from this Fund for the ordinary and 18 contingent expenses of the Public Pension Division of the 19 Illinois Department of Insurance. 20 Section 10. The Public Funds Investment Act is amended 21 by changing Section 1 as follows: 22 (30 ILCS 235/1) (from Ch. 85, par. 901) 23 Sec. 1. The words "public funds", as used in this Act, 24 mean current operating funds, special funds, interest and 25 sinking funds, and funds of any kind or character belonging 26 to or in the custody of any public agency. 27 The words "public agency", as used in this Act, mean the 28 State of Illinois, the various counties, townships, cities, 29 towns, villages, school districts, educational service -2- LRB9002742EGfg 1 regions, special road districts, public water supply 2 districts, fire protection districts, drainage districts, 3 levee districts, sewer districts, housing authorities, the 4 Illinois Bank Examiners' Education Foundation, the Chicago 5 Park District, and all other political corporations or 6 subdivisions of the State of Illinois, now or hereafter 7 created, whether herein specifically mentioned or not. 8 Beginning January 1, 1998, this Act does not apply to police 9 pension funds established under Article 3 of the Illinois 10 Pension Code or firefighter pension funds established under 11 Article 4 of the Illinois Pension Code, unless otherwise 12 provided by that Code. 13 (Source: P.A. 87-968.) 14 Section 15. The Illinois Pension Code is amended by 15 changing Sections 1-101.1, 1-113, 3-102, 3-132, 3-135, 3-143, 16 4-123, 4-128, and 4-134 and adding Sections 1-101.2, 1-101.3, 17 1-101.4, 1-113.1, 1-113.2, 1-113.3, 1-113.4, 1-113.5, 18 1-113.6, 1-113.7, 1-113.8, 1-113.9, 1-113.10, 1-113.11, 19 1A-101, 1A-102, 1A-103, 1A-104, 1A-105, 1A-106, 1A-107, 20 1A-108, 1A-109, 1A-110, 1A-111, 1A-112, 1A-113, 3-108.2, 21 3-108.3, and 4-105d as follows: 22 (40 ILCS 5/1-101.1) (from Ch. 108 1/2, par. 1-101.1) 23 Sec. 1-101.1. Definitions. For purposes of this Article, 24 unless the context otherwise requires, the words defined in 25 the Sections following this Section and preceding Section 26 1-102 shall have meanings given in those Sections.
:27 (a) A person is a "Fiduciary" with respect to a28 retirement system or pension fund established under this Code29 to the extent that such person:30 (i) exercises any discretionary authority or31 discretionary control respecting management of such32 retirement system or pension fund, or exercises any authority-3- LRB9002742EGfg 1 or control respecting management or disposition of its2 assets;3 (ii) renders investment advice for a fee or other4 compensation, direct or indirect, with respect to any moneys5 or other property of such retirement system or pension fund,6 or has any authority or responsibility to do so; or7 (iii) has any discretionary authority or discretionary8 responsibility in the administration of such retirement9 system.10 (b) A person is a "Party in interest" with respect to a11 retirement system or pension fund established under this Code12 if such person is:13 (i) a fiduciary, counsel or employee of such retirement14 system or pension fund;15 (ii) a person providing services to such retirement16 system or pension fund;17 (iii) an employer, any of whose employees are covered by18 such retirement system or pension fund;19 (iv) an employee organization any of whose members are20 covered by such retirement system or pension fund;21 (v) a relative of any individual described in paragraph22 (i) or (ii) above of this subsection (b); or23 (vi) an employee, officer or director (or an individual24 having powers or responsibilities similar to those of25 officers or directors) of a person described in paragraphs26 (ii), (iii) or (iv) above of this subsection (b), or of such27 retirement system or pension fund.28 (c) A person is an "Investment manager" with respect to29 a retirement system or pension fund established under this30 Code if such person:31 (i) is a fiduciary appointed by the board of trustees of32 a retirement system or pension fund in accordance with33 Section 1-109.1;34 (ii) has the power to manage, acquire or dispose of any-4- LRB9002742EGfg 1 asset of the retirement system or pension fund;2 (iii) is either -3 (A) registered as an investment advisor under the4 Investment Advisors Act of 1940 (15 U.S.C. 80b-1, et seq.);5 (B) a bank, as defined in that Act; or6 (C) an insurance company; and7 (iv) has acknowledged in writing that he is a fiduciary8 with respect to the retirement system or pension fund.9 (Source: P.A. 82-960.) 10 (40 ILCS 5/1-101.2 new) 11 Sec. 1-101.2. Fiduciary. A person is a "fiduciary" with 12 respect to a pension fund or retirement system established 13 under this Code to the extent that the person: 14 (1) exercises any discretionary authority or 15 discretionary control respecting management of the 16 pension fund or retirement system, or exercises any 17 authority or control respecting management or disposition 18 of its assets; 19 (2) renders investment advice for a fee or other 20 compensation, direct or indirect, with respect to any 21 moneys or other property of the pension fund or 22 retirement system, or has any authority or responsibility 23 to do so; or 24 (3) has any discretionary authority or 25 discretionary responsibility in the administration of the 26 pension fund or retirement system. 27 (40 ILCS 5/1-101.3 new) 28 Sec. 1-101.3. Party in interest. A person is a "party in 29 interest" with respect to a pension fund or retirement system 30 established under this Code if the person is: 31 (1) a fiduciary, counsel, or employee of the 32 pension fund or retirement system, or a relative of such -5- LRB9002742EGfg 1 a person; 2 (2) a person providing services to the pension fund 3 or retirement system, or a relative of such a person; 4 (3) an employer, any of whose employees are covered 5 by the pension fund or retirement system; 6 (4) an employee organization, any members of which 7 are covered by the pension fund or retirement system; or 8 (5) an employee, officer, or director (or an 9 individual having powers or responsibilities similar to 10 those of an officer or director) of the pension fund or 11 retirement system or of a person described under item 12 (2), (3), or (4) of this Section. 13 (40 ILCS 5/1-101.4 new) 14 Sec. 1-101.4. Investment adviser. A person is an 15 "investment adviser", "investment advisor", or "investment 16 manager" with respect to a pension fund or retirement system 17 established under this Code if the person: 18 (1) is a fiduciary appointed by the board of 19 trustees of the pension fund or retirement system in 20 accordance with Section 1-109.1; 21 (2) has the power to manage, acquire, or dispose of 22 any asset of the retirement system or pension fund; 23 (3) has acknowledged in writing that he or she is a 24 fiduciary with respect to the pension fund or retirement 25 system; and 26 (4) is at least one of the following: (i) 27 registered as an investment adviser under the federal 28 Investment Advisers Act of 1940 (15 U.S.C. 80b-1, et 29 seq.); (ii) registered as an investment adviser under the 30 Illinois Securities Law of 1953; (iii) a bank, as defined 31 in the Investment Advisers Act of 1940; or (iv) an 32 insurance company authorized to transact business in this 33 State. -6- LRB9002742EGfg 1 (40 ILCS 5/1-113) (from Ch. 108 1/2, par. 1-113) 2 Sec. 1-113. Investment authority of certain pension 3 funds, not including those established under Article 3 or 4. 4 The investment authority of a board of trustees of a 5 retirement system or pension fund established under this Code 6 shall, if so provided in the Article establishing such 7 retirement system or pension fund, embrace the following 8 investments: 9 (1) Bonds, notes and other direct obligations of the 10 United States Government; bonds, notes and other obligations 11 of any United States Government agency or instrumentality, 12 whether or not guaranteed; and obligations the principal and 13 interest of which are guaranteed unconditionally by the 14 United States Government or by an agency or instrumentality 15 thereof. 16 (2) Obligations of the Inter-American Development Bank, 17 the International Bank for Reconstruction and Development, 18 the African Development Bank, the International Finance 19 Corporation, and the Asian Development Bank. 20 (3) Obligations of any state, or of any political 21 subdivision in Illinois, or of any county or city in any 22 other state having a population as shown by the last federal 23 census of not less than 30,000 inhabitants provided that such 24 political subdivision is not permitted by law to become 25 indebted in excess of 10% of the assessed valuation of 26 property therein and has not defaulted for a period longer 27 than 30 days in the payment of interest and principal on any 28 of its general obligations or indebtedness during a period of 29 10 calendar years immediately preceding such investment. 30 (4) Nonconvertible bonds, debentures, notes and other 31 corporate obligations of any corporation created or existing 32 under the laws of the United States or any state, district or 33 territory thereof, provided there has been no default on the 34 obligations of the corporation or its predecessor(s) during -7- LRB9002742EGfg 1 the 5 calendar years immediately preceding the purchase. 2 (5) Obligations guaranteed by the Government of Canada, 3 or by any Province of Canada, or by any Canadian city with a 4 population of not less than 150,000 inhabitants, provided (a) 5 they are payable in United States currency and are exempt 6 from any Canadian withholding tax; (b) the investment in any 7 one issue of bonds shall not exceed 10% of the amount 8 outstanding; and (c) the total investments at book value in 9 Canadian securities shall be limited to 5% of the total 10 investment account of the board at book value. 11 (5.1) Direct obligations of the State of Israel for the 12 payment of money, or obligations for the payment of money 13 which are guaranteed as to the payment of principal and 14 interest by the State of Israel, or common or preferred stock 15 or notes issued by a bank owned or controlled in whole or in 16 part by the State of Israel, on the following conditions: 17 (a) The total investments in such obligations shall 18 not exceed 5% of the book value of the aggregate 19 investments owned by the board; 20 (b) The State of Israel shall not be in default in 21 the payment of principal or interest on any of its direct 22 general obligations on the date of such investment; 23 (c) The bonds, stock or notes, and interest thereon 24 shall be payable in currency of the United States; 25 (d) The bonds shall (1) contain an option for the 26 redemption thereof after 90 days from date of purchase or 27 (2) either become due 5 years from the date of their 28 purchase or be subject to redemption 120 days after the 29 date of notice for redemption; 30 (e) The investment in these obligations has been 31 approved in writing by investment counsel employed by the 32 board, which counsel shall be a national or state bank or 33 trust company authorized to do a trust business in the 34 State of Illinois, or an investment advisor qualified -8- LRB9002742EGfg 1 under the federal Investment Advisors Act of 1940 and 2 registered under the Illinois Securities Act of 1953; 3 (f) The fund or system making the investment shall 4 have at least $5,000,000 of net present assets. 5 (6) Notes secured by mortgages under Sections 203, 207, 6 220 and 221 of the National Housing Act which are insured by 7 the Federal Housing Commissioner, or his successor assigns, 8 or debentures issued by such Commissioner, which are 9 guaranteed as to principal and interest by the Federal 10 Housing Administration, or agency of the United States 11 Government, provided the aggregate investment shall not 12 exceed 20% of the total investment account of the board at 13 book value, and provided further that the investment in such 14 notes under Sections 220 and 221 shall in no event exceed 15 one-half of the maximum investment in notes under this 16 paragraph. 17 (7) Loans to veterans guaranteed in whole or part by the 18 United States Government pursuant to Title III of the Act of 19 Congress known as the "Servicemen's Readjustment Act of 20 1944," 58 Stat. 284, 38 U.S.C. 693, as amended or 21 supplemented from time to time, provided such guaranteed 22 loans are liens upon real estate. 23 (8) Common and preferred stocks and convertible debt 24 securities authorized for investment of trust funds under the 25 laws of the State of Illinois, provided: 26 (a) the common stocks, except as provided in 27 subparagraph (g) (h), are listed on a national securities 28 exchange or board of trade, as defined in the federal 29 Securities Exchange Act of 1934, or quoted in the 30 National Association of Securities Dealers Automated 31 Quotation System (NASDAQ); 32 (b) the securities are of a corporation created or 33 existing under the laws of the United States or any 34 state, district or territory thereof; -9- LRB9002742EGfg 1 (c) the corporation is not in arrears on payment of 2 dividends on its preferred stock; 3 (d) the total book value of all stocks and 4 convertible debt owned by any pension fund or retirement 5 system shall not exceed 40% of the aggregate book value 6 of all investments of such pension fund or retirement 7 system, except for that system governed by Article 17, 8 where the total of all stocks and convertible debt shall 9 not exceed 50% of the aggregate book value of all fund 10 investments; 11 (e) the book value of stock and convertible debt 12 investments in any one corporation shall not exceed 5% of 13 the total investment account at book value in which such 14 securities are held, determined as of the date of the 15 investment, and the investments in the stock of any one 16 corporation shall not exceed 5% of the total outstanding 17 stock of such corporation, and the investments in the 18 convertible debt of any one corporation shall not exceed 19 5% of the total amount of such debt that may be 20 outstanding; 21 (f) the straight preferred stocks or convertible 22 preferred stocks and convertible debt securities are 23 issued or guaranteed by a corporation whose common stock 24 qualifies for investment by the board; and 25 (g) that any common stocks not listed or quoted as 26 provided in subdivision 8(a) above be limited to the 27 following types of institutions: (a) any bank which is a 28 member of the Federal Deposit Insurance Corporation 29 having capital funds represented by capital stock, 30 surplus and undivided profits of at least $20,000,000; 31 (b) any life insurance company having capital funds 32 represented by capital stock, special surplus funds and 33 unassigned surplus totalling at least $50,000,000; and 34 (c) any fire or casualty insurance company, or a -10- LRB9002742EGfg 1 combination thereof, having capital funds represented by 2 capital stock, net surplus and voluntary reserves of at 3 least $50,000,000. 