State of Illinois
91st General Assembly
Legislation

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[ Engrossed ][ Enrolled ][ House Amendment 001 ]

91_HB3944

 
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 1        AN ACT to amend  the  various  Acts  concerning  business
 2    organizations.

 3        Be  it  enacted  by  the People of the State of Illinois,
 4    represented in the General Assembly:

 5        Section 5.   The  Illinois  Securities  Law  of  1953  is
 6    amended  by  changing Sections 2.5a, 2.9, 2.12b, 3, 4, 8, 11,
 7    and 12 as follows:

 8        (815 ILCS 5/2.5a) (from Ch. 121 1/2, par. 137.2-5a)
 9        Sec. 2.5a.  Offer.  "Offer" shall include every offer  to
10    sell  or otherwise dispose of, or solicitation of an offer to
11    purchase,  whether  orally  or  by  means   of   publication,
12    including  but not limited to printed and electronic media, a
13    security or interest in a security for value;  provided  that
14    the  term  "offer" shall not include preliminary negotiations
15    or agreements between an issuer and any underwriter or  among
16    underwriters who are or are to be in privity of contract with
17    an   issuer,   or   the  circulation  or  publication  of  an
18    identifying statement or circular or preliminary  prospectus,
19    as defined by rules or regulations of the Secretary of State.
20    (Source: P.A. 89-209, eff. 1-1-96.)

21        (815 ILCS 5/2.9) (from Ch. 121 1/2, par. 137.2-9)
22        Sec.  2.9.  "Salesperson" means an individual, other than
23    an issuer or a dealer, employed or appointed or authorized by
24    a dealer, issuer or controlling person to offer, purchase  or
25    sell securities in this State.  The partners or officers of a
26    dealer  or  issuer  shall  not  be  deemed to be salespersons
27    within the meaning of this definition if they are not or have
28    not been regularly engaged in securities offering, purchasing
29    or selling activities other than transactions for  their  own
30    respective  accounts.  No  individual shall be deemed to be a
 
                            -2-                LRB9111259STsb
 1    salesperson solely by reason of effecting transactions  in  a
 2    covered  security  to  qualified  purchasers  as described in
 3    Section  18(b)(3)  of  the  Federal   1933   Act,   effecting
 4    transactions  in  a  covered security as described in Section
 5    18(b)(4)(D) of the Federal 1933 Act, or engaging in offers or
 6    effecting sales of securities to employees of the  issuer  of
 7    such securities or to employees of the parent or any majority
 8    wholly-owned  subsidiary  of  such issuer, provided that such
 9    individual  is  an  employee  of  such  issuer,   parent   or
10    subsidiary  who  has not been employed primarily to make such
11    offers or sales and who  receives  no  special  compensation,
12    directly  or  indirectly, for or on account of any such offer
13    or  sale.  "Salesperson"  also  means  a   limited   Canadian
14    salesperson.  "Salesperson"  also means an individual who, in
15    this State,  communicates  with  members  of  the  public  to
16    identify  prospective customers for the purpose of soliciting
17    the purchase or sale of securities or related services.
18    (Source: P.A. 90-70, eff. 7-8-97; 90-667, eff. 7-30-98.)

19        (815 ILCS 5/2.12b) (from Ch. 121 1/2, par. 137.2-12b)
20        Sec.   2.12b.    Investment    adviser    representative.
21    "Investment adviser representative" means, with respect to an
22    investment  adviser  who  is  required to register under this
23    Act, any partner, officer, director of (or a person occupying
24    a similar status or performing similar functions),  or  other
25    natural  person  employed by or associated with an investment
26    adviser, except clerical or  ministerial  personnel,  who  in
27    this State:
28        (1)  makes   any  recommendations  or  otherwise  renders
29    advice regarding securities;
30        (2)  manages accounts or portfolios of clients;
31        (3)  determines what recommendation or  advice  regarding
32    securities should be given; or
33        (4)  supervises  any  employee  who  performs  any of the
 
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 1    foregoing; or.
 2        (5)  solicits, refers, offers, or negotiates for the sale
 3    of, or sells, investment advisory services.
 4        With respect to a  federal  covered  investment  adviser,
 5    "investment  adviser  representative" means any person who is
 6    an investment adviser representative with a place of business
 7    in this State as such terms are defined by the Securities and
 8    Exchange Commission under Section 203A of  the  Federal  1940
 9    Investment Advisers Act.
10    (Source: P.A. 90-70, eff. 7-8-97; 90-667, eff. 7-30-98.)

11        (815 ILCS 5/3) (from Ch. 121 1/2, par. 137.3)
12        Sec.  3.   The  provisions  of Sections 2a, 5, 6 and 7 of
13    this Act shall not apply to any of the following securities:
14        A.  Any security (including a revenue obligation)  issued
15    or  guaranteed by the United States, any state, any political
16    subdivision of a state, or any agency or corporation or other
17    instrumentality of any one or more of the foregoing,  or  any
18    certificate of deposit for any such security.
19        B.  Any  security  issued  or  guaranteed  by Canada, any
20    Canadian province, any  political  subdivision  of  any  such
21    province,  any agency or corporation or other instrumentality
22    of one or  more  of  the  foregoing,  or  any  other  foreign
23    government  with  which  the  United  States  then  maintains
24    diplomatic  relations,  if  the  security  is recognized as a
25    valid obligation by the issuer or guarantor.
26        C. (1)  Any  security  issued  by  and  representing   an
27    interest  in  or  a  debt  of,  or guaranteed by, any bank or
28    savings bank, bank holding company, or credit union organized
29    under the laws of the United States,  or  any  bank,  savings
30    bank,  savings  institution  or  trust  company organized and
31    supervised under the laws of any state, or  any  interest  or
32    participation  in  any  common  trust  fund  or  similar fund
33    maintained  by  any  such   bank,   savings   bank,   savings
 
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 1    institution  or  trust company exclusively for the collective
 2    investment and reinvestment of assets contributed thereto  by
 3    such bank, savings bank, savings institution or trust company
 4    or  any  affiliate  thereof,  in  its  capacity as fiduciary,
 5    trustee, executor, administrator or guardian.
 6        (2)  Any security issued or guaranteed to both  principal
 7    and  interest  by  an  international bank of which the United
 8    States is a member.
 9        D. (1)  Any  security  issued  by  and  representing   an
10    interest  in  or  a  debt  of,  or guaranteed by, any federal
11    savings  and  loan  association,  or  any  savings  and  loan
12    association or building and loan  association  organized  and
13    supervised under the laws of any state.
14        (2)  Any  security  issued  or  guaranteed by any federal
15    credit  union  or   any   credit   union,   industrial   loan
16    association, or similar organization organized and supervised
17    under the laws of any state.
18        E.  Any  security  issued  or guaranteed by any railroad,
19    other common carrier, public utility or holding company where
20    such issuer or guarantor is subject to  the  jurisdiction  of
21    the Interstate Commerce Commission or successor entity, or is
22    a registered holding company under the Public Utility Holding
23    Company  Act of 1935 or a subsidiary of such a company within
24    the meaning of that Act, or is regulated in  respect  of  its
25    rates  and  charges by a governmental authority of the United
26    States or any state,  or  is  regulated  in  respect  of  the
27    issuance  or  guarantee  of  the  security  by a governmental
28    authority of the United States, any  state,  Canada,  or  any
29    Canadian province.
30        F.  Equipment  trust certificates in respect of equipment
31    leased or conditionally  sold  to  a  person,  if  securities
32    issued  by  such person would be exempt under subsection E of
33    this Section.
34        G.  Any security which at the time of sale is  listed  or
 
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 1    approved  for listing upon notice of issuance on the New York
 2    Stock Exchange, Inc., the American Stock Exchange, Inc.,  the
 3    Pacific  Stock  Exchange,  Inc.,  the Chicago Stock Exchange,
 4    Inc., the Chicago Board  of  Trade,  the  Philadelphia  Stock
 5    Exchange,   Inc.,   the   Chicago   Board  Options  Exchange,
 6    Incorporated, the National Market System of the Nasdaq  Stock
 7    Market,  or any other exchange, automated quotation system or
 8    board of trade which the  Secretary  of  State,  by  rule  or
 9    regulation,  deems to have substantially equivalent standards
10    for listing or designation as required by any such  exchange,
11    automated  quotation system or board of trade; and securities
12    senior or of substantially equal rank, both as  to  dividends
13    or  interest and upon liquidation, to securities so listed or
14    designated; and warrants and rights to purchase  any  of  the
15    foregoing;  provided,  however,  that this subsection G shall
16    not apply to investment fund shares  or  securities  of  like
17    character,  which are being continually offered at a price or
18    prices determined in accordance with a prescribed formula.
19        The Secretary of State may, after notice and  opportunity
20    for   hearing,     revoke  the  exemption  afforded  by  this
21    subparagraph with respect to any  securities  by  issuing  an
22    order  if  the Secretary of State finds that the further sale
23    of the securities in this State would work or tend to work  a
24    fraud on purchasers of the securities.
25        H.  Any   security  issued  by  a  person  organized  and
26    operated  not  for  pecuniary  profit  and  exclusively   for
27    religious,  educational, benevolent, fraternal, agricultural,
28    charitable,  athletic,   professional,   trade,   social   or
29    reformatory  purposes,  or  as a chamber of commerce or local
30    industrial development corporation, or for more than  one  of
31    said purposes and no part of the net earnings of which inures
32    to the benefit of any private stockholder or member.
33        I.  Instruments    evidencing   indebtedness   under   an
34    agreement for the acquisition of property under  contract  of
 
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 1    conditional sale.
 2        J.  A  note  secured  by  a  first mortgage upon tangible
 3    personal  or  real  property  when  such  mortgage  is  made,
 4    assigned, sold, transferred and delivered with such  note  or
 5    other  written obligation secured by such mortgage, either to
 6    or for the benefit of the purchaser or lender;  or  bonds  or
 7    notes  not more than 10 in number secured by a first mortgage
 8    upon the  title  in  fee  simple  to  real  property  if  the
 9    aggregate  principal amount secured by such mortgage does not
10    exceed $500,000 and also does not  exceed  75%  of  the  fair
11    market value of such real property.
12        K.  A note or notes not more than 10 in number secured by
13    a  junior  mortgage lien if the aggregate principal amount of
14    the indebtedness represented thereby does not exceed  50%  of
15    the  amount  of  the then outstanding prior lien indebtedness
16    and provided  that  the  total  amount  of  the  indebtedness
17    (including the indebtedness represented by the subject junior
18    mortgage  note  or  notes)  shall  not exceed 90% of the fair
19    market value of the property securing such indebtedness;  and
20    provided  further  that  each  such  note or notes shall bear
21    across the face thereof the following legend  in  letters  at
22    least  as  large as 12 point type: "THIS NOTE IS SECURED BY A
23    JUNIOR MORTGAGE".
24        L.  Any negotiable promissory  note  or  draft,  bill  of
25    exchange or bankers' acceptance which arises out of a current
26    transaction  or  the proceeds of which have been or are to be
27    used  for  current  transactions,  and  which  evidences   an
28    obligation  to  pay  cash  within  9  months  of  the date of
29    issuance exclusive of days of grace, or any renewal  of  such
30    note, draft, bill or acceptance which is likewise limited, or
31    any  guarantee  of such note, draft, bill or acceptance or of
32    any such renewal, provided that the  note,  draft,  bill,  or
33    acceptance  is a negotiable security eligible for discounting
34    by banks that are members of the Federal Reserve System.  Any
 