4 (9) Withdrawable accounts of State chartered and federal 5 chartered savings and loan associations insured by the 6 Federal Savings and Loan Insurance Corporation; deposits or 7 certificates of deposit in State and national banks insured 8 by the Federal Deposit Insurance Corporation; and share 9 accounts or share certificate accounts in a State or federal 10 credit union, the accounts of which are insured as required 11 by the Illinois Credit Union Act or the Federal Credit Union 12 Act, as applicable. 13 No bank or savings and loan association shall receive 14 investment funds as permitted by this subsection (9), unless 15 it has complied with the requirements established pursuant to 16 Section 6 of the Public Funds Investment Act. 17 (10) Trading, purchase or sale of listed options on 18 underlying securities owned by the board. 19 (11) Contracts and agreements supplemental thereto 20 providing for investments in the general account of a life 21 insurance company authorized to do business in Illinois. 22 (12) Conventional mortgage pass-through securities which 23 are evidenced by interests in Illinois owner-occupied 24 residential mortgages, having not less than an "A" rating 25 from at least one national securities rating service. Such 26 mortgages may have loan-to-value ratios up to 95%, provided 27 that any amount over 80% is insured by private mortgage 28 insurance. The pool of such mortgages shall be insured by 29 mortgage guaranty or equivalent insurance, in accordance with 30 industry standards. 31 (13) Pooled or commingled funds managed by a national or 32 State bank which is authorized to do a trust business in the 33 State of Illinois, shares of registered investment companies 34 as defined in the federal Investment Company Act of 1940 -11- LRB9002742EGfg 1 which are registered under that Act, and separate accounts of 2 a life insurance company authorized to do business in 3 Illinois, where such pooled or commingled funds, shares, or 4 separate accounts are comprised of common or preferred 5 stocks, bonds, or money market instruments. 6 (14) Pooled or commingled funds managed by a national or 7 state bank which is authorized to do a trust business in the 8 State of Illinois, separate accounts managed by a life 9 insurance company authorized to do business in Illinois, and 10 commingled group trusts managed by an investment adviser 11 registered under the federal Investment Advisors Act of 1940 12 (15 U.S.C. 80b-1 et seq.) and under The Illinois Securities 13 Law of 1953, where such pooled or commingled funds, separate 14 accounts or commingled group trusts are comprised of real 15 estate or loans upon real estate secured by first or second 16 mortgages. The total investment in such pooled or commingled 17 funds, commingled group trusts and separate accounts shall 18 not exceed 10% of the aggregate book value of all investments 19 owned by the fund. 20 (15) Investment companies which (a) are registered as 21 such under the Investment Company Act of 1940, (b) are 22 diversified, open-end management investment companies and (c) 23 invest only in money market instruments. 24 (16) Up to 10% of the assets of the fund may be invested 25 in investments not included in paragraphs (1) through (15) of 26 this Section, provided that such investments comply with the 27 requirements and restrictions set forth in Sections 1-109, 28 1-109.1, 1-109.2, 1-110 and 1-111 of this Code. 29 The board shall have the authority to enter into such 30 agreements and to execute such documents as it determines to 31 be necessary to complete any investment transaction. 32 Any limitations herein set forth shall be applicable only 33 at the time of purchase and shall not require the liquidation 34 of any investment at any time. -12- LRB9002742EGfg 1 All investments shall be clearly held and accounted for 2 to indicate ownership by such board. Such board may direct 3 the registration of securities in its own name or in the name 4 of a nominee created for the express purpose of registration 5 of securities by a national or state bank or trust company 6 authorized to conduct a trust business in the State of 7 Illinois. 8 Investments shall be carried at cost or at a book value 9 in accordance with accounting procedures approved by such 10 board. No adjustments shall be made in investment carrying 11 values for ordinary current market price fluctuations; but 12 reserves may be provided to account for possible losses or 13 unrealized gains as determined by such board. 14 The book value of investments held by any pension fund or 15 retirement system in one or more commingled investment 16 accounts shall be the cost of its units of participation in 17 such commingled account or accounts as recorded on the books 18 of such board. 19 (Source: P.A. 86-272; 87-575; 87-794; 87-895.) 20 (40 ILCS 5/1-113.1 new) 21 Sec. 1-113.1. Investment authority of pension funds 22 established under Article 3 or 4. The board of trustees of a 23 police pension fund established under Article 3 of this Code 24 or firefighter pension fund established under Article 4 of 25 this Code shall draw pension funds from the treasurer of the 26 municipality and, beginning January 1, 1998, invest any part 27 thereof in the name of the board in the items listed in 28 Sections 1-113.2 through 1-113.4 according to the limitations 29 and requirements of this Article. These investments shall be 30 made with the care, skill, prudence, and diligence that a 31 prudent person acting in like capacity and familiar with such 32 matters would use in the conduct of an enterprise of like 33 character with like aims. -13- LRB9002742EGfg 1 Interest and any other income from the investments shall 2 be credited to the pension fund. 3 For the purposes of Sections 1-113.2 through 1-113.11, 4 the "net assets" of a pension fund include both the cash and 5 invested assets of the pension fund. 6 (40 ILCS 5/1-113.2 new) 7 Sec. 1-113.2. List of permitted investments for all 8 Article 3 or 4 pension funds. Any pension fund established 9 under Article 3 or 4 may invest in the following items: 10 (1) Interest bearing direct obligations of the United 11 States of America. 12 (2) Interest bearing obligations to the extent that they 13 are fully guaranteed or insured as to payment of principal 14 and interest by the United States of America. 15 (3) Interest bearing bonds, notes, debentures, or other 16 similar obligations of agencies of the United States of 17 America. 18 (4) Interest bearing savings accounts or certificates of 19 deposit, issued by federally chartered banks or savings and 20 loan associations, to the extent that the deposits are 21 insured by agencies or instrumentalities of the federal 22 government. 23 (5) Interest bearing savings accounts or certificates of 24 deposit, issued by State of Illinois chartered banks or 25 savings and loan associations, to the extent that the 26 deposits are insured by agencies or instrumentalities of the 27 federal government. 28 (6) Investments in credit unions, to the extent that the 29 investments are insured by agencies or instrumentalities of 30 the federal government. 31 (7) Interest bearing bonds of the State of Illinois. 32 (8) Pooled interest bearing accounts managed by the 33 Illinois Public Treasurer's Investment Pool in accordance -14- LRB9002742EGfg 1 with the Deposit of State Moneys Act and interest bearing 2 funds or pooled accounts managed, operated, and administered 3 by banks, subsidiaries of banks, or subsidiaries of bank 4 holding companies in accordance with the Public Funds 5 Investment Act. 6 (9) Interest bearing bonds or tax anticipation warrants 7 of any county, township, or municipal corporation of the 8 State of Illinois. 9 (10) Direct obligations of the State of Israel, subject 10 to the conditions and limitations of item (5.1) of Section 11 1-113. 12 (11) Money market mutual funds managed by investment 13 companies that are registered under the federal Investment 14 Company Act of 1940 and the Illinois Securities Law of 1953 15 and are diversified, open-ended management investment 16 companies; provided that the portfolio of the money market 17 mutual fund is limited to the following: 18 (i) bonds, notes, certificates of indebtedness, 19 treasury bills, or other securities that are guaranteed 20 by the full faith and credit of the United States of 21 America as to principal and interest; 22 (ii) bonds, notes, debentures, or other similar 23 obligations of the United States of America or its 24 agencies; and 25 (iii) short term obligations of corporations 26 organized in the United States with assets exceeding 27 $400,000,000, provided that (A) the obligations mature no 28 later than 180 days from the date of purchase, (B) at the 29 time of purchase, the obligations are rated by at least 2 30 standard national rating services at one of their 3 31 highest classifications, and (C) the obligations held by 32 the mutual fund do not exceed 10% of the corporation's 33 outstanding obligations. 34 (12) General accounts of life insurance companies -15- LRB9002742EGfg 1 authorized to transact business in Illinois. 2 (13) Any combination of the following, not to exceed 10% 3 of the pension fund's net assets: 4 (i) separate accounts that are managed by life 5 insurance companies authorized to transact business in 6 Illinois and are comprised of diversified portfolios 7 consisting of common or preferred stocks, bonds, or money 8 market instruments; and 9 (ii) separate accounts that are managed by 10 insurance companies authorized to transact business in 11 Illinois, and are comprised of real estate or loans upon 12 real estate secured by first or second mortgages. 13 (40 ILCS 5/1-113.3 new) 14 Sec. 1-113.3. List of additional permitted investments 15 for pension funds with net assets of $2,500,000 or more. In 16 addition to the items in Section 3-113.2, a pension fund 17 established under Article 3 or 4 that has net assets of at 18 least $2,500,000 may invest up to 35% of its net assets in 19 the following items: 20 (1) Separate accounts that are managed by life insurance 21 companies authorized to transact business in Illinois and are 22 comprised of diversified portfolios consisting of common or 23 preferred stocks, bonds, or money market instruments. 24 (2) Mutual funds that meet the following requirements: 25 (i) the mutual fund is managed by an investment 26 company as defined and registered under the federal 27 Investment Company Act of 1940 and registered under the 28 Illinois Securities Law of 1953; 29 (ii) the mutual fund has been in operation for at 30 least 5 years; 31 (iii) the mutual fund has total net assets of $250 32 million or more; and 33 (iv) the mutual fund is comprised of diversified -16- LRB9002742EGfg 1 portfolios of common or preferred stocks, bonds, or money 2 market instruments. 3 (40 ILCS 5/1-113.4 new) 4 Sec. 1-113.4. List of additional permitted investments 5 for pension funds with net assets of $5,000,000 or more. In 6 addition to the items in Sections 1-113.2 and 1-113.3, a 7 pension fund established under Article 3 or 4 that has net 8 assets of at least $5,000,000 and has appointed an investment 9 adviser under Section 1-113.5 may invest up to 35% of its net 10 assets in common and preferred stocks authorized for 11 investments of trust funds under the laws of the State of 12 Illinois. The stocks must meet all of the following 13 requirements: 14 (1) The common stocks are listed on a national 15 securities exchange or board of trade (as defined in the 16 federal Securities Exchange Act of 1934 and set forth in 17 Section 3.G of the Illinois Securities Law of 1953) or 18 quoted in the National Association of Securities Dealers 19 Automated Quotation System National Market System (NASDAQ 20 NMS). 21 (2) The securities are of a corporation created or 22 existing under the laws of the United States or any 23 state, district, or territory thereof and the corporation 24 has been in existence for at least 5 years. 25 (3) The corporation has not been in arrears on 26 payment of dividends on its preferred stock during the 27 preceding 5 years. 28 (4) The market value of stock in any one 29 corporation does not exceed 5% of the cash and invested 30 assets of the pension fund, and the investments in the 31 stock of any one corporation do not exceed 5% of the 32 total outstanding stock of that corporation. 33 (5) The straight preferred stocks or convertible -17- LRB9002742EGfg 1 preferred stocks are issued or guaranteed by a 2 corporation whose common stock qualifies for investment 3 by the board. 4 (6) The issuer of the stocks has been subject to 5 the requirements of Section 12 of the federal Securities 6 Exchange Act of 1934 and has been current with the filing 7 requirements of Sections 13 and 14 of that Act during the 8 preceding 3 years. 9 (40 ILCS 5/1-113.5 new) 10 Sec. 1-113.5. Investment advisers and investment 11 services. 12 (a) The board of trustees of a pension fund may appoint 13 investment advisers as defined in Section 1-101.4. The board 14 of any pension fund investing in common or preferred stock 15 under Section 1-113.4 shall appoint an investment adviser 16 before making such investments. 