                            -7-                LRB9111259STsb
 1    instrument  exempted   under   this   subsection   from   the
 2    requirement  of  Sections  5, 6, and 7 of this Act shall bear
 3    across the face thereof the following legend  in  letters  at
 4    least  as large as 12 point type: "THIS INSTRUMENT IS NEITHER
 5    GUARANTEED, NOR IS THE  ISSUANCE  THEREOF  REGULATED  BY  ANY
 6    AGENCY  OR  DEPARTMENT OF THE STATE OF ILLINOIS OR THE UNITED
 7    STATES.".   However,  the  foregoing  legend  shall  not   be
 8    required with respect to any such instrument:
 9             (i)  sold to a person described in subsection C or H
10        of Section 4 of this Act;
11             (ii)  sold  to  a "Qualified Institutional Buyer" as
12        that term is defined  in  Rule  144a  adopted  under  the
13        Securities Act of 1933;
14             (iii)  where  the  minimum  initial subscription for
15        the purchase of such instrument is $100,000 or more; or
16             (iv)  issued by an issuer  that  has  any  class  of
17        securities  registered under Section 12 of the Securities
18        Exchange Act of 1934 or  has  any  outstanding  class  of
19        indebtedness  rated in one of the 3 highest categories by
20        a rating agency designated by the Department;
21        M.  Any security issued by and representing  an  interest
22    in  or  a  debt  of,  or guaranteed by, any insurance company
23    organized under the laws of any state.
24        N.  Any  security  issued  pursuant  to  (i)  a   written
25    compensatory  benefit plan (including without limitation, any
26    purchase, savings, option, bonus, stock appreciation,  profit
27    sharing,  thrift,  incentive,  pension,  or similar plan) and
28    interests in such plans established by one  or  more  of  the
29    issuers thereof or its parents or majority-owned subsidiaries
30    for  the participation of their employees, directors, general
31    partners, trustees (where the issuer is  a  business  trust),
32    officers,  or  consultants or advisers of such issuers or its
33    parents or majority-owned subsidiaries,  provided  that  bona
34    fide  services  are  rendered  by consultants or advisers and
 
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 1    those services are not in connection with the offer and  sale
 2    of  securities  in  a  capital-raising  transaction or (ii) a
 3    written contract relating to the  compensation  of  any  such
 4    person.
 5        O.  Any option, put, call, spread or straddle issued by a
 6    clearing  agency  registered  as  such under the Federal 1934
 7    Act, if the security, currency, commodity, or other  interest
 8    underlying  the  option, put, call, spread or straddle is not
 9    required to be registered under Section 5.
10        P.  Any  security  which  meets  all  of  the   following
11    conditions:
12             (1)  If  the  issuer is not organized under the laws
13        of the United States or a state, it has appointed a  duly
14        authorized  agent  in  the  United  States for service of
15        process and has set forth the name  and  address  of  the
16        agent in its prospectus.
17             (2)  A  class of the issuer's securities is required
18        to be and is registered under Section 12 of  the  Federal
19        1934  Act, and has been so registered for the three years
20        immediately preceding the offering date.
21             (3)  Neither the issuer nor a significant subsidiary
22        has had a material default during the last  seven  years,
23        or  for the period of the issuer's existence if less than
24        seven years, in the payment of (i)  principal,  interest,
25        dividend,  or sinking fund installment on preferred stock
26        or indebtedness for borrowed money, or (ii) rentals under
27        leases with terms of three years or more.
28             (4)  The issuer has  had  consolidated  net  income,
29        before  extraordinary  items and the cumulative effect of
30        accounting changes, of at least $1,000,000 in four of its
31        last five fiscal years including its  last  fiscal  year;
32        and  if  the  offering is of interest bearing securities,
33        has had for its last  fiscal  year,  net  income,  before
34        deduction  for income taxes and depreciation, of at least
 
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 1        1-1/2 times the issuer's annual interest expense,  giving
 2        effect  to  the proposed offering and the intended use of
 3        the proceeds.  For the  purposes  of  this  clause  "last
 4        fiscal year" means the most recent year for which audited
 5        financial  statements  are  available, provided that such
 6        statements cover a fiscal period ended not more  than  15
 7        months from the commencement of the offering.
 8             (5)  If  the  offering  is  of stock or shares other
 9        than preferred  stock  or  shares,  the  securities  have
10        voting  rights  and  the  rights include (i) the right to
11        have at least as many votes per share, and (ii) the right
12        to vote on at least as many general corporate  decisions,
13        as  each  of the issuer's outstanding classes of stock or
14        shares, except as otherwise required by law.
15             (6)  If the offering is of stock  or  shares,  other
16        than  preferred stock or shares, the securities are owned
17        beneficially or of record, on any date within six  months
18        prior  to  the  commencement of the offering, by at least
19        1,200 persons, and  on  that  date  there  are  at  least
20        750,000  such shares outstanding with an aggregate market
21        value, based on the average bid price for that day, of at
22        least $3,750,000.  In connection with  the  determination
23        of the number of persons who are beneficial owners of the
24        stock  or  shares  of an issuer, the issuer or dealer may
25        rely in good faith for the purposes of this  clause  upon
26        written information furnished by the record owners.
27             (7)  The  issuer  meets  the conditions specified in
28        paragraphs (2), (3) and  (4)  of  this  subsection  P  if
29        either   the  issuer  or  the  issuer  and  the  issuer's
30        predecessor, taken together, meet such conditions and if:
31        (a) the succession  was  primarily  for  the  purpose  of
32        changing the state of incorporation of the predecessor or
33        forming  a holding company and the assets and liabilities
34        of the successor at  the  time  of  the  succession  were
 
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 1        substantially  the  same  as those of the predecessor; or
 2        (b) all predecessors met such conditions at the  time  of
 3        succession  and  the  issuer has continued to do so since
 4        the succession.
 5        Q.  Any security appearing on  the  List  of  OTC  Margin
 6    Stocks  published  by  the  Board of Governors of the Federal
 7    Reserve System or any security incorporated by  reference  to
 8    the  List  of  OTC Margin Stocks by the Board of Governors of
 9    the Federal Reserve System; any other securities of the  same
10    issuer  which  are of senior or substantially equal rank; any
11    securities called for by subscription rights or  warrants  so
12    listed  or approved; or any warrants or rights to purchase or
13    subscribe to any of the foregoing.
14        R.  Any security  issued  by  a  bona  fide  agricultural
15    cooperative  operating  in this State that is organized under
16    the  laws  of  this  State  or  as  a   foreign   cooperative
17    association organized under the law of another state that has
18    been duly qualified to transact business in this State.
19    (Source: P.A. 89-209, eff. 1-1-96; 90-70, eff. 7-8-97.)

20        (815 ILCS 5/4) (from Ch. 121 1/2, par. 137.4)
21        Sec. 4.  Exempt transactions.  The provisions of Sections
22    2a,  5,  6  and  7  of this Act shall not apply to any of the
23    following transactions, except where otherwise  specified  in
24    this Section 4:
25        A.  Any  offer  or  sale,  whether  through  a  dealer or
26    otherwise, of securities by a person who is  not  an  issuer,
27    underwriter,  dealer or controlling person in respect of such
28    securities, and who,  being  the  bona  fide  owner  of  such
29    securities,  disposes  thereof  for  his  or her own account;
30    provided, that such offer or sale is  not  made  directly  or
31    indirectly for the benefit of the issuer or of an underwriter
32    or controlling person.
33        B.  Any  offer,  sale, issuance or exchange of securities
 
                            -11-               LRB9111259STsb
 1    of the issuer to or  with  security  holders  of  the  issuer
 2    except  to or with persons who are security holders solely by
 3    reason  of  holding   transferable   warrants,   transferable
 4    options,  or similar transferable rights of the issuer, if no
 5    commission or other remuneration is paid or given directly or
 6    indirectly for or on account of the procuring  or  soliciting
 7    of   such  sale  or  exchange  (other  than  a  fee  paid  to
 8    underwriters based  on  their  undertaking  to  purchase  any
 9    securities  not  purchased  by security holders in connection
10    with such sale or exchange).
11        C.  Any offer, sale or  issuance  of  securities  to  any
12    corporation, bank, savings bank, savings institution, savings
13    and  loan  association,  trust  company,  insurance  company,
14    building  and loan association, or dealer; to a pension fund,
15    pension trust, or  employees'  profit  sharing  trust,  other
16    financial   institution   or   institutional   investor,  any
17    government  or  political  subdivision   or   instrumentality
18    thereof,  whether  the  purchaser  is acting for itself or in
19    some  fiduciary  capacity;  to  any  partnership   or   other
20    association  engaged as a substantial part of its business or
21    operations in purchasing or holding securities; to any  trust
22    in  respect  of  which  a bank or trust company is trustee or
23    co-trustee; to any entity in which at least 90% of the equity
24    is owned by persons described under subsection C, H, or S  of
25    this  Section  4;  to  any  employee  benefit plan within the
26    meaning of Title I of  the  Federal  ERISA  Act  if  (i)  the
27    investment decision is made by a plan fiduciary as defined in
28    Section  3(21)  of  the  Federal  ERISA  Act  and  such  plan
29    fiduciary  is  either  a  bank, savings and loan association,
30    insurance  company,  registered  investment  adviser  or   an
31    investment   adviser   registered   under  the  Federal  1940
32    Investment Advisers Act, or (ii) the plan has total assets in
33    excess of $5,000,000, or (iii) in the case of a self-directed
34    plan, investment decisions are made solely  by  persons  that
 
                            -12-               LRB9111259STsb
 1    are  described  under subsection C, D, H or S of this Section
 2    4; to any plan established and maintained  by,  and  for  the
 3    benefit   of   the  employees  of,  any  state  or  political
 4    subdivision or agency or instrumentality thereof if such plan
 5    has  total  assets  in  excess  of  $5,000,000;  or  to   any
 6    organization  described  in Section 501(c)(3) of the Internal
 7    Revenue Code of 1986, any Massachusetts or  similar  business
 8    trust,  or  any  partnership, if such organization, trust, or
 9    partnership has total assets in excess of $5,000,000.
10        D.  The Secretary of State is granted authority to create
11    by  rule  or  regulation  a  limited  offering  transactional
12    exemption that furthers the objectives of compatibility  with
13    federal  exemptions  and  uniformity  among  the states.  The
14    Secretary of State shall prescribe by rule or regulation  the
15    amount  of  the fee for filing any report required under this
16    subsection, but the fee shall not be less  than  the  minimum
17    amount  nor  more  than  the maximum amount established under
18    Section 11a of this Act and shall not be  returnable  in  any
19    event.
20        E.  Any  offer  or  sale  of  securities  by an executor,
21    administrator, guardian, receiver or trustee in insolvency or
22    bankruptcy, or at any judicial sale, or at a public  sale  by
23    auction held at an advertised time and place, or the offer or
24    sale  of  securities in good faith and not for the purpose of
25    avoiding  the  provisions  of  this  Act  by  a  pledgee   of
26    securities pledged for a bona fide debt.
27        F.  Any  offer  or sale by a registered dealer, either as
28    principal or agent, of any  securities  (except  face  amount
29    certificate  contracts and investment fund shares) at a price
30    reasonably related  to  the  current  market  price  of  such
31    securities, provided:
32             (1) (a)  the securities are issued and outstanding;
33                  (b)  the  issuer  is  required  to file reports
34             pursuant to Section  13  or  Section  15(d)  of  the
 
                            -13-               LRB9111259STsb
 1             Federal  1934  Act  and  has  been  subject  to such
 2             requirements during the 90  day  period  immediately
 3             preceding  the  date  of the offer or sale, or is an
 4             issuer of a security covered by Section  12(g)(2)(B)
 5             or (G) of the Federal 1934 Act;
 6                  (c)  the  dealer  has  a  reasonable  basis for
 7             believing that the issuer is current in  filing  the
 8             reports  required  to  be filed at regular intervals
 9             pursuant to the provisions of Section 13 or  Section
10             15(d),  as the case may be, of the Federal 1934 Act,
11             or in the case of insurance companies exempted  from
12             Section   12(g)   of   the   Federal   1934  Act  by
13             subparagraph   12(g)(2)(G)   thereof,   the   annual
14             statement referred to in Section  12(g)(2)(G)(i)  of
15             the Federal 1934 Act; and
16                  (d)  the  dealer  has in its records, and makes
17             reasonably available  upon  request  to  any  person
18             expressing  an interest in a proposed transaction in
19             the securities, the  issuer's   most  recent  annual
20             report filed pursuant to Section 13 or 15(d), as the
21             case  may  be, of the Federal 1934 Act or the annual
22             statement  in  the  case  of  an  insurance  company
23             exempted from Section 12(g) of the Federal 1934  Act
24             by  subparagraph  12(g)(2)(G) thereof, together with
25             any other reports required to be  filed  at  regular
26             intervals  under  the Federal 1934 Act by the issuer
27             after  such  annual  report  or  annual   statement;
28             provided  that  the making available of such reports
29             pursuant  to  this  subparagraph,  unless  otherwise
30             represented, shall not constitute  a  representation
31             by  the  dealer  that  the  information  is true and
32             correct, but shall constitute  a  representation  by
33             the   dealer  that  the  information  is  reasonably
34             current; or
 
                            -14-               LRB9111259STsb
 1             (2) (a)  prior to any offer or sale, an  application
 2             for  the  authorization  thereof and a report as set
 3             forth under sub-paragraph (d) of this paragraph  (2)
 4             has  been  filed  by  any registered dealer with and
 5             approved by the Secretary of State pursuant to  such
 6             rules  and regulations as the Secretary of State may
 7             prescribe;
 8                  (b)  the Secretary  of  State  shall  have  the
 9             power  by order to refuse to approve any application
10             or report filed pursuant to this paragraph (2) if
11                       (i)  the application or  report  does  not
12                  comply  with  the  provisions of this paragraph
13                  (2), or
14                       (ii)  the offer or sale of such securities
15                  would work or tend to work a fraud  or  deceit,
16                  or
17                       (iii)  the  issuer  or  the  applicant has
18                  violated any of the provisions of this Act;
19                  (c)  each application and report filed pursuant
20             to this paragraph (2)  shall  be  accompanied  by  a
21             filing  fee  and  an  examination  fee in the amount
22             established pursuant to Section  11a  of  this  Act,
23             which shall not be returnable in any event;
24                  (d)  there  shall be submitted to the Secretary
25             of State no later than 120 days following the end of
26             the issuer's  fiscal  year,  each  year  during  the
27             period  of  the  authorization, one copy of a report
28             which shall  contain  a  balance  sheet  and  income
29             statement  prepared  as  of the issuer's most recent
30             fiscal  year  end  certified   by   an   independent
31             certified  public  accountant,  together  with  such
32             current  information  concerning  the securities and
33             the issuer thereof as the  Secretary  of  State  may
34             prescribe by rule or regulation or order;
 
                            -15-               LRB9111259STsb
 1                  (e)  prior  to  any offer or sale of securities
 2             under the provisions of  this  paragraph  (2),  each
 3             registered dealer participating in the offer or sale
 4             of  such  securities  shall  provide upon request of
 5             prospective purchasers of such securities a copy  of
 6             the most recent report required under the provisions
 7             of sub-paragraph (d) of this paragraph (2);
 8                  (f)  approval  of an application filed pursuant
 9             to this paragraph (2) of subsection F shall expire 5
10             years  after  the  date  of  the  granting  of   the
11             approval,  unless said approval is sooner terminated
12             by (1) suspension or revocation by the Secretary  of
13             State  in  the  same  manner  as  is provided for in
14             subsections E, F and G of Section 11 of this Act, or
15             (2) the applicant filing with the Secretary of State
16             an affidavit to the  effect  that  (i)  the  subject
17             securities  have  become  exempt  under Section 3 of
18             this Act or (ii) the applicant no longer is  capable
19             of  acting  as the applicant and stating the reasons
20             therefor or (iii) the applicant no longer desires to
21             act as the applicant.  In the event of the filing of
22             an affidavit  under  either  preceding  sub-division
23             (ii) or (iii) the Secretary of State may authorize a
24             substitution  of  applicant  upon  the new applicant
25             executing  the  application  as  originally   filed.
26             However,  the  aforementioned  substituted execution
27             shall have no effect upon the previously  determined
28             date  of  expiration of approval of the application.
29             Notwithstanding the provisions of this  subparagraph
30             (f),  approvals  granted under this paragraph (2) of
31             subsection F prior to the effective date of this Act
32             shall be governed by the provisions of this  Act  in
33             effect on such date of approval; and
34                  (g)  no  person  shall  be  considered  to have
 
                            -16-               LRB9111259STsb
 1             violated Section 5 of this  Act  by  reason  of  any
 2             offer  or sale effected in reliance upon an approval
 3             granted under this paragraph (2) after a termination
 4             thereof under  the  foregoing  subparagraph  (f)  if
 5             official  notice  of  such  termination has not been
 6             circulated generally to dealers by the Secretary  of
 7             State  and  if  such  person  sustains the burden of
 8             proof that he or  she  did  not  know,  and  in  the
 9             exercise  of  reasonable care, could not have known,
10             of the termination; or
11             (3)  the  securities,  or  securities  of  the  same
12        class, are the subject of an existing registration  under
13        Section 5 of this Act.
14        The  exemption  provided in this subsection F shall apply
15    only if the offer or sale is made in good faith and  not  for
16    the  purpose  of  avoiding any of the provisions of this Act,
17    and only if the offer or sale is not made for the  direct  or
18    indirect  benefit  of  the  issuer  of the securities, or the
19    controlling person in respect of such issuer.
20        G. (1)  Any  offer,  sale  or  issuance  of  a  security,
21        whether to residents or to non-residents of  this  State,
22        where:
23                  (a)  all sales of such security to residents of
24             this  State  (including  the  most recent such sale)
25             within the  immediately  preceding  12-month  period
26             have  been  made to not more than 35 persons or have
27             involved an aggregate sales price of not  more  than
28             $1,000,000;
29                  (b)  such  security  is  not offered or sold by
30             means  of  any  general   advertising   or   general
31             solicitation in this State; and
32                  (c)  no    commission,   discount,   or   other
33             remuneration exceeding 20% of the sale price of such
34             security, if sold to a resident of  this  State,  is
 
                            -17-               LRB9111259STsb
 1             paid  or  given  directly  or  indirectly  for or on
 2             account of such sales.
 3             (2)  In computing the number of resident  purchasers
 4        or  the  aggregate  sales  price  under paragraph (1) (a)
 5        above, there shall be excluded any  purchaser  or  dollar
 6        amount  of  sales price, as the case may be, with respect
 7        to any security which at the time of its sale was  exempt
 8        under Section 3 or was registered under Section 5, 6 or 7
 9        or   was   sold  in  a  transaction  exempt  under  other
10        subsections of this Section 4.
11             (3)  A prospectus  or  preliminary  prospectus  with
12        respect  to a security for which a registration statement
13        is pending or effective under the Federal 1933 Act  shall
14        not  be  deemed  to  constitute  general  advertising  or
15        general solicitation in this State as such terms are used
16        in paragraph (1) (b) above, provided that such prospectus
17        or  preliminary prospectus has not been sent or otherwise
18        delivered to more than 150 residents of this State.
19             (4)  The  Secretary  of  State  shall  by  rule   or
20        regulation  require  the filing of a report or reports of
21        sales made in reliance upon  the  exemption  provided  by
22        this  subsection  G and prescribe the form of such report
23        and the time within which such  report  shall  be  filed.
24        Such  report  shall set forth the name and address of the
25        issuer and of the controlling person, if the sale was for
26        the direct or indirect benefit of such  person,  and  any
27        other  information  deemed  necessary by the Secretary of
28        State to enforce compliance with this subsection G.   The
29        Secretary  of State shall prescribe by rule or regulation
30        the amount  of  the  fee  for  filing  any  such  report,
31        established  pursuant  to  Section 11a of this Act, which
32        shall not be returnable in any event.  The  Secretary  of
33        State  may  impose,  in  such cases as he or she may deem
34        appropriate, a penalty  for  failure  to  file  any  such
 