17 The investment adviser shall be a fiduciary, as defined 18 in Section 1-101.2, with respect to the pension fund and 19 shall be one of the following: 20 (1) an investment adviser registered under the 21 federal Investment Advisers Act of 1940 and the Illinois 22 Securities Law of 1953; 23 (2) a bank or trust company authorized to conduct a 24 trust business in Illinois; 25 (3) a life insurance company authorized to transact 26 business in Illinois; or 27 (4) an investment company as defined and registered 28 under the federal Investment Company Act of 1940 and 29 registered under the Illinois Securities Law of 1953. 30 (b) All investment advice and services provided by an 31 investment adviser appointed under this Section shall be 32 rendered pursuant to a written contract between the 33 investment adviser and the board, and in accordance with the -18- LRB9002742EGfg 1 board's investment policy. 2 The contract shall include all of the following: 3 (1) acknowledgement in writing by the investment 4 adviser that he or she is a fiduciary with respect to the 5 pension fund; 6 (2) the board's investment policy; 7 (3) full disclosure of direct and indirect fees, 8 commissions, penalties, and any other compensation that 9 may be received by the investment adviser, including 10 reimbursement for expenses; and 11 (4) a requirement that the investment adviser 12 submit periodic written reports, on at least a quarterly 13 basis, for the board's review at its regularly scheduled 14 meetings. All returns on investment shall be reported as 15 net returns after payment of all fees, commissions, and 16 any other compensation. 17 (c) Within 30 days after appointing an investment 18 adviser, the board shall submit a copy of the contract to the 19 Department of Insurance. 20 (d) Investment services provided by a person other than 21 an investment adviser appointed under this Section, including 22 but not limited to services provided by the kinds of persons 23 listed in items (1) through (4) of subsection (a), shall be 24 rendered only after full written disclosure of direct and 25 indirect fees, commissions, penalties, and any other 26 compensation that shall or may be received by the person 27 rendering those services. 28 (e) The board of trustees of each pension fund shall 29 retain records of investment transactions in accordance with 30 the rules of the Department of Insurance. 31 (40 ILCS 5/1-113.6 new) 32 Sec. 1-113.6. Investment policies. Every board of 33 trustees of a pension fund shall adopt a written investment -19- LRB9002742EGfg 1 policy and file a copy of that policy with the Department of 2 Insurance within 30 days after its adoption. Whenever a 3 board changes its investment policy, it shall file a copy of 4 the new policy with the Department within 30 days. 5 (40 ILCS 5/1-113.7 new) 6 Sec. 1-113.7. Registration of investments; custody and 7 safekeeping. The board of trustees may register the 8 investments of its pension fund in the name of the pension 9 fund, in the nominee name of an investment adviser appointed 10 under Section 1-113.5, in the nominee name of a bank or trust 11 company authorized to conduct a trust business in Illinois, 12 or in the nominee name of the Illinois Public Treasurer's 13 Investment Pool. 14 The assets of the pension fund and ownership of its 15 investments shall be protected through third-party custodial 16 safekeeping. The board of trustees may appoint as custodian 17 of the investments of its pension fund the treasurer of the 18 municipality, an investment adviser appointed under Section 19 1-113.5, a bank or trust company authorized to conduct a 20 trust business in Illinois, or the Illinois Public 21 Treasurer's Investment Pool. 22 No pension fund investments may be held by a dealer or 23 salesperson as defined in the Illinois Securities Law of 24 1953, except in a money market mutual fund in accordance with 25 Section 1-113.2 for a period of time not to exceed 180 days. 26 A bank or trust company authorized to conduct a trust 27 business in Illinois shall register, deposit, or hold 28 investments for safekeeping, all in accordance with the 29 obligations and subject to the limitations of the Securities 30 in Fiduciary Accounts Act. 31 (40 ILCS 5/1-113.8 new) 32 Sec. 1-113.8. Limitations on banks and savings and loan -20- LRB9002742EGfg 1 associations. A bank or savings and loan association shall 2 not receive investment funds from a pension fund established 3 under Article 3 or 4 of this Code, unless it has complied 4 with the requirements established under Section 6 of the 5 Public Funds Investment Act. The limitations set forth in 6 that Section 6 are applicable only at the time of investment 7 and do not require the liquidation of any investment at any 8 time. 9 (40 ILCS 5/1-113.9 new) 10 Sec. 1-113.9. Illegal investments. A person registered 11 as a dealer, salesperson, or investment adviser under the 12 Illinois Securities Law of 1953 who advises or causes a 13 pension fund to make an investment or engage in a transaction 14 not authorized by this Code is subject to the penalty 15 provisions of paragraph q of subsection E of Section 8 of 16 that law. 17 A bank or trust company authorized to conduct a trust 18 business in Illinois, and any officer, director, or employee 19 thereof, that advises or causes a pension fund to make an 20 investment or engages in a transaction not authorized by this 21 Code is subject to the penalty provisions of Article V of the 22 Corporate Fiduciary Act. 23 (40 ILCS 5/1-113.10 new) 24 Sec. 1-113.10. Legality at time of investment. The 25 investment limitations set forth in this Article are 26 applicable only at the time of investment and do not require 27 the liquidation of any investment at any time. However, no 28 additional pension funds may be invested in any investment 29 item while the market value of the pension fund's investments 30 in that item meets or exceeds the applicable limitation. 31 (40 ILCS 5/1-113.11 new) -21- LRB9002742EGfg 1 Sec. 1-113.11. Rules. The Department of Insurance is 2 authorized to promulgate rules that are necessary or useful 3 for the administration and enforcement of Sections 1-113.1 4 through 1-113.10 of this Article. 5 (40 ILCS 5/Art. 1A heading new) 6 ARTICLE 1A. REGULATION OF PUBLIC PENSION FUNDS 7 (40 ILCS 5/1A-101 new) 8 Sec. 1A-101. Creation of Public Pension Division. There 9 is created in the Department of Insurance a Public Pension 10 Division which, under the supervision and direction of the 11 Director of Insurance, shall exercise the powers and perform 12 the duties and functions prescribed under this Code. The 13 Division shall consist of an administrator, a supervisor, a 14 technical staff trained in the fundamentals of public pension 15 fund planning, operations, administration, and investment of 16 public pension funds, and such other personnel as may be 17 necessary properly and effectively to discharge the functions 18 of the Division. 19 (40 ILCS 5/1A-102 new) 20 Sec. 1A-102. Definitions. As used in this Article, the 21 following terms have the meanings ascribed to them in this 22 Section, unless the context otherwise requires: 23 "Accrued liability" means the actuarial present value of 24 future benefit payments and appropriate administrative 25 expenses under a plan, reduced by the actuarial present value 26 of all future normal costs (including any participant 27 contributions) with respect to the participants included in 28 the actuarial valuation of the plan. 29 "Actuarial present value" means the single amount, as of 30 a given valuation date, that results from applying actuarial 31 assumptions to an amount or series of amounts payable or -22- LRB9002742EGfg 1 receivable at various times. 2 "Actuarial value of assets" means the value assigned by 3 the actuary to the assets of a plan for the purposes of an 4 actuarial valuation. 5 "Beneficiary" means a person eligible for or receiving 6 benefits from a pension fund as provided in the Article of 7 this Code under which the fund is established. 8 "Credited projected benefit" means that portion of a 9 participant's projected benefit based on an allocation taking 10 into account service to date determined in accordance with 11 the terms of the plan based on anticipated future 12 compensation. 13 "Current value" means the fair market value when 14 available; otherwise, the fair value as determined in good 15 faith by a trustee, assuming an orderly liquidation at the 16 time of the determination. 17 "Department" means the Department of Insurance of the 18 State of Illinois. 19 "Director" means the Director of the Department of 20 Insurance. 21 "Division" means the Public Pension Division of the 22 Department of Insurance. 23 "Governmental unit" means the State of Illinois, any 24 instrumentality or agency thereof (except transit authorities 25 or agencies operating within or within and without cities 26 with a population over 3,000,000), and any political 27 subdivision or municipal corporation that establishes and 28 maintains a public pension fund. 29 "Normal cost" means that part of the actuarial present 30 value of all future benefit payments and appropriate 31 administrative expenses assigned to the current year under 32 the actuarial valuation method used by the plan (excluding 33 any amortization of the unfunded accrued liability). 34 "Participant" means a participating member or deferred -23- LRB9002742EGfg 1 pensioner or annuitant of a pension fund as provided in the 2 Article of this Code under which the pension fund is 3 established, or a beneficiary thereof. 4 "Pension fund" means any public pension fund, annuity and 5 benefit fund, or retirement system established under this 6 Code. 7 "Plan year" means the calendar or fiscal year on which 8 the records of a given plan are kept. 9 "Projected benefits" means benefit amounts under a plan 10 which are expected to be paid at various future times under a 11 particular set of actuarial assumptions, taking into account, 12 as applicable, the effect of advancement in age and past and 13 anticipated future compensation and service credits. 14 "Supplemental annual cost" means that portion of the 15 unfunded accrued liability assigned to the current year under 16 one of the following bases: 17 (1) interest only on the unfunded accrued 18 liability; 19 (2) the level annual amount required to amortize 20 the unfunded accrued liability over a period not 21 exceeding 40 years; 22 (3) the amount required for the current year to 23 amortize the unfunded accrued liability over a period not 24 exceeding 40 years as a level percentage of payroll. 25 "Total annual cost" means the sum of the normal cost plus 26 the supplemental annual cost. 27 "Unfunded accrued liability" means the excess of the 28 accrued liability over the actuarial value of the assets of a 29 plan. 30 "Vested pension benefit" means an interest obtained by a 31 participant or beneficiary in that part of an immediate or 32 deferred benefit under a plan which arises from the 33 participant's service and is not conditional upon the 34 participant's continued service for an employer any of whose -24- LRB9002742EGfg 1 employees are covered under the plan, and which has not been 2 forfeited under the terms of the plan. 3 (40 ILCS 5/1A-103 new) 4 Sec. 1A-103. Rules. The Department is authorized to 5 promulgate rules necessary for the administration and 6 enforcement of this Code. Except as otherwise provided under 7 this Code, these rules shall apply only to pension funds 8 established under Article 3 or Article 4 of this Code. Rules 9 adopted pursuant to this Section shall govern where conflict 10 with local rules and regulations exists. 11 (40 ILCS 5/1A-104 new) 12 Sec. 1A-104. Examinations and investigations. 13 (a) The Division shall make periodic examinations and 14 investigations of all pension funds established under this 15 Code and maintained for the benefit of employees and officers 16 of governmental units in the State of Illinois. 17 However, in lieu of making an examination and 18 investigation, the Division may accept and rely upon a report 19 of audit or examination of any pension fund made by an 20 independent certified public accountant pursuant to the 21 provisions of the Article of this Code governing the pension 22 fund. The acceptance of the report of audit or examination 23 does not bar the Division from making a further audit, 24 examination, and investigation if deemed necessary by the 25 Division. 26 (b) Beginning July 1, 1999, the Division shall examine 27 or investigate each pension fund established under Article 3 28 or Article 4 of this Code at least once every 2 years. 29 Each examination shall include the following: 30 (1) an audit of financial transactions, investment 31 policies, and procedures; 32 (2) an examination of books, records, documents, -25- LRB9002742EGfg 1 files, and other pertinent memoranda relating to 2 financial, statistical, and administrative operations; 3 (3) a review of policies and procedures maintained 4 for the administration and operation of the pension fund; 5 (4) a determination of whether or not full effect 6 is being given to the statutory provisions governing the 7 operation of the pension fund; 8 (5) a determination of whether or not the 9 administrative policies in force are in accord with the 10 purposes of the statutory provisions and effectively 11 protect and preserve the rights and equities of the 12 participants; and 13 (6) a determination of whether or not proper 14 financial and statistical records have been established 15 and adequate documentary evidence is recorded and 16 maintained in support of the several types of annuity and 17 benefit payments being made. 18 In addition, the Division may conduct investigations, 19 which shall be identified as such and which may include one 20 or more of the items listed in this subsection. 