                            -18-               LRB9111259STsb
 1        report  in  a  timely  manner,  but no such penalty shall
 2        exceed an amount equal to five times the filing fee.  The
 3        contents of any such report or  portion  thereof  may  be
 4        deemed  confidential by the Secretary of State by rule or
 5        order and if so deemed shall  not  be  disclosed  to  the
 6        public  except by order of court or in court proceedings.
 7        The failure to file any such report shall not affect  the
 8        availability  of such exemption, but such failure to file
 9        any  such  report  shall  constitute   a   violation   of
10        subsection  D  of  Section 12 of this Act, subject to the
11        penalties enumerated in Section  14  of  this  Act.   The
12        civil remedies provided for in subsection A of Section 13
13        of  this  Act  and  the  civil remedies of rescission and
14        appointment  of  a   receiver,   conservator,   ancillary
15        receiver   or   ancillary  conservator  provided  for  in
16        subsection F of Section 13  of  this  Act  shall  not  be
17        available  against any person by reason of the failure to
18        file any such report or on account of the contents of any
19        such report.
20        H.  Any offer, sale or issuance of a security to (1)  any
21    natural  person  who  has,  or  is reasonably believed by the
22    person relying upon this subsection H to have, a net worth or
23    joint net worth with that person's spouse, at the time of the
24    offer, sale or issuance, in excess  of  $1,000,000  excluding
25    the value of a principal residence, or (2) any natural person
26    who had, or is reasonably believed by the person relying upon
27    this subsection H to have had, an income or joint income with
28    that  person's  spouse,  in excess of $200,000 in each of the
29    two most recent years  and  who  reasonably  expects,  or  is
30    reasonably  expected to have, an income in excess of $200,000
31    in the current year, or (3) any person that is not a  natural
32    person  and  in  which at least 90% of the equity interest is
33    owned by persons who meet either of the tests  set  forth  in
34    clauses  (1)  or (2) of this subsection H; provided that such
 
                            -19-               LRB9111259STsb
 1    security is not offered or  sold  by  means  of  any  general
 2    advertising or general solicitation in this State.
 3        I.  Any  offer,  sale or issuance of securities to or for
 4    the benefit of security holders of any person incident  to  a
 5    vote  by  such  security  holders  pursuant  to such person's
 6    organizational document or  any  applicable  statute  of  the
 7    jurisdiction  of  such  person's  organization,  on a merger,
 8    consolidation, reclassification of  securities,  or  sale  or
 9    transfer  of  assets  in  consideration  of  or  exchange for
10    securities of the same or another person.
11        J.  Any offer, sale or issuance of securities in exchange
12    for one or more outstanding securities,  claims  or  property
13    interests,  or  partly  in such exchange and partly for cash,
14    where  such  offer,  sale  or  issuance  is  incident  to   a
15    reorganization,  recapitalization,  readjustment, composition
16    or settlement of a claim, as approved by a court of competent
17    jurisdiction of the United States, or any state.
18        K.  Any  offer,  sale  or  issuance  of  securities   for
19    patronage,  or  as  patronage  refunds, or in connection with
20    marketing agreements by  cooperative  associations  organized
21    exclusively    for    agricultural,    producer,   marketing,
22    purchasing,  or  consumer   purposes;   and   the   sale   of
23    subscriptions   for   or   shares  of  stock  of  cooperative
24    associations   organized   exclusively   for    agricultural,
25    producer,  marketing, purchasing, or consumer purposes, if no
26    commission or other remuneration is paid or given directly or
27    indirectly for or on account of such  subscription,  sale  or
28    resale, and if any person does not own beneficially more than
29    5%  of the aggregate amount of issued and outstanding capital
30    stock of such cooperative association.
31        L.  Offers for sale or solicitations  of  offers  to  buy
32    (but not the acceptance thereof), of securities which are the
33    subject  of  a pending registration statement filed under the
34    Federal 1933 Act and  which are  the  subject  of  a  pending
 
                            -20-               LRB9111259STsb
 1    application for registration under this Act.
 2        M.  Any  offer  or  sale of preorganization subscriptions
 3    for any securities prior to the  incorporation,  organization
 4    or  formation  of  any  issuer  under  the laws of the United
 5    States, or any state, or the issuance by such  issuer,  after
 6    its  incorporation,  organization or formation, of securities
 7    pursuant to such preorganization subscriptions, provided  the
 8    number  of  subscribers  does not exceed 25 and either (1) no
 9    commission or other remuneration is paid or given directly or
10    indirectly for or  on  account  of  such  sale  or  sales  or
11    issuance,  or  (2) if any commission or other remuneration is
12    paid or given directly or indirectly for  or  on  account  of
13    such  sale  or  sales  or  issuance,  the  securities are not
14    offered or sold  by  any  means  of  general  advertising  or
15    general solicitation in this State.
16        N.  The execution of orders for purchase of securities by
17    a  registered  salesperson  and dealer, provided such persons
18    act as agent for the purchaser, have made no solicitation  of
19    the order to purchase the securities, have no direct interest
20    in  the  sale  or  distribution  of  the  securities ordered,
21    receive no commission, profit, or  other  compensation  other
22    than the commissions involved in the purchase and sale of the
23    securities  and deliver to the purchaser written confirmation
24    of the order which clearly identifies the commissions paid to
25    the registered dealer.
26        O.  Any offer, sale or issuance of securities, other than
27    fractional undivided  interests  in  an  oil,  gas  or  other
28    mineral  lease,  right or royalty, for the direct or indirect
29    benefit of the issuer thereof, or of  a  controlling  person,
30    whether  through  a  dealer  (acting  either  as principal or
31    agent) or otherwise,  if  the  securities  sold,  immediately
32    following the sale or sales, together with securities already
33    owned  by  the purchaser, would constitute 50% or more of the
34    equity interest of any one issuer, provided that  the  number
 
                            -21-               LRB9111259STsb
 1    of purchasers is not more than 5 and provided further that no
 2    commission,  discount  or other remuneration exceeding 15% of
 3    the aggregate sale price of the securities is paid  or  given
 4    directly  or  indirectly  for  or  on  account of the sale or
 5    sales.
 6        P.  Any offer, sale or  issuance  of  securities  (except
 7    face amount certificate contracts and investment fund shares)
 8    issued  by and representing an interest in an issuer which is
 9    a business corporation incorporated under the  laws  of  this
10    State,  the  purposes  of  which  are  to provide capital and
11    supervision solely for the redevelopment  of  blighted  urban
12    areas  located  in  a  municipality  in  this State and whose
13    assets  are  located  entirely  within   that   municipality,
14    provided:   (1) no commission, discount or other remuneration
15    is paid or given directly or indirectly for or on account  of
16    the  sale  or  sales  of  such  securities; (2) the aggregate
17    amount of any securities of the issuer  owned  of  record  or
18    beneficially  by any one person will not exceed the lesser of
19    $5,000 or 4% of the equity capitalization of the issuer;  (3)
20    the  officers and directors of the corporation have been bona
21    fide residents of the municipality  not  less  than  3  years
22    immediately preceding the effectiveness of the offering sheet
23    for  the  securities  under  this  subsection  P; and (4) the
24    issuer files with the Secretary of State  an  offering  sheet
25    descriptive of the securities setting forth:
26             (a)  the name and address of the issuer;
27             (b)  the  title and total amount of securities to be
28        offered;
29             (c)  the price at which the  securities  are  to  be
30        offered; and
31             (d)  such additional information as the Secretary of
32        State may prescribe by rule and regulation.
33        The  Secretary  of  State  shall within a reasonable time
34    examine the offering sheet so filed and, unless the Secretary
 
                            -22-               LRB9111259STsb
 1    of State shall make a determination that the  offering  sheet
 2    so  filed  does  not  conform  to  the  requirements  of this
 3    subsection  P,  shall  declare  the  offering  sheet  to   be
 4    effective,  which offering sheet shall continue effective for
 5    a period of 12 months from the  date  it  becomes  effective.
 6    The  fee  for  examining  the  offering  sheet  shall  be  as
 7    established  pursuant  to  Section 11a of this Act, and shall
 8    not be returnable in any event.  The Secretary of State shall
 9    by rule or regulation require  the  filing  of  a  report  or
10    reports  of sales made to residents of this State in reliance
11    upon  the  exemption  provided  by  this  subsection  P   and
12    prescribe  the  form of such report and the time within which
13    such report shall be filed.  The  Secretary  of  State  shall
14    prescribe  by  rule  or  regulation the amount of the fee for
15    filing any such report, but such fee shall not be  less  than
16    the   minimum   amount  nor  more  than  the  maximum  amount
17    established pursuant to Section 11a of this  Act,  and  shall
18    not  be  returnable in any event.  The Secretary of State may
19    impose, in such cases as he or she may  deem  appropriate,  a
20    penalty  for  failure  to  file  any  such report in a timely
21    manner, but no such penalty shall exceed an amount  equal  to
22    five  times  the filing fee.  The contents of any such report
23    shall be deemed confidential and shall not  be  disclosed  to
24    the  public except by order of court or in court proceedings.
25    The failure to file any such  report  shall  not  affect  the
26    availability  of such exemption, but such failure to file any
27    such report shall constitute a violation of subsection  D  of
28    Section  12  of this Act, subject to the penalties enumerated
29    in Section 14 of this Act.  The civil remedies  provided  for
30    in  subsection  A  of  Section  13  of this Act and the civil
31    remedies  of  rescission  and  appointment  of  a   receiver,
32    conservator,  ancillary  receiver  or  ancillary  conservator
33    provided  for in subsection F of Section 13 of this Act shall
34    not be available against any person by reason of the  failure
 
                            -23-               LRB9111259STsb
 1    to  file any such report or on account of the contents of any
 2    such report.
 3        Q.  Any  isolated  transaction,  whether  effected  by  a
 4    dealer or not.
 5        R.  Any offer, sale or issuance  of  a  security  to  any
 6    person  who  purchases  at  least  $150,000 of the securities
 7    being offered, where the  purchaser's  total  purchase  price
 8    does  not, or it is reasonably believed by the person relying
 9    upon this subsection R that said  purchase  price  does  not,
10    exceed 20 percent of the purchaser's net worth at the time of
11    sale,  or  if  a  natural  person a joint net worth with that
12    person's spouse, for one or any combination of the following:
13    (i) cash, (ii) securities for  which  market  quotations  are
14    readily  available,  (iii) an unconditional obligation to pay
15    cash  or  securities  for  which   quotations   are   readily
16    available,  which  obligation is to be discharged within five
17    years of the sale of the securities to the purchaser, or (iv)
18    the cancellation of any indebtedness owed by  the  issuer  to
19    the  purchaser; provided that such security is not offered or
20    sold  by  means  of  any  general  advertising   or   general
21    solicitation in this State.
22        S.  Any  offer,  sale  or  issuance  of a security to any
23    person who is, or who is reasonably believed  by  the  person
24    relying  upon  this subsection S to be, a director, executive
25    officer, or general partner of the issuer of  the  securities
26    being offered or sold, or any director, executive officer, or
27    general  partner  of  a  general  partner of that issuer. For
28    purposes of this subsection S, "executive officer" shall mean
29    the president, any vice president in charge  of  a  principal
30    business   unit,   division   or  function  (such  as  sales,
31    administration or finance), any other officer who performs  a
32    policy  making  function,  or  any  other person who performs
33    similar policy making functions for  the  issuer.   Executive
34    officers  of subsidiaries may be deemed executive officers of
 
                            -24-               LRB9111259STsb
 1    the issuer if they perform such policy making  functions  for
 2    the issuer.
 3        A  document  being filed pursuant to this Section 4 shall
 4    be deemed filed, and any fee paid pursuant to this Section  4
 5    shall be deemed paid, upon the date of actual receipt thereof
 6    by the Secretary of State.
 7    (Source:  P.A.  89-209,  eff.  1-1-96;  89-626,  eff. 8-9-96;
 8    90-70, eff. 7-8-97.)