21 A copy of the report of examination or investigation as 22 prepared by the Division shall be submitted to the secretary 23 of the board of trustees of the pension fund examined or 24 investigated. The Director, upon request, shall grant a 25 hearing to the officers or trustees of the pension fund or 26 their duly appointed representatives, upon any facts 27 contained in the report of examination. The hearing shall be 28 conducted before filing the report or making public any 29 information contained in the report. The Director may 30 withhold the report from public inspection for up to 60 days 31 following the hearing. 32 (40 ILCS 5/1A-105 new) 33 Sec. 1A-105. Examination and subpoena of records and -26- LRB9002742EGfg 1 witnesses. The Director may administer oaths and 2 affirmations and summon and compel the attendance before him 3 or her and examine under oath any officer, trustee, agent, 4 actuary, attorney, or employee connected either directly or 5 indirectly with any pension fund, or any other person having 6 information regarding the condition, affairs, management, 7 administration, or methods of conducting a pension fund. The 8 Director may require any person having possession of any 9 record, book, paper, contract, or other document pertaining 10 to a pension fund to surrender it or to otherwise afford the 11 Director access to it and for failure so to do the Director 12 may attach the same. 13 Should any person fail to obey the summons of the 14 Director or refuse to surrender to him or her or afford him 15 or her access to any such record, book, paper, contract, or 16 other document, the Director may apply to the circuit court 17 of the county in which the principal office of the pension 18 fund involved is located, and the court, if it finds that the 19 Director has not exceeded his or her authority in the matter, 20 may, by order duly entered, require the attendance of 21 witnesses and the production of all relevant documents 22 required by the Director in carrying out his or her 23 responsibilities under this Code. Upon refusal or neglect to 24 obey the order of the court, the court may compel obedience 25 by proceedings for contempt of court. 26 (40 ILCS 5/1A-106 new) 27 Sec. 1A-106. Advisory services. The Division shall 28 render advisory services to the pension funds on all matters 29 pertaining to their operations and shall recommend any 30 corrective or clarifying legislation that it may deem 31 necessary. These recommendations shall be made in the report 32 of examination of the particular pension fund and in the 33 biennial report to the General Assembly under Section 1A-108. -27- LRB9002742EGfg 1 The recommendations may embrace all substantive legislative 2 and administrative policies, including, but not limited to, 3 matters dealing with the payment of annuities and benefits, 4 the investment of funds, and the condition of the books, 5 records, and accounts of the pension fund. 6 (40 ILCS 5/1A-107 new) 7 Sec. 1A-107. Automation of services. The Division shall 8 automate its operations, services, and communications to the 9 fullest practical extent. This automation shall include, but 10 need not be limited to, the acquisition, use, and maintenance 11 of electronic data processing technology to (i) automate 12 Division operations as necessary to carry out its duties and 13 responsibilities under this Code, (ii) provide by FY 2000 14 electronic exchange of information between the Division and 15 pension funds subject to this Code, (iii) provide to pension 16 funds and the general public and receive from pension funds 17 and the general public data on computer processible media, 18 and (iv) control access to information when necessary to 19 protect the confidentiality of persons identified in the 20 information. 21 The Director is authorized to enter into contracts for 22 the purposes set forth in this Section. The Director is 23 further authorized to contract with public pension funds and 24 other entities, and to receive payment under those contracts. 25 All money collected under this Section shall be deposited as 26 provided in Section 1A-112. 27 (40 ILCS 5/1A-108 new) 28 Sec. 1A-108. Report to the Governor and General Assembly. 29 On or before October 1 following the convening of a regular 30 session of the General Assembly, the Division shall submit a 31 report to the Governor and General Assembly setting forth the 32 latest financial statements on the pension funds operating in -28- LRB9002742EGfg 1 the State of Illinois, a summary of the current provisions 2 underlying these funds, and a report on any changes that have 3 occurred in these provisions since the date of the last such 4 report submitted by the Division. 5 The report shall also include the results of examinations 6 made by the Division of any pension fund and any specific 7 recommendations for legislative and administrative correction 8 that the Division deems necessary. The report may embody 9 general recommendations concerning desirable changes in any 10 existing pension, annuity, or retirement laws designed to 11 standardize and establish uniformity in their basic 12 provisions and to bring about an improvement in the financial 13 condition of the pension funds. The purposes of these 14 recommendations and the objectives sought shall be clearly 15 expressed in the report. 16 The requirement for reporting to the General Assembly 17 shall be satisfied by filing copies of the report with the 18 Speaker, the Minority Leader, and the Clerk of the House of 19 Representatives, the President, the Minority Leader, and the 20 Secretary of the Senate, and the Legislative Research Unit, 21 as required by Section 3.1 of the General Assembly 22 Organization Act, and filing additional copies with the State 23 Government Report Distribution Center for the General 24 Assembly as required under paragraph (t) of Section 7 of the 25 State Library Act. 26 The Division shall distribute additional copies of the 27 report at no charge to the secretary of each pension fund 28 established under Article 3 or 4, the treasurer or fiscal 29 officer of each municipality with an established police or 30 firefighter pension fund, the executive director of every 31 other pension fund established under this Code, and upon 32 request to public libraries, State agencies, and police, 33 firefighter, and municipal organizations active in the public 34 pension area. -29- LRB9002742EGfg 1 (40 ILCS 5/1A-109 new) 2 Sec. 1A-109. Annual statements by pension funds. Each 3 pension fund shall furnish to the Division an annual 4 statement in a format prepared by the Division. The Division 5 shall design the form and prescribe the content of the annual 6 statement and, at least 60 days prior to the filing date, 7 shall furnish the form to each pension fund for completion. 8 The annual statement shall be prepared by each fund, properly 9 certified by its officers, and submitted to the Division 10 within 6 months following the close of the fiscal year of the 11 pension fund. 12 The annual statement shall include, but need not be 13 limited to, the following: 14 (1) a financial balance sheet as of the close of 15 the fiscal year; 16 (2) a statement of income and expenditures; 17 (3) an actuarial balance sheet; 18 (4) statistical data reflecting age, service, and 19 salary characteristics concerning all participants; 20 (5) special facts concerning disability or other 21 claims; 22 (6) details on investment transactions that 23 occurred during the fiscal year covered by the report; 24 (7) details on administrative expenses; and 25 (8) such other supporting data and schedules as in 26 the judgement of the Division may be necessary for a 27 proper appraisal of the financial condition of the 28 pension fund and the results of its operations. The 29 annual statement shall also specify the actuarial and 30 interest tables used in the operation of the pension 31 fund. 32 A pension fund that fails to file its annual statement 33 within the time prescribed under this Section is subject to 34 the penalty provisions of Section 1A-113. -30- LRB9002742EGfg 1 (40 ILCS 5/1A-110 new) 2 Sec. 1A-110. Actuarial statements by pension funds 3 established under Articles other than 3 or 4. 4 (a) Each pension fund established under an Article of 5 this Code other than Article 3 or 4 shall include as part of 6 its annual statement a complete actuarial statement 7 applicable to the plan year. 8 The actuarial statement shall be filed with the Division 9 within 9 months after the close of the fiscal year of the 10 pension fund. Any pension fund that fails to file within 11 that time is subject to the penalty provisions of Section 12 1A-113. 13 The board of trustees of each pension fund subject to 14 this Section, on behalf of all its participants, shall engage 15 an enrolled actuary who shall be responsible for the 16 preparation of the materials comprising the actuarial 17 statement. The enrolled actuary shall utilize such 18 assumptions and methods as are necessary for the contents of 19 the matters reported in the actuarial statement to be 20 reasonably related to the experience of the plan and to 21 reasonable expectations, and to represent in the aggregate 22 the actuary's best estimate of anticipated experience under 23 the plan. 24 The actuarial statement shall include a description of 25 the actuarial assumptions and methods used to determine the 26 actuarial values in the statement and shall disclose the 27 impact of significant changes in the actuarial assumptions 28 and methods, plan provisions, and other pertinent factors on 29 the actuarial position of the plan. 30 The actuarial statement shall include a statement by the 31 enrolled actuary that to the best of his or her knowledge the 32 actuarial statement is complete and accurate and has been 33 prepared in accordance with generally accepted actuarial 34 principles and practice. -31- LRB9002742EGfg 1 For the purposes of this Section, "enrolled actuary" 2 means an actuary who (1) is a member of the Society of 3 Actuaries or the American Academy of Actuaries and (2) either 4 is enrolled under Subtitle C of Title III of the Employee 5 Retirement Income Security Act of 1974 or was engaged in 6 providing actuarial services to a public retirement plan in 7 Illinois on July 1, 1983. 8 (b) The actuarial statement referred to in subsection 9 (a) shall include all of the following: 10 (1) The dates of the plan year and the date of the 11 actuarial valuation applicable to the plan year for which 12 the actuarial statement is filed. 13 (2) The amount of (i) the contributions made by the 14 participants, and (ii) all other contributions, including 15 those made by the employer or employers. 16 (3) The total estimated amount of the covered 17 compensation with respect to active participants for the 18 plan year for which the statement is filed. 19 (4) The number of (i) active participants, (ii) 20 terminated participants currently eligible for deferred 21 vested pension benefits or the return of contributions 22 made by those participants, and (iii) all other 23 participants and beneficiaries included in the actuarial 24 valuation. 25 (5) The following values as of the date of the 26 actuarial valuation applicable to the plan year for which 27 the statement is filed: 28 (i) The current value of assets accumulated in 29 the plan. 30 (ii) The unfunded accrued liability. The 31 major factors that have resulted in the change in 32 the unfunded accrued liability from the previous 33 year shall be identified. Effects that are 34 individually significant shall be separately -32- LRB9002742EGfg 1 identified. As a minimum, the effect of the 2 following shall be shown: plan amendments; changes 3 in actuarial assumptions; experience less (or more) 4 favorable than that assumed; and contributions less 5 (or more) than the normal cost plus interest on the 6 unfunded accrued liability. 7 (iii) The amount of accumulated contributions 8 for active participants (including interest, if 9 any). 10 (iv) The actuarial present value of credited 11 projected benefits for vested participants currently 12 receiving benefits, other vested participants, and 13 non-vested participants. 14 (6) The actuarial value of assets. 15 (7) Any other information that is necessary to 16 fully and fairly disclose the actuarial position of the 17 plan and any other information the enrolled actuary may 18 present. 19 (8) Any other information regarding the plan that 20 the Division may by rule request. 21 (40 ILCS 5/1A-111 new) 22 Sec. 1A-111. Actuarial statements by pension funds 23 established under Article 3 or 4. 24 (a) Each pension fund established under Article 3 or 4 25 of this Code shall include as part of its annual statement a 26 complete actuarial statement applicable to the plan year. 27 If the actuarial statement is prepared by a person other 28 than the Department, it shall be filed with the Division 29 within 9 months after the close of the fiscal year of the 30 pension fund. Any pension fund that fails to file within 31 that time shall be subject to the penalty provisions of 32 Section 1A-113. The statement shall be prepared by or under 33 the supervision of a qualified actuary, signed by the -33- LRB9002742EGfg 1 qualified actuary, and contain such information as the 2 Division may by rule require. 3 (b) For the purposes of this Section, "qualified 4 actuary" means (i) a member of the American Academy of 5 Actuaries, or (ii) an individual who has demonstrated to the 6 satisfaction of the Director that he or she has the 7 educational background necessary for the practice of 8 actuarial science and has at least 7 years of actuarial 9 experience. 10 (40 ILCS 5/1A-112 new) 11 Sec. 1A-112. Fees. 12 (a) Every pension fund that is required to file an 13 annual statement under Section 1A-109 shall pay to the 14 Department a filing fee in conjunction with the filing of the 15 annual statement. The filing fee shall be based upon the 16 total number of participants covered by pension fund 17 (including active participants, pensioners, widows, parents, 18 and children) as follows: 19 (1) For fewer than 51 participants, $25; 20 (2) For 51 to 100 participants, inclusive, $50; 21 (3) For 101 to 150 participants, inclusive, $75; 22 (4) For 151 to 500 participants, inclusive, $100; 23 (5) For over 500 participants, $150. 24 (b) All other actual and necessary expenses connected 25 with the examination or audit required under Article shall be 26 assumed by the State of Illinois. 27 (c) Any information obtained by the Division that is 28 available to the public under the Freedom of Information Act 29 and is either compiled in published form or maintained on a 30 computer processible medium shall be furnished upon the 31 written request of any applicant and the payment of a 32 reasonable information services fee established by the 33 Director, sufficient to cover the total cost to the Division -34- LRB9002742EGfg 1 of compiling, processing, maintaining, and generating the 2 information. The information may be furnished by means of 3 published copy or on a computer processed or computer 4 processible medium. 5 No fee may be charged to any person for information that 6 the Division is required by law to furnish to that person. 7 (d) Except as otherwise provided in this Section, all 8 fees and penalties collected by the Department under this 9 Code shall be deposited into the Public Pension Regulation 10 Fund. 11 (e) Fees collected under subsection (c) of this Section 12 and money collected under Section 1A-107 shall be deposited 13 into the Department's Statistical Services Revolving Fund and 14 credited to the account of the Public Pension Division. This 15 income shall be used exclusively for the purposes set forth 16 in Section 1A-107. Notwithstanding the provisions of Section 17 408.2 of the Illinois Insurance Code, no surplus funds 18 remaining in this account shall be deposited in the Insurance 19 Financial Regulation Fund. All money in this account that 20 the Director certifies is not needed for the purposes set 21 forth in Section 1A-107 of this Code shall be transferred to 22 the Public Pension Regulation Fund. 23 (f) Nothing in this Code prohibits the General Assembly 24 from appropriating funds from the General Revenue Fund to the 25 Department for the purpose of administering or enforcing this 26 Code. 27 (40 ILCS 5/1A-113 new) 28 Sec. 1A-113. Penalties. 29 (a) A pension fund that fails, without just cause, to 30 file its annual statement within the time prescribed under 31 Section 1A-109 shall pay to the Department a penalty to be 32 determined by the Department, which shall not exceed $100 for 33 each day's delay. -35- LRB9002742EGfg 1 (b) A pension fund that fails, without just cause, to 2 file its actuarial statement within the time prescribed under 3 Section 1A-110 or 1A-111 shall pay to the Department a 4 penalty to be determined by the Department, which shall not 5 exceed $100 for each day's delay. 6 (c) A pension fund that fails to pay a fee within the 7 time prescribed under Section 1A-112 shall pay to the 8 Department a penalty of 5% of the amount of the fee for each 9 month or part of a month that the fee is late. The entire 10 penalty shall not exceed 25% of the fee due. 11 (d) This subsection applies to any governmental unit, as 12 defined in Section 1A-102, that is subject to any law 13 establishing a pension fund or retirement system for the 14 benefit of employees of the governmental unit. 15 Whenever the Division determines by examination, 16 investigation, or in any other manner that the governing body 17 or any elected or appointed officer or official of a 18 governmental unit has failed to comply with any provision of 19 that law: 20 (1) The Director shall notify in writing the 21 governing body, officer, or official of the specific 22 provision or provisions of the law with which the person 23 has failed to comply. 24 (2) Upon receipt of the notice, the person notified 25 shall take immediate steps to comply with the provisions 26 of law specified in the notice. 27 (3) If the person notified fails to comply within a 28 reasonable time after receiving the notice, the Director 29 may hold a hearing at which the person notified may show 30 cause for noncompliance with the law. 31 (4) If upon hearing the Director determines that 32 good and sufficient cause for noncompliance has not been 33 shown, the Director may order the person to submit 34 evidence of compliance within a specified period of not -36- LRB9002742EGfg 1 less than 30 days. 2 (5) If evidence of compliance has not been 3 submitted to the Director within the period of time 4 prescribed in the order and no administrative appeal from 5 the order has been initiated, the Director may assess a 6 civil penalty of up to $2,000 against the governing body, 7 officer, or official. 8 The Director shall develop by rule, with as much 9 specificity as practicable, the standards and criteria to be 10 used in assessing penalties and their amounts. The standards 11 and criteria shall include, but need not be limited to, 12 consideration of evidence of efforts made in good faith to 13 comply with applicable legal requirements. This rulemaking 14 is subject to the provisions of the Illinois Administrative 15 Procedure Act. 16 If a penalty is not paid within 30 days of the date of 17 assessment, the Director without further notice shall report 18 the act of noncompliance to the Attorney General of this 19 State. It shall be the duty of the Attorney General or, if 20 the Attorney General so designates, the State's Attorney of 21 the county in which the governmental unit is located to apply 22 promptly by complaint on relation of the Director of 23 Insurance in the name of the people of the State of Illinois, 24 as plaintiff, to the circuit court of the county in which the 25 governmental unit is located for enforcement of the penalty 26 prescribed in this subsection or for such additional relief 27 as the nature of the case and the interest of the employees 28 of the governmental unit or the public may require. 29 (e) Whoever knowingly makes a false certificate, entry, 30 or memorandum upon any of the books or papers pertaining to 31 any pension fund or upon any statement, report, or exhibit 32 filed or offered for file with the Division or the Director 33 of Insurance in the course of any examination, inquiry, or 34 investigation, with intent to deceive the Director, the -37- LRB9002742EGfg 1 Division, or any of its employees is guilty of a Class A 2 misdemeanor. 3 (40 ILCS 5/3-102) (from Ch. 108 1/2, par. 3-102) 4 Sec. 3-102. Terms defined. The terms used in this 5 Article have the meanings ascribed to them in Sections 3-103 6 through 3-108.3 3-108.1, except when the context otherwise 7 requires. 8 (Source: P.A. 83-1440.) 9 (40 ILCS 5/3-108.2 new) 10 Sec. 3-108.2. Participant. "Participant": A police 11 officer or deferred pensioner of a pension fund, or a 12 beneficiary of the pension fund. 13 (40 ILCS 5/3-108.3 new) 14 Sec. 3-108.3. Beneficiary. "Beneficiary": A person 15 receiving benefits from a pension fund, including, but not 16 limited to, retired pensioners, disabled pensioners, their 17 surviving spouses, minor children, disabled children, and 18 dependent parents. 19 (40 ILCS 5/3-132) (from Ch. 108 1/2, par. 3-132) 20 Sec. 3-132. To control and manage the Pension Fund. In 21 accordance with the applicable provisions of Articles 1 and 22 1A and this Article, to control and manage, exclusively, the 23 following: 24 (1) the pension fund, 25 (2) investment expenditures and income, including 26 interest dividends, capital gains and other distributions 27 on the investments, and 28 (3) all money donated, paid, orassessed, or 29 provided by law for the pensioning of disabled and 30 retired police officers, their surviving spouses, minor -38- LRB9002742EGfg 1 children, and dependent parents. 2 All money received or collected shall be credited by the 3 treasurer of the municipality such moneys shall be placed by4 the treasurer of the municipalityto the account creditof 5 the pension fund ,and held by the treasurer of the 6 municipality subject to the order and control of the board. 7 The treasurer of the municipality shall maintain a record of 8 all money received, transferred, and held for the account of 9 the board. 10 (Source: P.A. 83-1440.) 11 (40 ILCS 5/3-135) (from Ch. 108 1/2, par. 3-135) 12 Sec. 3-135. To draw andinvest funds. Beginning January 13 1, 1998, the board shall invest funds in accordance with 14 Sections 1-113.1 through 1-113.10 of this Code. To draw15 pension funds from the treasurer of the municipality, and16 invest any part thereof in the name of the board in: (1)17 interest bearing bonds or tax anticipation warrants of the18 United States, of the State of Illinois, or of any county,19 township or municipal corporation of the State of Illinois;20 (2) insured withdrawable capital accounts of State chartered21 savings and loan associations; (3) insured withdrawable22 capital accounts of federal chartered federal savings and23 loan associations if the withdrawable capital accounts are24 insured by the Federal Savings and Loan Insurance25 Corporation; (4) insured investments in credit unions if the26 investments are insured by the National Credit Union27 Administration; (5) savings accounts or certificates of28 deposit of a national or State bank; (6) securities described29 in item 5.1 of Section 1-113 of this Code, but only subject30 to the conditions therein set forth; (7) contracts and31 agreements supplemental thereto providing for investments in32 the general account of a life insurance company authorized to33 do business in Illinois; (8) separate accounts of a life-39- LRB9002742EGfg 1 insurance company authorized to do business in Illinois,2 comprised of common or preferred stocks, bonds, or money3 market instruments; and (9) separate accounts managed by a4 life insurance company authorized to do business in Illinois,5 comprised of real estate or loans upon real estate secured by6 first or second mortgages. The total investment in such7 separate accounts shall not exceed 10% of the aggregate book8 value of all investments owned by the fund. All securities9 shall be deposited with the treasurer of the municipality,10 and be subject to the order of the board. Interest on the11 investments shall be credited to the pension fund.12 No bank or savings and loan association shall receive13 investment funds as permitted by this Section, unless it has14 complied with the requirements established pursuant to15 Section 6 of "An Act relating to certain investments of16 public funds by public agencies", approved July 23, 1943, as17 now or hereafter amended. The limitations set forth in such18 Section 6 shall be applicable only at the time of investment19 and shall not require the liquidation of any investment at20 any time.21 (Source: P.A. 84-1472.) 22 (40 ILCS 5/3-143) (from Ch. 108 1/2, par. 3-143) 23 Sec. 3-143. Report by board. The board shall report 24 annually to the city council or board of trustees of the 25 municipality on the condition of the pension fund at the end 26 of its most recently completed fiscal year. The report shall 27 be made prior to the council or board meeting held for the 28 levying of taxes for the year for which the report is made. 29 The board shall certify: 30 (1) the assets of the fund in its custody at the 31 end of the fiscal year such time; 32 (2) the estimated receipts during the next 33 succeeding fiscal calendaryear from deductions from the -40- LRB9002742EGfg 1 salaries of police officers, and from all other sources; 2 and3 (3) the estimated amount required during the next 4 succeeding fiscal said calendaryear to (a) pay all 5 pensions and other obligations provided in this Article, 6 and (b) to meet the annual requirements of the fund as 7 provided in Sections Section3-125 and 3-127; and 8 (4) the total net income received from investment 9 of assets, compared to such income received during the 10 preceding fiscal year. 11 Prior to making its report, the board shall have the 12 assets of the fund and their current market value verified by 13 an independent certified public accountant of its choice. 14 (Source: P.A. 83-1440.) 15 (40 ILCS 5/4-105c new) 16 Sec. 4-105c. Participant. "Participant": A firefighter 17 or deferred pensioner of a pension fund, or a beneficiary of 18 the pension fund. 19 (40 ILCS 5/4-105d new) 20 Sec. 4-105d. Beneficiary. "Beneficiary": A person 21 receiving benefits from a pension fund, including, but not 22 limited to, retired pensioners, disabled pensioners, their 23 surviving spouses, minor children, disabled children, and 24 dependent parents. 25 (40 ILCS 5/4-123) (from Ch. 108 1/2, par. 4-123) 26 Sec. 4-123. To control and manage the Pension Fund. In 27 accordance with the applicable provisions of Articles 1 and 28 1A and this Article, to control and manage, exclusively, the 29 following: 30 (1) the pension fund, 31 (2) investment expenditures and income, including -41- LRB9002742EGfg 1 interest dividends, capital gains, and other 2 distributions on the investments, and 3 (3) all money donated, paid, assessed, or provided 4 by law for the pensioning of disabled and retired 5 firefighters, their surviving spouses, minor children, 6 and dependent parents. 7 All money received or collected shall be credited by the 8 treasurer of the municipality to the account of the pension 9 fund and held by the treasurer of the municipality subject to 10 the order and control of the board. The treasurer of the 11 municipality shall maintain a record of all money received, 12 transferred, and held for the account of the board. 13 (Source: P.A. 83-1440.) 