 9        (815 ILCS 5/8) (from Ch. 121 1/2, par. 137.8)
10        Sec.  8.   Registration  of  dealers,  limited   Canadian
11    dealers,  salespersons,  investment  advisers, and investment
12    adviser representatives.

13        A.  Except as otherwise provided in  this  subsection  A,
14    every   dealer,   limited   Canadian   dealer,   salesperson,
15    investment  adviser,  and  investment  adviser representative
16    shall be registered as such with the Secretary of State.   No
17    dealer  or  salesperson  need  be  registered  as  such  when
18    offering  or  selling  securities in transactions believed in
19    good faith to be exempted by subsection A, B, C, D, E, G,  H,
20    I,  J,  K,  M,  O,  P,  Q,  R  or S of Section 4 of this Act,
21    provided that such dealer or  salesperson  is  not  regularly
22    engaged  in the business of offering or selling securities in
23    reliance upon the exemption set forth in subsection G or M of
24    Section 4 of this  Act.  No  dealer,  issuer  or  controlling
25    person  shall employ a salesperson unless such salesperson is
26    registered as such with the Secretary of State or is employed
27    for the purpose of offering or selling securities  solely  in
28    transactions  believed  in  good  faith  to  be  exempted  by
29    subsection  A, B, C, D, E, G, H, I, J, K, L, M, O, P, Q, R or
30    S of Section 4 of this Act; provided  that  such  salesperson
31    need  not  be  registered when effecting transactions in this
32    State limited to  those  transactions  described  in  Section
33    15(h)(2)  of the Federal 1934 Act or engaging in the offer or
 
                            -25-               LRB9111259STsb
 1    sale of  securities  in  respect  of  which  he  or  she  has
 2    beneficial  ownership  and  is  a  controlling  person.   The
 3    Secretary  of  State  may,  by  rule, regulation or order and
 4    subject  to  such  terms,  conditions  as  fees  as  may   be
 5    prescribed in such rule, regulation or order, exempt from the
 6    registration  requirements  of  this Section 8 any investment
 7    adviser, if the Secretary  of  State  shall  find  that  such
 8    registration  is  not  necessary  in  the  public interest by
 9    reason of the small  number of clients or  otherwise  limited
10    character of operation of such investment adviser.

11        B.  An  application  for  registration  as  a  dealer  or
12    limited Canadian dealer, executed, verified, or authenticated
13    by  or  on  behalf  of the applicant, shall be filed with the
14    Secretary of State, in such form as the  Secretary  of  State
15    may  by rule, regulation or order prescribe, setting forth or
16    accompanied by:
17             (1)  The name and  address  of  the  applicant,  the
18        location  of its principal business office and all branch
19        offices, if any, and the date of its organization;
20             (2)  A statement  of  any  other  Federal  or  state
21        licenses  or  registrations  which  have been granted the
22        applicant and whether any such licenses or  registrations
23        have  ever been refused, cancelled, suspended, revoked or
24        withdrawn;
25             (3)  The  assets  and  all  liabilities,   including
26        contingent liabilities of the applicant, as of a date not
27        more than 60 days prior to the filing of the application;
28             (4) (a)  A   brief   description  of  any  civil  or
29        criminal  proceeding  of  which  fraud  is  an  essential
30        element pending against the  applicant  and  whether  the
31        applicant  has ever been convicted of a felony, or of any
32        misdemeanor of which fraud is an essential element;
33             (b)  A list setting forth the  name,  residence  and
34        business  address and a 10 year occupational statement of
 
                            -26-               LRB9111259STsb
 1        each  principal  of  the  applicant   and   a   statement
 2        describing  briefly  any civil or criminal proceedings of
 3        which fraud is an essential element pending  against  any
 4        such principal and the facts concerning any conviction of
 5        any  such principal of a felony, or of any misdemeanor of
 6        which fraud is an essential element;
 7             (5)  If the applicant is a corporation:  a  list  of
 8        its  officers  and  directors setting forth the residence
 9        and business address  of  each;  a  10-year  occupational
10        statement  of  each  such  officer  or  director;  and  a
11        statement   describing  briefly  any  civil  or  criminal
12        proceedings  of  which  fraud  is  an  essential  element
13        pending against each such officer  or  director  and  the
14        facts   concerning  any  conviction  of  any  officer  or
15        director of a felony, or  of  any  misdemeanor  of  which
16        fraud is an essential element;
17             (6)  If  the  applicant  is a sole proprietorship, a
18        partnership, limited liability company, an unincorporated
19        association or any similar form of business organization:
20        the  name,  residence  and  business   address   of   the
21        proprietor or of each partner, member, officer, director,
22        trustee  or  manager;  the  limitations,  if  any, of the
23        liability of each such individual; a 10-year occupational
24        statement of each such individual; a statement describing
25        briefly any civil or criminal proceedings of which  fraud
26        is   an  essential  element  pending  against  each  such
27        individual and the facts concerning any conviction of any
28        such individual of a felony, or  of  any  misdemeanor  of
29        which fraud is an essential element;
30             (7)  Such additional information as the Secretary of
31        State may by rule or regulation prescribe as necessary to
32        determine   the   applicant's  financial  responsibility,
33        business repute and qualification to act as a dealer.
34             (8) (a)  No  applicant  shall   be   registered   or
 
                            -27-               LRB9111259STsb
 1        re-registered  as  a  dealer  or  limited Canadian dealer
 2        under this Section unless and until each principal of the
 3        dealer  has  passed  an  examination  conducted  by   the
 4        Secretary  of  State or a self-regulatory organization of
 5        securities dealers or similar person,  which  examination
 6        has  been  designated by the Secretary  of State by rule,
 7        regulation or order to be satisfactory  for  purposes  of
 8        determining   whether   the   applicant   has  sufficient
 9        knowledge of the securities business  and  laws  relating
10        thereto to act as a registered dealer. Any dealer who was
11        registered on September 30, 1963, and has continued to be
12        so  registered;  and  any  principal  of  any  registered
13        dealer,   who   was   acting  in  such  capacity  on  and
14        continuously since September 30, 1963; and any individual
15        who has previously passed a securities dealer examination
16        administered by the Secretary of State or any examination
17        designated by the Secretary of State to  be  satisfactory
18        for  purposes  of  determining  whether the applicant has
19        sufficient knowledge of the securities business and  laws
20        relating  thereto  to act as a registered dealer by rule,
21        regulation or order, shall not be  required  to  pass  an
22        examination in order to continue to act in such capacity.
23        The Secretary of State may by order waive the examination
24        requirement   for  any  principal  of  an  applicant  for
25        registration under this subsection B  who  has  had  such
26        experience   or  education  relating  to  the  securities
27        business as may be determined by the Secretary  of  State
28        to  be  the  equivalent of such examination.  Any request
29        for such a waiver shall be filed with  the  Secretary  of
30        State  in  such  form  as  may  be  prescribed by rule or
31        regulation.
32             (b)  Unless an applicant is a  member  of  the  body
33        corporate  known  as  the  Securities Investor Protection
34        Corporation established pursuant to the Act  of  Congress
 
                            -28-               LRB9111259STsb
 1        of  the  United  States  known as the Securities Investor
 2        Protection Act of  1970,  as  amended,  a  member  of  an
 3        association   of   dealers   registered   as  a  national
 4        securities association pursuant to  Section  15A  of  the
 5        Federal  1934  Act,  or  a  member  of  a self-regulatory
 6        organization  or  stock  exchange  in  Canada  which  the
 7        Secretary of State has designated by rule  or  order,  an
 8        applicant shall not be registered or re-registered unless
 9        and  until  there  is  filed  with the Secretary of State
10        evidence that such applicant has in effect  insurance  or
11        other  equivalent  protection  for  each client's cash or
12        securities held by such  applicant,  and  an  undertaking
13        that   such  applicant  will  continually  maintain  such
14        insurance  or  other  protection  during  the  period  of
15        registration or re-registration.  Such insurance or other
16        protection shall be  in  a  form  and  amount  reasonably
17        prescribed   by   the  Secretary  of  State  by  rule  or
18        regulation.
19             (9)  The  application  for  the  registration  of  a
20        dealer or limited Canadian dealer  shall  be  accompanied
21        by  a filing fee and a fee for each branch office in this
22        State, in each case in the amount established pursuant to
23        Section  11a  of  this  Act,  which  fees  shall  not  be
24        returnable in any event.
25             (10)  The Secretary of State shall notify the dealer
26        or  limited  Canadian dealer by written notice (which may
27        be  by  electronic  or  facsimile  transmission)  of  the
28        effectiveness of the registration as  a  dealer  in  this
29        State.
30             (11)  Any  change  which  renders no longer accurate
31        any  information  contained  in   any   application   for
32        registration  or  re-registration  of a dealer or limited
33        Canadian dealer shall be reported  to  the  Secretary  of
34        State  within  10  business  days after the occurrence of
 
                            -29-               LRB9111259STsb
 1        such change;  but in respect to  assets  and  liabilities
 2        only materially adverse changes need be reported.

 3        C.  Any   registered  dealer,  limited  Canadian  dealer,
 4    issuer,  or  controlling  person  desiring  to   register   a
 5    salesperson  shall  file an application with the Secretary of
 6    State, in such form as the Secretary of State may by rule  or
 7    regulation  prescribe,  which  the salesperson is required by
 8    this Section to provide to the dealer, issuer, or controlling
 9    person,  executed,  verified,   or   authenticated   by   the
10    salesperson setting forth or accompanied by:
11             (1)  The name, residence and business address of the
12        salesperson;
13             (2)  Whether   any   federal  or  State  license  or
14        registration  as  dealer,  limited  Canadian  dealer,  or
15        salesperson has ever  been  refused  the  salesperson  or
16        cancelled, suspended, revoked, or withdrawn;
17             (3)  The  nature  of  employment with, and names and
18        addresses of, employers of the  salesperson  for  the  10
19        years immediately preceding the date of application;
20             (4)  A  brief  description  of any civil or criminal
21        proceedings  of  which  fraud  is  an  essential  element
22        pending  against  the  salesperson,   and   whether   the
23        salesperson  has  ever  been convicted of a felony, or of
24        any misdemeanor of which fraud is an essential element;
25             (5)  Such additional information as the Secretary of
26        State may by  rule,  regulation  or  order  prescribe  as
27        necessary  to determine the salesperson's business repute
28        and qualification to act as a salesperson; and
29             (6)  No   individual   shall   be   registered    or
30        re-registered  as a salesperson under this Section unless
31        and until  such  individual  has  passed  an  examination
32        conducted  by the Secretary of State or a self-regulatory
33        organization of securities  dealers  or  similar  person,
34        which examination has been designated by the Secretary of
 
                            -30-               LRB9111259STsb
 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 act as a registered salesperson.
 5             Any   salesperson   who   was  registered  prior  to
 6        September  30,  1963,  and  has  continued   to   be   so
 7        registered,   and   any   individual  who  has  passed  a
 8        securities salesperson examination  administered  by  the
 9        Secretary  of  State  or an examination designated by the
10        Secretary of State by rule, regulation  or  order  to  be
11        satisfactory  for  purposes  of  determining  whether the
12        applicant has  sufficient  knowledge  of  the  securities
13        business and laws relating thereto to act as a registered
14        salesperson, shall not be required to pass an examination
15        in  order  to  continue  to  act  as  a  salesperson. The
16        Secretary of State may by  order  waive  the  examination
17        requirement for any applicant for registration under this
18        subsection  C  who  has  had such experience or education
19        relating to the securities business as may be  determined
20        by  the  Secretary  of State to be the equivalent of such
21        examination.  Any request for  such  a  waiver  shall  be
22        filed  with the Secretary of State in such form as may be
23        prescribed by rule, regulation or order.
24             (7)  The   application   for   registration   of   a
25        salesperson shall be accompanied by a filing  fee  and  a
26        Securities  Audit  and  Enforcement Fund fee, each in the
27        amount established pursuant to Section 11a of  this  Act,
28        which shall not be returnable in any event.
29             (8)  Any change which renders no longer accurate any
30        information contained in any application for registration
31        or  re-registration as a salesperson shall be reported to
32        the Secretary of State within 10 business  days after the
33        occurrence  of  such  change.  If  the   activities   are
34        terminated which rendered an individual a salesperson for
 
                            -31-               LRB9111259STsb
 1        the  dealer,  issuer  or  controlling person, the dealer,
 2        issuer or controlling person, as the case may be,   shall
 3        notify the Secretary of State, in writing, within 30 days
 4        of  the  salesperson's cessation of activities, using the
 5        appropriate termination notice form.
 6             (9)  A registered salesperson may  transfer  his  or
 7        her  registration  under this Section 8 for the unexpired
 8        term  thereof  from  one  registered  dealer  or  limited
 9        Canadian dealer to another by the giving of notice of the
10        transfer by the new registered dealer or limited Canadian
11        dealer to the Secretary of State in such form and subject
12        to such conditions as the Secretary  of  State  shall  by
13        rule  or regulation prescribe.  The new registered dealer
14        or  limited  Canadian  dealer  shall  promptly  file   an
15        application  for  registration  of  such  salesperson  as
16        provided  in this subsection C, accompanied by the filing
17        fee prescribed by paragraph (7) of this subsection C.

18        C-5.  Except with respect to federal  covered  investment
19    advisers  whose  only  clients  are  investment  companies as
20    defined in the Federal 1940 Act, other  investment  advisers,
21    federal  covered  investment  advisers, or any similar person
22    which the Secretary of State may prescribe by rule or  order,
23    a  federal  covered  investment  adviser  shall file with the
24    Secretary of State, prior to  acting  as  a  federal  covered
25    investment adviser in this State, such documents as have been
26    filed  with  the  Securities  and  Exchange Commission as the
27    Secretary of State by  rule  or  order  may  prescribe.   The
28    notification of a federal covered investment adviser shall be
29    accompanied by a notification filing fee established pursuant
30    to  Section 11a of this Act, which shall not be returnable in
31    any  event.   Every  person  acting  as  a  federal   covered
32    investment  adviser  in  this State shall file a notification
33    filing and pay an annual notification filing fee  established
34    pursuant to Section 11a of this Act, which is not  returnable
 
                            -32-               LRB9111259STsb
 1    in  any  event.   The  failure  to file any such notification
 2    shall constitute a violation of subsection D of Section 12 of
 3    this Act, subject to the penalties enumerated in  Section  14
 4    of  this  Act. Until October 10, 1999 or other date as may be
 5    legally permissible, a federal covered investment adviser who
 6    fails to file the notification or refuses to pay the fees  as
 7    required  by  this subsection shall register as an investment
 8    adviser with the Secretary of State under Section 8  of  this
 9    Act.  The  civil  remedies  provided  for  in subsection A of
10    Section 13 of this Act and the civil remedies  of  rescission
11    and appointment of receiver, conservator, ancillary receiver,
12    or  ancillary  conservator  provided  for  in subsection F of
13    Section 13 of this Act shall not  be  available  against  any
14    person by reason of the failure to file any such notification
15    or  to pay the notification fee or on account of the contents
16    of any such notification.

17        D.  An application  for  registration  as  an  investment
18    adviser, executed, verified, or authenticated by or on behalf
19    of the applicant, shall be filed with the Secretary of State,
20    in  such  form  as  the  Secretary  of  State  may by rule or
21    regulation prescribe, setting forth or accompanied by:
22             (1)  The name and form of organization  under  which
23        the  investment  adviser  engages or intends to engage in
24        business;  the  state  or  country  and   date   of   its
25        organization;  the  location  of  the adviser's principal
26        business office and branch offices, if any; the names and
27        addresses of the adviser's principal, partners, officers,
28        directors, and persons performing similar  functions  or,
29        if  the  investment  adviser  is  an  individual,  of the
30        individual; and the number of the adviser's employees who
31        perform investment advisory functions;
32             (2)  The education, the  business  affiliations  for
33        the  past 10 years, and the present business affiliations
34        of the investment adviser and of the adviser's principal,
 
                            -33-               LRB9111259STsb
 1        partners, officers,  directors,  and  persons  performing
 2        similar  functions  and  of  any  person  controlling the
 3        investment adviser;
 4             (3)  The nature of the business  of  the  investment
 5        adviser,  including  the  manner  of  giving  advice  and
 6        rendering analyses or reports;
 7             (4)  The  nature  and  scope of the authority of the
 8        investment adviser with respect  to  clients'  funds  and
 9        accounts;
10             (5)  The  basis  or  bases upon which the investment
11        adviser is compensated;
12             (6)  Whether   the   investment   adviser   or   any
13        principal, partner, officer, director, person  performing
14        similar  functions  or  person controlling the investment
15        adviser  (i)  within  10  years  of  the  filing  of  the
16        application has been convicted of a  felony,  or  of  any
17        misdemeanor  of  which  fraud is an essential element, or
18        (ii) is permanently or temporarily enjoined by  order  or
19        judgment   from   acting   as   an   investment  adviser,
20        underwriter, dealer, principal or  salesperson,  or  from
21        engaging  in  or  continuing  any  conduct or practice in
22        connection with any such activity or in  connection  with
23        the  purchase  or  sale of any security, and in each case
24        the facts relating to the conviction, order or judgment;
25             (7) (a)  A statement as to  whether  the  investment
26        adviser  is  engaged  or  is  to  engage primarily in the
27        business of rendering  investment  supervisory  services;
28        and
29             (b)  A  statement  that  the investment adviser will
30        furnish his, her, or its clients with such information as
31        the Secretary  of  State  deems  necessary  in  the  form
32        prescribed   by   the  Secretary  of  State  by  rule  or
33        regulation;
34             (8)  Such additional information as the Secretary of
 
                            -34-               LRB9111259STsb
 1        State may, by rule,  regulation  or  order  prescribe  as
 2        necessary   to   determine   the   applicant's  financial
 3        responsibility, business repute and qualification to  act
 4        as an investment adviser.
 5             (9)  No    applicant    shall   be   registered   or
 6        re-registered as an investment adviser under this Section
 7        unless and until each principal of the applicant  who  is
 8        actively  engaged  in  the  conduct and management of the
 9        applicant's advisory business in this State has passed an
10        examination or completed an educational program conducted
11        by the Secretary of State or an association of investment
12        advisers  or  similar  person,   which   examination   or
13        educational  program has been designated by the Secretary
14        of State by rule, regulation or order to be  satisfactory
15        for  purposes  of  determining  whether the applicant has
16        sufficient knowledge of the securities business and  laws
17        relating  thereto to conduct the business of a registered
18        investment adviser.
19             Any person who was a registered  investment  adviser
20        prior  to  September 30, 1963, and has continued to be so
21        registered,  and  any  individual  who  has   passed   an
22        investment   adviser   examination  administered  by  the
23        Secretary of State, or passed an examination or completed
24        an educational program designated  by  the  Secretary  of
25        State by rule, regulation or order to be satisfactory for
26        purposes   of   determining  whether  the  applicant  has
27        sufficient knowledge of the securities business and  laws
28        relating  thereto to conduct the business of a registered
29        investment adviser, shall not  be  required  to  pass  an
30        examination  or  complete an educational program in order
31        to  continue  to  act  as  an  investment  adviser.   The
32        Secretary of State may by order waive the examination  or
33        educational  program  requirement  for  any applicant for
34        registration under this subsection D if the principal  of
 
                            -35-               LRB9111259STsb
 1        the  applicant who is actively engaged in the conduct and
 2        management of the applicant's advisory business  in  this
 3        State  has  had  such experience or education relating to
 4        the securities business  as  may  be  determined  by  the
 5        Secretary   of   State   to  be  the  equivalent  of  the
 6        examination or educational program.  Any  request  for  a
 7        waiver shall be filed with the Secretary of State in such
 8        form as may be prescribed by rule or regulation.
 9             (10)  No    applicant   shall   be   registered   or
10        re-registered as an investment adviser under this Section
11        8   unless   the   application   for   registration    or
12        re-registration  is  accompanied  by  an  application for
13        registration or re-registration for each person acting as
14        an investment adviser representative  on  behalf  of  the
15        adviser  and  a Securities Audit and Enforcement Fund fee
16        that shall not be returnable in any event  is  paid  with
17        respect to each investment adviser representative.
18             (11)  The   application   for   registration  of  an
19        investment adviser shall be accompanied by a  filing  fee
20        and  a  fee for each branch office in this State, in each
21        case in the amount established pursuant to Section 11a of
22        this Act, which fees  shall  not  be  returnable  in  any
23        event.
24             (12)  The   Secretary  of  State  shall  notify  the
25        investment adviser by written notice  (which  may  be  by
26        electronic    or    facsimile    transmission)   of   the
27        effectiveness  of  the  registration  as  an   investment
28        adviser in this State.
29             (13)  Any  change  which  renders no longer accurate
30        any  information  contained  in   any   application   for
31        registration  or re-registration of an investment adviser
32        shall be reported to the Secretary  of  State  within  10
33        business  days  after  the  occurrence of the change.  In
34        respect  to  assets  and  liabilities  of  an  investment
 
                            -36-               LRB9111259STsb
 1        adviser  that  retains  custody  of  clients'   cash   or
 2        securities  or  accepts  pre-payment of fees in excess of
 3        $500 per client and 6 or  more  months  in  advance  only
 4        materially  adverse  changes  need be reported by written
 5        notice  (which  may  be  by   electronic   or   facsimile
 6        transmission)  no later than the close of business on the
 7        second business day following the discovery thereof.
 8             (14)  Each  application  for  registration   as   an
 9        investment  adviser  shall become effective automatically
10        on the 45th day following the filing of the  application,
11        required  documents  or  information,  and payment of the
12        required fee  unless  (i)  the  Secretary  of  State  has
13        registered  the  investment adviser prior to that date or
14        (ii) an action with respect to the applicant  is  pending
15        under Section 11 of this Act.