14 (40 ILCS 5/4-128) (from Ch. 108 1/2, par. 4-128) 15 Sec. 4-128. To invest funds. Beginning January 1, 1998, 16 the board shall invest funds in accordance with Sections 17 1-113.1 through 1-113.10 of this Code. To invest the money18 of the pension fund only in: (1) interest bearing bonds of19 the United States, or of the State of Illinois, or of any20 county, city, township, village, incorporated town, municipal21 corporation or school district in this State; (2) tax22 anticipation warrants issued by any city, township, village,23 incorporated town, or fire protection district included24 within this Article; (3) notes, bonds, debentures or other25 similar obligations which are guaranteed as to principal and26 interest by the United States; (4) insured withdrawable27 capital accounts of State chartered savings and loan28 associations; (5) insured withdrawable capital accounts of29 federal chartered federal savings and loan associations if30 the withdrawable capital accounts are insured by the Federal31 Savings and Loan Insurance Corporation; (6) insured32 investments in credit unions if the investments are insured33 by the National Credit Union Administration; and (7) savings-42- LRB9002742EGfg 1 accounts or certificates of deposit of a national or State2 bank; (8) securities described in item 5.1 of Section 1-1133 of this Code, but only subject to the conditions therein set4 forth; (9) contracts and agreements supplemental thereto5 providing for investments in the general account of a life6 insurance company authorized to do business in Illinois; (10)7 separate accounts of a life insurance company authorized to8 do business in Illinois, comprised of common or preferred9 stocks, bonds, or money market instruments; and (11) separate10 accounts managed by a life insurance company authorized to do11 business in Illinois, comprised of real estate or loans upon12 real estate secured by first or second mortgages. The total13 investment in such separate accounts shall not exceed 10% of14 the aggregate book value of all investments owned by the15 fund.16 Bonds purchased hereunder shall be registered in the name17 of the board or held under custodial agreement at a bank.18 No bank or savings and loan association shall receive19 investment funds as permitted by this Section, unless it has20 complied with the requirements established pursuant to21 Section 6 of "An Act relating to certain investments of22 public funds by public agencies", approved July 23, 1943, as23 now or hereafter amended. The limitations set forth in such24 Section 6 shall be applicable only at the time of investment25 and shall not require the liquidation of any investment at26 any time.27 (Source: P.A. 84-1472.) 28 (40 ILCS 5/4-134) (from Ch. 108 1/2, par. 4-134) 29 Sec. 4-134. Report for tax levy. The board shall report 30 to the city council or board of trustees of the municipality 31 on the condition of the pension fund at the end of its most 32 recently completed fiscal year. The report shall be made 33 prior to the council or board meeting held for appropriating -43- LRB9002742EGfg 1 and levying taxes for the year for which the report is made. 2 The board in the report shall certify: 3 (1) the assets of the fund and their current market 4 value in its custody at such time; 5 (2) the estimated receipts during the next 6 succeeding fiscal year (from January 1 to December 31)7 from deductions from the salaries or wages of 8 firefighters firemen, and from all other sources; 9 (3) the estimated amount necessary during the 10 fiscal year such periodto meet the annual actuarial 11 requirements of the pension fund as provided in Sections 12 Section4-118 and 4-120; and 13 (4) the total net income received from investment 14 of assets, compared to such income received during the 15 preceding fiscal year. 16 Prior to making its report, the board shall have the 17 assets of the fund and their current market value verified by 18 an independent certified public accountant of its choice. 19 (Source: P.A. 85-293.) 20 (40 ILCS 5/Art. 22, Div. 5 rep.) 21 Section 20. Division 5 of Article 22 of the Illinois 22 Pension Code is repealed. 23 Section 25. The Illinois Securities Law of 1953 is 24 amended by changing Section 8 as follows: 25 (815 ILCS 5/8) (from Ch. 121 1/2, par. 137.8) 26 Sec. 8. Registration of dealers, salespersons and 27 investment advisers. 28 A. Except as otherwise provided in this subsection A, 29 every dealer, salesperson and investment adviser shall be 30 registered as such with the Secretary of State. No dealer or 31 salesperson need be registered as such when offering or -44- LRB9002742EGfg 1 selling securities in transactions believed in good faith to 2 be exempted by subsection A, B, C, E, G, H, I, J, K, M, O, P, 3 Q, R or S of Section 4 of this Act, provided that such dealer 4 or salesperson is not regularly engaged in the business of 5 offering or selling securities in reliance upon the exemption 6 set forth in subsection G or M of Section 4 of this Act. No 7 dealer, issuer or controlling person shall employ a 8 salesperson unless such salesperson is registered as such 9 with the Secretary of State or is employed for the purpose of 10 offering or selling securities solely in transactions 11 believed in good faith to be exempted by subsection A, B, C, 12 D, E, G, H, I, J, K, L, M, O, P, Q, R or S of Section 4 of 13 this Act; provided that such salesperson need not be 14 registered when engaged in the offer or sale of securities in 15 respect of which he or she has beneficial ownership and is a 16 controlling person. The Secretary of State may, by rule, 17 regulation or order and subject to such terms, conditions as 18 fees as may be prescribed in such rule, regulation or order, 19 exempt from the registration requirements of this Section 8 20 any investment adviser, if the Secretary of State shall find 21 that such registration is not necessary in the public 22 interest by reason of the small number of clients or 23 otherwise limited character of operation of such investment 24 adviser. 25 B. An application for registration as a dealer, 26 executed, verified, or authenticated by or on behalf of the 27 applicant, shall be filed with the Secretary of State, in 28 such form as the Secretary of State may by rule, regulation 29 or order prescribe, setting forth or accompanied by: 30 (1) The name and address of the applicant, the 31 location of its principal business office and all branch 32 offices, if any, and the date of its organization; 33 (2) A statement of any other Federal or state 34 licenses or registrations which have been granted the -45- LRB9002742EGfg 1 applicant and whether any such licenses or registrations 2 have ever been refused, cancelled, suspended, revoked or 3 withdrawn; 4 (3) The assets and all liabilities, including 5 contingent liabilities of the applicant, as of a date not 6 more than 60 days prior to the filing of the application; 7 (4) (a) A brief description of any civil or 8 criminal proceeding of which fraud is an essential 9 element pending against the applicant and whether the 10 applicant has ever been convicted of a felony, or of any 11 misdemeanor of which fraud is an essential element; 12 (b) A list setting forth the name, residence and 13 business address and a 10 year occupational statement of 14 each principal of the applicant and a statement 15 describing briefly any civil or criminal proceedings of 16 which fraud is an essential element pending against any 17 such principal and the facts concerning any conviction of 18 any such principal of a felony, or of any misdemeanor of 19 which fraud is an essential element; 20 (5) If the applicant is a corporation: a copy of 21 its articles of incorporation in their most current form, 22 unless they are already on file in the office of the 23 Secretary of State; a list of its officers and directors 24 setting forth the residence and business address of each; 25 a 10-year occupational statement of each such officer or 26 director; and a statement describing briefly any civil or 27 criminal proceedings of which fraud is an essential 28 element pending against each such officer or director and 29 the facts concerning any conviction of any officer or 30 director of a felony, or of any misdemeanor of which 31 fraud is an essential element; 32 (6) If the applicant is a sole proprietorship, a 33 partnership, limited liability company, an unincorporated 34 association or any similar form of business organization: -46- LRB9002742EGfg 1 the name, residence and business address of the 2 proprietor or of each partner, member, officer, director, 3 trustee or manager; the limitations, if any, of the 4 liability of each such individual; a 10-year occupational 5 statement of each such individual; a statement describing 6 briefly any civil or criminal proceedings of which fraud 7 is an essential element pending against each such 8 individual and the facts concerning any conviction of any 9 such individual of a felony, or of any misdemeanor of 10 which fraud is an essential element; 11 (7) Such additional information as the Secretary of 12 State may by rule or regulation prescribe as necessary to 13 determine the applicant's financial responsibility, 14 business repute and qualification to act as a dealer. 15 (8) (a) No applicant shall be registered or 16 re-registered as a dealer under this Section unless and 17 until each principal of the dealer has passed an 18 examination conducted by the Secretary of State or a 19 self-regulatory organization of securities dealers or 20 similar person, which examination has been designated by 21 the Secretary of State by rule, regulation or order to 22 be satisfactory for purposes of determining whether the 23 applicant has sufficient knowledge of the securities 24 business and laws relating thereto to act as a registered 25 dealer. Any dealer who was registered on September 30, 26 1963, and has continued to be so registered; and any 27 principal of any registered dealer, who was acting in 28 such capacity on and continuously since September 30, 29 1963; and any individual who has previously passed a 30 securities dealer examination administered by the 31 Secretary of State or any examination designated by the 32 Secretary of State to be satisfactory for purposes of 33 determining whether the applicant has sufficient 34 knowledge of the securities business and laws relating -47- LRB9002742EGfg 1 thereto to act as a registered dealer by rule, regulation 2 or order, shall not be required to pass an examination in 3 order to continue to act in such capacity. The Secretary 4 of State may by order waive the examination requirement 5 for any principal of an applicant for registration under 6 this subsection B who has had such experience or 7 education relating to the securities business as may be 8 determined by the Secretary of State to be the equivalent 9 of such examination. Any request for such a waiver shall 10 be filed with the Secretary of State in such form as may 11 be prescribed by rule or regulation. 12 (b) Unless an applicant is a member of the body 13 corporate known as the Securities Investor Protection 14 Corporation established pursuant to the Act of Congress 15 of the United States known as the Securities Investor 16 Protection Act of 1970, as amended, or a member of an 17 association of dealers registered as a national 18 securities association pursuant to Section 15A of the 19 Federal 1934 Act, an applicant shall not be registered or 20 re-registered unless and until there is filed with the 21 Secretary of State evidence that such applicant has in 22 effect insurance or other equivalent protection for each 23 client's cash or securities held by such applicant, and 24 an undertaking that such applicant will continually 25 maintain such insurance or other protection during the 26 period of registration or re-registration. Such 27 insurance or other protection shall be in a form and 28 amount reasonably prescribed by the Secretary of State by 29 rule or regulation. 30 (9) The application for the registration of a 31 dealer shall be accompanied by a filing fee and a fee 32 for each branch office in this State, in each case in the 33 amount established pursuant to Section 11a of this Act, 34 which fees shall not be returnable in any event. -48- LRB9002742EGfg 1 (10) The Secretary of State shall notify the dealer 2 by written notice (which may be by electronic, 3 telegraphic, or facsimile transmission) of the 4 effectiveness of the registration as a dealer in this 5 State. 6 (11) Any change which renders no longer accurate 7 any information contained in any application for 8 registration or re-registration of a dealer shall be 9 reported to the Secretary of State within 10 business 10 days after the occurrence of such change; but in respect 11 to assets and liabilities only materially adverse changes 12 need be reported. 13 C. Any registered dealer, issuer, or controlling person 14 desiring to register a salesperson shall file an application 15 with the Secretary of State, in such form as the Secretary of 16 State may by rule or regulation prescribe, which the 17 salesperson is required by this Section to provide to the 18 dealer, issuer, or controlling person, executed, verified, or 19 authenticated by the salesperson setting forth or accompanied 20 by: 21 (1) The name, residence and business address of the 22 salesperson; 23 (2) Whether any federal or State license or 24 registration as dealer or salesperson has ever been 25 refused the salesperson or cancelled, suspended, 26 revoked, or withdrawn; 27 (3) The nature of employment with, and names and 28 addresses of, employers of the salesperson for the 10 29 years immediately preceding the date of application; 30 (4) A brief description of any civil or criminal 31 proceedings of which fraud is an essential element 32 pending against the salesperson, and whether the 33 salesperson has ever been convicted of a felony, or of 34 any misdemeanor of which fraud is an essential element; -49- LRB9002742EGfg 1 (5) Such additional information as the Secretary of 2 State may by rule, regulation or order prescribe as 3 necessary to determine the salesperson's business repute 4 and qualification to act as a salesperson; and 5 (6) No individual shall be registered or 6 re-registered as a salesperson under this Section unless 7 and until such individual has passed an examination 8 conducted by the Secretary of State or a self-regulatory 9 organization of securities dealers or similar person, 10 which examination has been designated by the Secretary of 11 State by rule, regulation or order to be satisfactory for 12 purposes of determining whether the applicant has 13 sufficient knowledge of the securities business and laws 14 relating thereto to act as a registered salesperson. 