16        D-5.  A  registered investment adviser or federal covered
17    investment  adviser    desiring  to  register  an  investment
18    adviser representative shall file  an  application  with  the
19    Secretary of State, in the form as the Secretary of State may
20    by  rule  or  order  prescribe,  which the investment adviser
21    representative is required by this Section to provide to  the
22    investment  adviser,  executed, verified, or authenticated by
23    the investment adviser representative and  setting  forth  or
24    accompanied by:
25             (1)  The  name,  residence,  and business address of
26        the investment  adviser representative;
27             (2)  A  statement  whether  any  federal  or   state
28        license   or   registration  as  a  dealer,  salesperson,
29        investment adviser, or investment adviser  representative
30        has  ever  been  refused, canceled, suspended, revoked or
31        withdrawn;
32             (3)  The nature of employment with,  and  names  and
33        addresses  of,    employers  of  the  investment  adviser
34        representative for the 10 years immediately preceding the
 
                            -37-               LRB9111259STsb
 1        date of application;
 2             (4)  A  brief  description  of any civil or criminal
 3        proceedings, of which  fraud  is  an  essential  element,
 4        pending against the investment adviser representative and
 5        whether  the  investment  adviser representative has ever
 6        been convicted of a felony or of any misdemeanor of which
 7        fraud is an essential element;
 8             (5)  Such additional information as the Secretary of
 9        State may by rule or  order  prescribe  as  necessary  to
10        determine   the   investment   adviser   representative's
11        business  repute or qualification to act as an investment
12        adviser representative;
13             (6)  Documentation that the individual has passed an
14        examination conducted  by  the  Secretary  of  State,  an
15        organization  of  investment advisers, or similar person,
16        which examination has been designated by the Secretary of
17        State by rule or order to be satisfactory for purposes of
18        determining  whether  the    applicant   has   sufficient
19        knowledge   of  the  investment  advisory  or  securities
20        business and laws relating to that business to act  as  a
21        registered investment  adviser representative; and
22             (7)  A  Securities  Audit  and  Enforcement Fund fee
23        established under Section 11a of this  Act,  which  shall
24        not be returnable in any event.
25        The Secretary of State may by order waive the examination
26    requirement  for  an  applicant  for  registration under this
27    subsection D-5  who  has  had  the  experience  or  education
28    relating to the investment advisory or securities business as
29    may  be  determined  by  the  Secretary  of  State  to be the
30    equivalent of the examination.  A request for a waiver  shall
31    be  filed  with  the Secretary of State in the form as may be
32    prescribed by rule or order.
33        A change that renders no longer accurate any  information
34    contained   in   any      application   for  registration  or
 
                            -38-               LRB9111259STsb
 1    re-registration as an investment adviser representative  must
 2    be reported to the Secretary of State within 10 business days
 3    after  the  occurrence of the change.  If the activities that
 4    rendered an individual an investment  adviser  representative
 5    for  the  investment  adviser  are terminated, the investment
 6    adviser shall notify the Secretary of State in writing (which
 7    may be by electronic or facsimile  transmission),  within  30
 8    days  of the investment adviser representative's termination,
 9    using  the  appropriate  termination  notice  form   as   the
10    Secretary of State may prescribe by rule or order.
11        A   registered   investment  adviser  representative  may
12    transfer his or her registration under this Section 8 for the
13    unexpired  term  of  the  registration  from  one  registered
14    investment adviser to another by the giving of notice of  the
15    transfer  by  the  new investment adviser to the Secretary of
16    State in the form  and  subject  to  the  conditions  as  the
17    Secretary  of  State  shall  prescribe.    The new registered
18    investment adviser shall promptly  file  an  application  for
19    registration  of  the  investment  adviser  representative as
20    provided in this subsection, accompanied  by  the  Securities
21    Audit and Enforcement Fund fee prescribed by paragraph (7) of
22    this subsection D-5.

23        E. (1)  Subject  to  the  provisions  of  subsection F of
24    Section 11 of this Act, the registration of a dealer, limited
25    Canadian  dealer,   salesperson,   investment   adviser,   or
26    investment adviser representative may be denied, suspended or
27    revoked  if  the  Secretary  of  State finds that the dealer,
28    limited Canadian dealer, salesperson, investment adviser,  or
29    investment  adviser  representative or any principal officer,
30    director, partner, member, trustee, manager or any person who
31    performs a similar function of the dealer,  limited  Canadian
32    dealer, or investment adviser:
33             (a)  Has  been convicted of any felony during the 10
34        year  period  preceding  the  date  of  filing   of   any
 
                            -39-               LRB9111259STsb
 1        application  for  registration or at any time thereafter,
 2        or of any misdemeanor of  which  fraud  is  an  essential
 3        element;
 4             (b)  Has   engaged   in  any  unethical  inequitable
 5        practice in the offer or sale of  securities  or  in  any
 6        fraudulent business practice;
 7             (c)  Has   failed   to  account  for  any  money  or
 8        property, or has failed to deliver any security,  to  any
 9        person  entitled  thereto when due or within a reasonable
10        time thereafter;
11             (d)  In the  case  of  a  dealer,  limited  Canadian
12        dealer, or investment adviser, is insolvent;
13             (e)  In  the  case  of a dealer, or limited Canadian
14        dealer, salesperson, or registered principal of a  dealer
15        or  limited  Canadian dealer (i) has failed reasonably to
16        supervise  the  securities  activities  of  any  of   its
17        salespersons and the failure has permitted or facilitated
18        a violation of Section 12 of this Act or (ii) is offering
19        or  selling  or  has  offered  or sold securities in this
20        State through  a  salesperson  other  than  a  registered
21        salesperson, or, in the case of a salesperson, is selling
22        or  has  sold  securities  in  this  State  for a dealer,
23        limited Canadian dealer,  issuer  or  controlling  person
24        with  knowledge that the dealer, limited Canadian dealer,
25        issuer or controlling person has not  complied  with  the
26        provisions  of this Act or (iii) has failed reasonably to
27        supervise  the  implementation  of  compliance   measures
28        following   notice   by   the   Secretary   of  State  of
29        noncompliance  with  the  Act  or  with  the  regulations
30        promulgated thereunder or both;
31             (f)  In the  case  of  an  investment  adviser,  has
32        failed reasonably to supervise the advisory activities of
33        any   of   its   investment  adviser  representatives  or
34        employees and the failure has permitted or facilitated  a
 
                            -40-               LRB9111259STsb
 1        violation of Section 12 of this Act;
 2             (g)  Has violated any of the provisions of this Act;
 3             (h)  Has  made any material misrepresentation to the
 4        Secretary of State in  connection  with  any  information
 5        deemed necessary by the Secretary of State to determine a
 6        dealer's,   limited   Canadian  dealer's,  or  investment
 7        adviser's financial responsibility or a dealer's, limited
 8        Canadian dealer's, investment  adviser's,  salesperson's,
 9        or investment adviser representative's business repute or
10        qualifications,  or  has  refused  to  furnish  any  such
11        information requested by the Secretary of State;
12             (i)  Has  had  a  license  or registration under any
13        Federal or State law regulating  the  offer  or  sale  of
14        securities   or  commodity  futures  contracts,  refused,
15        cancelled, suspended or withdrawn;
16             (j)  Has been suspended or expelled from or  refused
17        membership  in  or  association  with  or  limited in any
18        capacity by any self-regulatory  organization  registered
19        under  the  Federal  1934  Act  or  the  Federal 1974 Act
20        arising  from  any  fraudulent  or  deceptive  act  or  a
21        practice in violation of any rule, regulation or standard
22        duly promulgated by the self-regulatory organization;
23             (k)  Has had any  order  entered  against  it  after
24        notice and opportunity for hearing by a securities agency
25        of  any  state, any foreign government or agency thereof,
26        the Securities and Exchange Commission,  or  the  Federal
27        Commodities  Futures  Trading Commission arising from any
28        fraudulent or deceptive act or a practice in violation of
29        any  statute,  rule   or   regulation   administered   or
30        promulgated by the agency or commission;
31             (l)  In  the  case  of  a dealer or limited Canadian
32        dealer, fails to maintain a minimum  net  capital  in  an
33        amount  which  the  Secretary  of  State  may  by rule or
34        regulation require;
 
                            -41-               LRB9111259STsb
 1             (m)  Has conducted a continuing course of dealing of
 2        such nature as to demonstrate an  inability  to  properly
 3        conduct  the  business  of  the  dealer, limited Canadian
 4        dealer, salesperson, investment  adviser,  or  investment
 5        adviser representative;
 6             (n)  Has  had,  after  notice  and  opportunity  for
 7        hearing,  any  injunction  or order entered against it or
 8        license or registration  refused,  cancelled,  suspended,
 9        revoked,  withdrawn  or  limited  by any state or federal
10        body, agency or commission regulating banking, insurance,
11        finance or small loan companies, real estate or  mortgage
12        brokers or companies, if the action resulted from any act
13        found   by  the  body,  agency  or  commission  to  be  a
14        fraudulent or deceptive act or practice in  violation  of
15        any   statute,   rule   or   regulation  administered  or
16        promulgated by the body, agency or commission;
17             (o)  Has failed to file a return, or to pay the tax,
18        penalty or interest shown in a filed return,  or  to  pay
19        any  final  assessment  of  tax,  penalty or interest, as
20        required by any tax  Act  administered  by  the  Illinois
21        Department   of   Revenue,   until   such   time  as  the
22        requirements of that tax Act are satisfied;
23             (p)  In the case  of  a  natural  person  who  is  a
24        dealer,  limited Canadian dealer, salesperson, investment
25        adviser,  or  investment  adviser   representative,   has
26        defaulted  on  an  educational  loan  guaranteed  by  the
27        Illinois Student Assistance Commission, until the natural
28        person has established a satisfactory repayment record as
29        determined by the Illinois Student Assistance Commission;
30             (q)  Has  failed  to  maintain the books and records
31        required  under  this  Act  or   rules   or   regulations
32        promulgated under this Act within a reasonable time after
33        receiving notice of any deficiency;
34             (r)  Has  refused  to  allow  or  otherwise  impeded
 