15 Any salesperson who was registered prior to 16 September 30, 1963, and has continued to be so 17 registered, and any individual who has passed a 18 securities salesperson examination administered by the 19 Secretary of State or an examination designated by the 20 Secretary of State by rule, regulation or order to be 21 satisfactory for purposes of determining whether the 22 applicant has sufficient knowledge of the securities 23 business and laws relating thereto to act as a registered 24 salesperson, shall not be required to pass an examination 25 in order to continue to act as a salesperson. The 26 Secretary of State may by order waive the examination 27 requirement for any applicant for registration under this 28 subsection C who has had such experience or education 29 relating to the securities business as may be determined 30 by the Secretary of State to be the equivalent of such 31 examination. Any request for such a waiver shall be 32 filed with the Secretary of State in such form as may be 33 prescribed by rule, regulation or order. 34 (7) The application for registration of a -50- LRB9002742EGfg 1 salesperson shall be accompanied by a filing fee and a 2 Securities Audit and Enforcement Fund fee, each in the 3 amount established pursuant to Section 11a of this Act, 4 which shall not be returnable in any event. 5 (8) Any change which renders no longer accurate any 6 information contained in any application for registration 7 or re-registration as a salesperson shall be reported to 8 the Secretary of State within 10 business days after the 9 occurrence of such change. If the activities are 10 terminated which rendered an individual a salesperson for 11 the dealer, issuer or controlling person, the dealer, 12 issuer or controlling person, as the case may be, shall 13 notify the Secretary of State, in writing, within 30 days 14 of the salesperson's cessation of activities, using the 15 appropriate termination notice form. 16 (9) A registered salesperson may transfer his or 17 her registration under this Section 8 for the unexpired 18 term thereof from one registered dealer to another by the 19 giving of notice of the transfer by the new registered 20 dealer to the Secretary of State in such form and subject 21 to such conditions as the Secretary of State shall by 22 rule or regulation prescribe. The new registered dealer 23 shall promptly file an application for registration of 24 such salesperson as provided in this subsection C, 25 accompanied by the filing fee prescribed by paragraph (7) 26 of this subsection C. 27 D. An application for registration as an investment 28 adviser, executed, verified, or authenticated by or on behalf 29 of the applicant, shall be filed with the Secretary of State, 30 in such form as the Secretary of State may by rule or 31 regulation prescribe, setting forth or accompanied by: 32 (1) The name and form of organization under which 33 the investment adviser engages or intends to engage in 34 business; the state or country and date of its -51- LRB9002742EGfg 1 organization; the location of the adviser's principal 2 business office and branch offices, if any; the names and 3 addresses of the adviser's principal, partners, officers, 4 directors, and persons performing similar functions or, 5 if the investment adviser is an individual, of the 6 individual; and the number of the adviser's employees who 7 perform investment advisory functions; 8 (2) The education, the business affiliations for 9 the past 10 years, and the present business affiliations 10 of the investment adviser and of the adviser's principal, 11 partners, officers, directors, and persons performing 12 similar functions and of any person controlling the 13 investment adviser; 14 (3) The nature of the business of the investment 15 adviser, including the manner of giving advice and 16 rendering analyses or reports; 17 (4) The nature and scope of the authority of the 18 investment adviser with respect to clients' funds and 19 accounts; 20 (5) The basis or bases upon which the investment 21 adviser is compensated; 22 (6) Whether the investment adviser or any 23 principal, partner, officer, director, person performing 24 similar functions or person controlling the investment 25 adviser (i) within 10 years of the filing of the 26 application has been convicted of a felony, or of any 27 misdemeanor of which fraud is an essential element, or 28 (ii) is permanently or temporarily enjoined by order or 29 judgment from acting as an investment adviser, 30 underwriter, dealer, principal or salesperson, or from 31 engaging in or continuing any conduct or practice in 32 connection with any such activity or in connection with 33 the purchase or sale of any security, and in each case 34 the facts relating to the conviction, order or judgment; -52- LRB9002742EGfg 1 (7) (a) A statement as to whether the investment 2 adviser is engaged or is to engage primarily in the 3 business of rendering investment supervisory services; 4 and 5 (b) A statement that the investment adviser will 6 furnish his, her, or its clients with such information as 7 the Secretary of State deems necessary in the form 8 prescribed by the Secretary of State by rule or 9 regulation; 10 (8) Such additional information as the Secretary of 11 State may, by rule, regulation or order prescribe as 12 necessary to determine the applicant's financial 13 responsibility, business repute and qualification to act 14 as an investment adviser. 15 (9) No applicant shall be registered or 16 re-registered as an investment adviser under this Section 17 unless and until each principal of the applicant who is 18 actively engaged in the conduct and management of the 19 applicant's advisory business in this State has passed an 20 examination or completed an educational program conducted 21 by the Secretary of State or an association of investment 22 advisers or similar person, which examination or 23 educational program has been designated by the Secretary 24 of State by rule, regulation or order to be satisfactory 25 for purposes of determining whether the applicant has 26 sufficient knowledge of the securities business and laws 27 relating thereto to conduct the business of a registered 28 investment adviser. 29 Any person who was a registered investment adviser 30 prior to September 30, 1963, and has continued to be so 31 registered, and any individual who has passed an 32 investment adviser examination administered by the 33 Secretary of State, or passed an examination or completed 34 an educational program designated by the Secretary of -53- LRB9002742EGfg 1 State by rule, regulation or order to be satisfactory for 2 purposes of determining whether the applicant has 3 sufficient knowledge of the securities business and laws 4 relating thereto to conduct the business of a registered 5 investment adviser, shall not be required to pass an 6 examination or complete an educational program in order 7 to continue to act as an investment adviser. The 8 Secretary of State may by order waive the examination or 9 educational program requirement for any applicant for 10 registration under this subsection D if the principal of 11 the applicant who is actively engaged in the conduct and 12 management of the applicant's advisory business in this 13 State has had such experience or education relating to 14 the securities business as may be determined by the 15 Secretary of State to be the equivalent of the 16 examination or educational program. Any request for a 17 waiver shall be filed with the Secretary of State in such 18 form as may be prescribed by rule or regulation. 19 (10) No applicant shall be registered or 20 re-registered as an investment adviser under this Section 21 8 unless (i) the application for registration or 22 re-registration is accompanied by a list of all persons 23 acting as investment adviser representatives on behalf of 24 the adviser and (ii) a Securities Audit and Enforcement 25 Fund fee that shall not be returnable in any event is 26 paid with respect to each investment adviser 27 representative. No fee, however, shall be required under 28 this paragraph if the investment adviser representative 29 is also registered as a salesperson and the Securities 30 Audit and Enforcement Fund fee required under subsection 31 C or subsection H of this Section has been paid to the 32 Secretary of State. 33 (11) The application for registration of an 34 investment adviser shall be accompanied by a filing fee -54- LRB9002742EGfg 1 and a fee for each branch office in this State, in each 2 case in the amount established pursuant to Section 11a of 3 this Act, which fees shall not be returnable in any 4 event. 5 (12) The Secretary of State shall notify the 6 investment adviser by written notice (which may be by 7 electronic, telegraphic, or facsimile transmission) of 8 the effectiveness of the registration as an investment 9 adviser in this State. 10 (13) Any change which renders no longer accurate 11 any information contained in any application for 12 registration or re-registration of an investment adviser 13 shall be reported to the Secretary of State within 10 14 business days after the occurrence of the change. In 15 respect to assets and liabilities of an investment 16 adviser that retains custody of clients' cash or 17 securities or accepts pre-payment of fees in excess of 18 $500 per client and 6 or more months in advance only 19 materially adverse changes need be reported by written 20 notice (which may be by telegraphic or facsimile 21 transmission) no later than the close of business on the 22 second business day following the discovery thereof. 23 (14) Each application for registration as an 24 investment adviser shall become effective automatically 25 on the 45th day following the filing of the application, 26 required documents or information, and payment of the 27 required fee unless (i) the Secretary of State has 28 registered the investment adviser prior to that date or 29 (ii) an action with respect to the applicant is pending 30 under Section 11 of this Act. 31 E. (1) Subject to the provisions of subsection F of 32 Section 11 of this Act, the registration of a dealer, 33 salesperson or investment adviser may be denied, suspended or 34 revoked if the Secretary of State finds that the dealer, -55- LRB9002742EGfg 1 salesperson or investment adviser or any officer, director, 2 partner, member, trustee, manager or any person who performs 3 a similar function of the dealer or investment adviser: 4 (a) Has been convicted of any felony, or of any 5 misdemeanor of which fraud is an essential element; 6 (b) Has engaged in any inequitable practice in the 7 offer or sale of securities or in any fraudulent business 8 practice; 9 (c) Has failed to account for any money or 10 property, or has failed to deliver any security, to any 11 person entitled thereto when due or within a reasonable 12 time thereafter; 13 (d) In the case of a dealer or investment adviser, 14 is insolvent; 15 (e) In the case of a dealer (i) has failed 16 reasonably to supervise the securities activities of any 17 of its salespersons and the failure has permitted or 18 facilitated a violation of Section 12 of this Act or (ii) 19 is offering or selling or has offered or sold securities 20 in this State through a salesperson other than a 21 registered salesperson, or, in the case of a salesperson, 22 is selling or has sold securities in this State for a 23 dealer, issuer or controlling person with knowledge that 24 the dealer, issuer or controlling person has not complied 25 with the provisions of this Act; 26 (f) In the case of an investment adviser, has 27 failed reasonably to supervise the advisory activities of 28 any of its employees and the failure has permitted or 29 facilitated a violation of Section 12 of this Act; 30 (g) Has violated any of the provisions of this Act; 31 (h) Has made any material misrepresentation to the 32 Secretary of State in connection with any information 33 deemed necessary by the Secretary of State to determine a 34 dealer's or investment adviser's financial responsibility -56- LRB9002742EGfg 1 or a dealer's, investment adviser's or salesperson's 2 business repute or qualifications, or has refused to 3 furnish any such information requested by the Secretary 4 of State; 5 (i) Has had a license or registration under any 6 Federal or State law regulating the offer or sale of 7 securities or commodity futures contracts, refused, 8 cancelled, suspended or withdrawn; 9 (j) Has been suspended or expelled from or refused 10 membership in or association with or limited in any 11 capacity by any self-regulatory organization registered 12 under the Federal 1934 Act or the Federal 1974 Act 13 arising from any fraudulent or deceptive act or a 14 practice in violation of any rule, regulation or standard 15 duly promulgated by the self-regulatory organization; 16 (k) Has had any order entered against it after 17 notice and opportunity for hearing by a securities agency 18 of any state, any foreign government or agency thereof, 19 the Securities and Exchange Commission, or the Federal 20 Commodities Futures Trading Commission arising from any 21 fraudulent or deceptive act or a practice in violation of 22 any statute, rule or regulation administered or 23 promulgated by the agency or commission; 24 (l) In the case of a dealer, fails to maintain a 25 minimum net capital in an amount which the Secretary of 26 State may by rule or regulation require; 27 (m) Has conducted a continuing course of dealing of 28 such nature as to demonstrate an inability to properly 29 conduct the business of the dealer, salesperson or 30 investment adviser; 31 (n) Has had, after notice and opportunity for 32 hearing, any injunction or order entered against it or 33 license or registration refused, cancelled, suspended, 34 revoked, withdrawn or limited by any state or federal -57- LRB9002742EGfg 1 body, agency or commission regulating banking, insurance, 2 finance or small loan companies, real estate or mortgage 3 brokers or companies, if the action resulted from any act 4 found by the body, agency or commission to be a 5 fraudulent or deceptive act or practice in violation of 6 any statute, rule or registration administered or 7 promulgated by the body, agency or commission; 8 (o) Has failed to file a return, or to pay the tax, 9 penalty or interest shown in a filed return, or to pay 10 any final assessment of tax, penalty or interest, as 11 required by any tax Act administered by the Illinois 12 Department of Revenue, until such time as the 13 requirements of that tax Act are satisfied; 14 (p) In the case of a natural person who is a 15 dealer, salesperson or investment adviser, has defaulted 16 on an educational loan guaranteed by the Illinois Student 17 Assistance Commission, until the natural person has 18 established a satisfactory repayment record as determined 19 by the Illinois Student Assistance Commission; 20 (q) Has failed to maintain the books and records 21 required under this Act or rules or regulations 22 promulgated under this Act within a reasonable time after 23 receiving notice of any deficiency; 24 (r) Has refused to allow or otherwise impeded 25 designees of the Secretary of State from conducting an 26 audit, examination, inspection, or investigation provided 27 for under Section 8 or 11 of this Act; 28 (s) Has failed to maintain any minimum net capital 29 or bond requirement set forth in this Act or any rule or 30 regulation promulgated under this Act; 31 (t) Has refused the Secretary of State or his or 32 her designee access to any office or location within an 33 office to conduct an investigation, audit, examination, 34 or inspection; -58- LRB9002742EGfg 1 (u) Has advised or caused a public pension fund or 2 retirement system established under the Illinois Pension 3 Code to make an investment or engage in a transaction not 4 authorized by that Code. 5 (2) If the Secretary of State finds that any registrant 6 or applicant for registration is no longer in existence or 7 has ceased to do business as a dealer, salesperson or 8 investment adviser, or is subject to an adjudication as a 9 person under legal disability or to the control of a 10 guardian, or cannot be located after reasonable search, or 11 has failed after written notice to pay to the Secretary of 12 State any additional fee prescribed by this Section or 13 specified by rule or regulation, or if a natural person, has 14 defaulted on an educational loan guaranteed by the Illinois 15 Student Assistance Commission, the Secretary of State may by 16 order cancel the registration or application. 17 (3) Withdrawal of an application for registration or 18 withdrawal from registration as a dealer, salesperson or 19 investment adviser becomes effective 30 days after receipt of 20 an application to withdraw or within such shorter period of 21 time as the Secretary of State may determine, unless any 22 proceeding is pending under Section 11 of this Act when the 23 application is filed or a proceeding is instituted within 30 24 days after the application is filed. If a proceeding is 25 pending or instituted, withdrawal becomes effective at such 26 time and upon such conditions as the Secretary of State by 27 order determines. If no proceeding is pending or instituted 28 and withdrawal automatically becomes effective, the Secretary 29 of State may nevertheless institute a revocation or 30 suspension proceeding within one year after withdrawal became 31 effective and enter a revocation or suspension order as of 32 the last date on which registration was effective. 33 F. The Secretary of State shall make available upon 34 request the date that each dealer, investment adviser or -59- LRB9002742EGfg 1 salesperson was granted registration, together with the name 2 and address of the dealer or issuer on whose behalf the 3 salesperson is registered, and all orders of the Secretary of 4 State denying or abandoning an application, or suspending or 5 revoking registration, or censuring the persons. The 6 Secretary of State may designate by rule, regulation or order 7 the statements, information or reports submitted to or filed 8 with him or her pursuant to this Section 8 which the 9 Secretary of State determines are of a sensitive nature and 10 therefore should be exempt from public disclosure. Any such 11 statement, information or report shall be deemed confidential 12 and shall not be disclosed to the public except upon the 13 consent of the person filing or submitting the statement, 14 information or report or by order of court or in court 15 proceedings. 16 G. The registration or re-registration of a dealer and 17 of all salespersons registered upon application of the dealer 18 shall expire on the next succeeding anniversary date of the 19 registration or re-registration of the dealer; and the 20 registration or re-registration of an investment adviser 21 shall expire on the next succeeding anniversary date of the 22 registration of the investment adviser; provided, that the 23 Secretary of State may by rule or regulation prescribe an 24 alternate date which any dealer registered under the Federal 25 1934 Act or a member of any self-regulatory association 26 approved pursuant thereto, or any investment adviser 27 registered under the Federal 1940 Investment Advisers Act may 28 elect as the expiration date of its dealer and salesperson 29 registrations, or the expiration date of its investment 30 adviser registration, as the case may be. A registration of 31 a salesperson registered upon application of an issuer or 32 controlling person shall expire on the next succeeding 33 anniversary date of the registration, or upon termination or 34 expiration of the registration of the securities, if any, -60- LRB9002742EGfg 1 designated in the application for his or her registration or 2 the alternative date as the Secretary may prescribe by rule 3 or regulation. Subject to paragraph (9) of subsection C of 4 this Section 8, a salesperson's registration also shall 5 terminate upon cessation of his or her employment, or 6 termination of his or her appointment or authorization, in 7 each case by the person who applied for the salesperson's 8 registration, provided that the Secretary of State may by 9 rule or regulation prescribe an alternate date for the 10 expiration of the registration. 11 H. Applications for re-registration of dealers, 12 salespersons and investment advisers shall be filed with the 13 Secretary of State not less than 7 days preceding the 14 expiration of the then current registration and shall contain 15 such information as may be required by the Secretary of State 16 upon initial application with such omission therefrom or 17 addition thereto as the Secretary of State may authorize or 18 prescribe. Each application for re-registration of a dealer 19 or investment adviser shall be accompanied by a filing fee 20 and each application for re-registration as a salesperson 21 shall be accompanied by a filing fee and a Securities Audit 22 and Enforcement Fund fee established pursuant to Section 11a 23 of this Act, which shall not be returnable in any event. 24 Notwithstanding the foregoing, (1) applications for 25 re-registration of dealers and investment advisers may be 26 filed within the 6 days next preceding the expiration of the 27 then current registration provided that the applicant pays 28 the annual registration fee for the year with respect to 29 which the re-registration is applicable together with an 30 additional amount equal to the annual registration fee; and 31 (2) applications for re-registration of dealers and 32 investment advisers may be filed within 30 days following the 33 expiration of the registration provided that the applicant 34 pays the annual registration fee together with an additional -61- LRB9002742EGfg 1 amount equal to 2 times the annual registration fee and files 2 any other information or documents that the Secretary of 3 State may prescribe by rule or regulation or order. Any 4 application filed within 30 days following the expiration of 5 the registration shall be automatically effective as of the 6 time of the earlier expiration provided that the proper fee 7 has been paid to the Secretary of State. 8 Each registered dealer or investment adviser shall 9 continue to be registered if the registrant changes his, her, 10 or its form of organization provided that the dealer or 11 investment adviser files an amendment to his, her, or its 12 application not later than 30 days following the occurrence 13 of the change and pays the Secretary of State a fee in the 14 amount established under Section 11a of this Act. 15 I. (1) Every registered dealer and investment adviser 16 shall make and keep for such periods, such accounts, 17 correspondence, memoranda, papers, books and records as the 18 Secretary of State may by rule or regulation prescribe. All 19 records so required shall be preserved for 3 years unless the 20 Secretary of State by rule, regulation or order prescribes 21 otherwise for particular types of records. 22 (2) Every registered dealer and investment adviser shall 23 file such financial reports as the Secretary of State may by 24 rule or regulation prescribe. 25 (3) All the books and records referred to in paragraph 26 (1) of this subsection I are subject at any time or from time 27 to time to such reasonable periodic, special or other audits, 28 examinations, or inspections by representatives of the 29 Secretary of State, within or without this State, as the 30 Secretary of State deems necessary or appropriate in the 31 public interest or for the protection of investors. 32 (4) At the time of an audit, examination, or inspection, 33 the Secretary of State, by his or her designees, may conduct 34 an interview of any person employed or appointed by or -62- LRB9002742EGfg 1 affiliated with a registered dealer or investment advisor, 2 provided that the dealer or investment advisor shall be given 3 reasonable notice of the time and place for the interview. 4 At the option of the dealer or investment advisor, a 5 representative of the dealer or investment advisor with 6 supervisory responsibility over the individual being 7 interviewed may be present at the interview. 8 J. The Secretary of State may require by rule or 9 regulation the payment of an additional fee for the filing of 10 information or documents required to be filed by this Section 11 which have not been filed in a timely manner. The Secretary 12 of State may also require by rule or regulation the payment 13 of an examination fee for administering any examination which 14 it may conduct pursuant to subsection B, C or D of this 15 Section 8. 16 K. The Secretary of State may declare any application 17 for registration under this Section 8 abandoned by order if 18 the applicant fails to pay any fee or file any information or 19 document required under this Section 8 or by rule or 20 regulation for more than 30 days after the required payment 21 or filing date. The applicant may petition the Secretary of 22 State for a hearing within 15 days after the applicant's 23 receipt of the order of abandonment, provided that the 24 petition sets forth the grounds upon which the applicant 25 seeks a hearing. 26 L. Any document being filed pursuant to this Section 8 27 shall be deemed filed, and any fee being paid pursuant to 28 this Section 8 shall be deemed paid, upon the date of actual 29 receipt thereof by the Secretary of State or his or her 30 designee. 31 M. The Secretary of State shall provide to the Illinois 32 Student Assistance Commission annually or at mutually agreed 33 periodic intervals the names and social security numbers of 34 natural persons registered under subsections B, C, and E of -63- LRB9002742EGfg 1 this Section. The Illinois Student Assistance Commission 2 shall determine if any student loan defaulter is registered 3 as a dealer, salesperson, or investment adviser under this 4 Act and report its determination to the Secretary of State or 5 his or her designee. 6 (Source: P.A. 88-494; 89-209, eff. 1-1-96; 89-626, eff. 7 8-9-96.) 8 Section 99. Effective date. This Act takes effect upon 9 becoming law. -64- LRB9002742EGfg 1 INDEX 2 Statutes amended in order of appearance 3 30 ILCS 105/8f new 4 30 ILCS 235/1 from Ch. 85, par. 901 5 40 ILCS 5/1-101.1 from Ch. 108 1/2, par. 1-101.1 6 40 ILCS 5/1-101.2 new 7 40 ILCS 5/1-101.3 new 8 40 ILCS 5/1-101.4 new 9 40 ILCS 5/1-113 from Ch. 108 1/2, par. 1-113 10 40 ILCS 5/1-113.1 new 11 40 ILCS 5/1-113.2 new 12 40 ILCS 5/1-113.3 new 13 40 ILCS 5/1-113.4 new 14 40 ILCS 5/1-113.5 new 15 40 ILCS 5/1-113.6 new 16 40 ILCS 5/1-113.7 new 17 40 ILCS 5/1-113.8 new 18 40 ILCS 5/1-113.9 new 19 40 ILCS 5/1-113.10 new 20 40 ILCS 5/1-113.11 new 21 40 ILCS 5/Art. 1A heading new 22 40 ILCS 5/1A-101 new 23 40 ILCS 5/1A-102 new 24 40 ILCS 5/1A-103 new 25 40 ILCS 5/1A-104 new 26 40 ILCS 5/1A-105 new 27 40 ILCS 5/1A-106 new 28 40 ILCS 5/1A-107 new 29 40 ILCS 5/1A-108 new 30 40 ILCS 5/1A-109 new 31 40 ILCS 5/1A-110 new 32 40 ILCS 5/1A-111 new 33 40 ILCS 5/1A-112 new 34 40 ILCS 5/1A-113 new -65- LRB9002742EGfg 1 40 ILCS 5/3-102 from Ch. 108 1/2, par. 3-102 2 40 ILCS 5/3-108.2 new 3 40 ILCS 5/3-108.3 new 4 40 ILCS 5/3-132 from Ch. 108 1/2, par. 3-132 5 40 ILCS 5/3-135 from Ch. 108 1/2, par. 3-135 6 40 ILCS 5/3-143 from Ch. 108 1/2, par. 3-143 7 40 ILCS 5/4-105c new 8 40 ILCS 5/4-105d new 9 40 ILCS 5/4-123 from Ch. 108 1/2, par. 4-123 10 40 ILCS 5/4-128 from Ch. 108 1/2, par. 4-128 11 40 ILCS 5/4-134 from Ch. 108 1/2, par. 4-134 12 40 ILCS 5/Art. rep. 13 815 ILCS 5/8 from Ch. 121 1/2, par. 137.8
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