                            -42-               LRB9111259STsb
 1        designees  of  the  Secretary of State from conducting an
 2        audit, examination, inspection, or investigation provided
 3        for under Section 8 or 11 of this Act;
 4             (s)  Has failed to maintain any minimum net  capital
 5        or  bond requirement set forth in this Act or any rule or
 6        regulation promulgated under this Act;
 7             (t)  Has refused the Secretary of State  or  his  or
 8        her  designee  access to any office or location within an
 9        office to conduct an investigation,  audit,  examination,
10        or inspection;
11             (u)  Has  advised or caused a public pension fund or
12        retirement system established under the Illinois  Pension
13        Code to make an investment or engage in a transaction not
14        authorized by that Code.
15        (2)  If  the Secretary of State finds that any registrant
16    or applicant for registration is no longer  in  existence  or
17    has  ceased  to  do  business  as  a dealer, limited Canadian
18    dealer,  salesperson,  investment  adviser,   or   investment
19    adviser representative, or is subject to an adjudication as a
20    person  under  legal  disability  or  to  the  control  of  a
21    guardian,  or  cannot  be located after reasonable search, or
22    has failed after written notice to pay to  the  Secretary  of
23    State  any  additional  fee  prescribed  by  this  Section or
24    specified by rule or regulation, or if a natural person,  has
25    defaulted  on  an educational loan guaranteed by the Illinois
26    Student Assistance Commission, the Secretary of State may  by
27    order cancel the registration or application.
28        (3)  Withdrawal  of  an  application  for registration or
29    withdrawal from registration as a  dealer,  limited  Canadian
30    dealer,   salesperson,   investment  adviser,  or  investment
31    adviser  representative  becomes  effective  30  days   after
32    receipt  of an application to withdraw or within such shorter
33    period of time as  the  Secretary  of  State  may  determine,
34    unless any proceeding is pending under Section 11 of this Act
 
                            -43-               LRB9111259STsb
 1    when  the  application is filed or a proceeding is instituted
 2    within  30  days  after  the  application  is  filed.   If  a
 3    proceeding  is  pending  or  instituted,  withdrawal  becomes
 4    effective at such  time  and  upon  such  conditions  as  the
 5    Secretary  of State by order determines.  If no proceeding is
 6    pending or instituted and  withdrawal  automatically  becomes
 7    effective,  the Secretary of State may nevertheless institute
 8    a revocation or suspension proceeding within 2 years one year
 9    after withdrawal became effective and enter a  revocation  or
10    suspension  order  as  of the last date on which registration
11    was effective.

12        F.  The Secretary of  State  shall  make  available  upon
13    request  the  date  that  each  dealer,  investment  adviser,
14    salesperson, or investment adviser representative was granted
15    registration,  together  with  the  name  and  address of the
16    dealer, limited Canadian dealer, or issuer  on  whose  behalf
17    the   salesperson  is  registered,  and  all  orders  of  the
18    Secretary of State denying or abandoning an  application,  or
19    suspending   or   revoking  registration,  or  censuring  the
20    persons.  The Secretary  of  State  may  designate  by  rule,
21    regulation  or  order  the statements, information or reports
22    submitted to or filed  with  him  or  her  pursuant  to  this
23    Section  8  which  the Secretary of State determines are of a
24    sensitive nature and therefore should be exempt  from  public
25    disclosure.   Any such statement, information or report shall
26    be deemed confidential and shall  not  be  disclosed  to  the
27    public  except  upon  the  consent  of  the  person filing or
28    submitting the statement, information or report or  by  order
29    of court or in court proceedings.

30        G.  The  registration  or  re-registration of a dealer or
31    limited Canadian dealer and of  all  salespersons  registered
32    upon  application  of  the  dealer or limited Canadian dealer
33    shall expire on the next succeeding anniversary date  of  the
 
                            -44-               LRB9111259STsb
 1    registration  or  re-registration  of  the  dealer;  and  the
 2    registration  or re-registration of an investment adviser and
 3    of all investment  adviser  representatives  registered  upon
 4    application  of  the  investment  adviser shall expire on the
 5    next succeeding anniversary date of the registration  of  the
 6    investment adviser; provided, that the Secretary of State may
 7    by  rule  or regulation prescribe an alternate date which any
 8    dealer registered under the Federal 1934 Act or a  member  of
 9    any  self-regulatory association approved pursuant thereto, a
10    member of a self-regulatory organization or stock exchange in
11    Canada, or any investment adviser may elect as the expiration
12    date of its dealer or limited Canadian dealer and salesperson
13    registrations, or  the  expiration  date  of  its  investment
14    adviser  registration, as the case may be.  A registration of
15    a salesperson registered upon application  of  an  issuer  or
16    controlling  person  shall  expire  on  the  next  succeeding
17    anniversary  date of the registration, or upon termination or
18    expiration of the registration of  the  securities,  if  any,
19    designated  in the application for his or her registration or
20    the alternative date as the Secretary may prescribe  by  rule
21    or  regulation.   Subject to paragraph (9) of subsection C of
22    this Section  8,  a  salesperson's  registration  also  shall
23    terminate  upon  cessation  of  his  or  her  employment,  or
24    termination  of  his  or her appointment or authorization, in
25    each case by the person who  applied  for  the  salesperson's
26    registration,  provided  that  the  Secretary of State may by
27    rule or  regulation  prescribe  an  alternate  date  for  the
28    expiration of the registration.

29        H.  Applications  for re-registration of dealers, limited
30    Canadian  dealers,  salespersons,  investment  advisers,  and
31    investment adviser representatives shall be  filed  with  the
32    Secretary  of  State  prior  to  the  expiration  of the then
33    current registration and shall contain  such  information  as
34    may  be  required  by  the  Secretary  of  State upon initial
 
                            -45-               LRB9111259STsb
 1    application with such omission therefrom or addition  thereto
 2    as  the  Secretary of State may authorize or prescribe.  Each
 3    application for re-registration of a dealer, limited Canadian
 4    dealer, or investment  adviser  shall  be  accompanied  by  a
 5    filing   fee,  each  application  for  re-registration  as  a
 6    salesperson shall be  accompanied  by  a  filing  fee  and  a
 7    Securities   Audit   and  Enforcement  Fund  fee  established
 8    pursuant to Section 11a of this Act, and each application for
 9    re-registration as an investment adviser representative shall
10    be accompanied by a Securities Audit and Enforcement Fund fee
11    established under Section 11a of this Act, which shall not be
12    returnable in  any  event.   Notwithstanding  the  foregoing,
13    applications for re-registration of dealers, limited Canadian
14    dealers,  and investment advisers may be filed within 30 days
15    following the expiration of the  registration  provided  that
16    the  applicant pays the annual registration fee together with
17    an additional amount equal to the annual registration fee and
18    files any other information or documents that  the  Secretary
19    of  State  may prescribe by rule or regulation or order.  Any
20    application filed within 30 days following the expiration  of
21    the  registration  shall be automatically effective as of the
22    time of the earlier expiration provided that the  proper  fee
23    has been paid to the Secretary of State.
24        Each  registered  dealer,  limited  Canadian  dealer,  or
25    investment  adviser  shall  continue  to be registered if the
26    registrant changes his, her,  or  its  form  of  organization
27    provided  that  the  dealer  or  investment  adviser files an
28    amendment to his, her, or its application not later  than  30
29    days  following  the  occurrence  of  the change and pays the
30    Secretary of State a fee  in  the  amount  established  under
31    Section 11a of this Act.

32        I. (1)  Every registered dealer, limited Canadian dealer,
33    and  investment adviser shall make and keep for such periods,
34    such accounts, correspondence, memoranda, papers,  books  and
 
                            -46-               LRB9111259STsb
 1    records  as  the Secretary of State may by rule or regulation
 2    prescribe.  All records so required shall be preserved for  3
 3    years  unless  the  Secretary of State by rule, regulation or
 4    order prescribes otherwise for particular types of records.
 5        (2)  Every registered dealer,  limited  Canadian  dealer,
 6    and  investment  adviser shall file such financial reports as
 7    the Secretary of State may by rule or regulation prescribe.
 8        (3)  All the books and records referred to  in  paragraph
 9    (1) of this subsection I are subject at any time or from time
10    to time to such reasonable periodic, special or other audits,
11    examinations,   or  inspections  by  representatives  of  the
12    Secretary of State, within or  without  this  State,  as  the
13    Secretary  of  State  deems  necessary  or appropriate in the
14    public interest or for the protection of investors.
15        (4)  At the time of an audit, examination, or inspection,
16    the Secretary of State, by his or her designees, may  conduct
17    an  interview  of  any  person  employed  or  appointed by or
18    affiliated with a registered dealer, limited Canadian dealer,
19    or investment advisor,  provided  that  the  dealer,  limited
20    Canadian   dealer,  or  investment  advisor  shall  be  given
21    reasonable notice of the time and place  for  the  interview.
22    At  the  option  of  the  dealer, limited Canadian dealer, or
23    investment  advisor,  a  representative  of  the  dealer   or
24    investment  advisor  with supervisory responsibility over the
25    individual being interviewed may be present at the interview.

26        J.  The  Secretary  of  State  may  require  by  rule  or
27    regulation the payment of an additional fee for the filing of
28    information or documents required to be filed by this Section
29    which have not been filed in a timely manner.  The  Secretary
30    of  State  may also require by rule or regulation the payment
31    of an examination fee for administering any examination which
32    it may conduct pursuant to subsection B, C, D, or D-5 of this
33    Section 8.
 
                            -47-               LRB9111259STsb
 1        K.  The Secretary of State may  declare  any  application
 2    for registration or limited registration under this Section 8
 3    abandoned  by  order if the applicant fails to pay any fee or
 4    file any information or document required under this  Section
 5    8  or  by  rule or regulation for more than 30 days after the
 6    required payment or filing date.  The applicant may  petition
 7    the Secretary of State for a hearing within 15 days after the
 8    applicant's  receipt  of  the  order of abandonment, provided
 9    that the petition sets  forth  the  grounds  upon  which  the
10    applicant seeks a hearing.

11        L.  Any  document  being filed pursuant to this Section 8
12    shall be deemed filed, and any fee  being  paid  pursuant  to
13    this  Section 8 shall be deemed paid, upon the date of actual
14    receipt thereof by the Secretary  of  State  or  his  or  her
15    designee.

16        M.  The  Secretary of State shall provide to the Illinois
17    Student Assistance Commission annually or at mutually  agreed
18    periodic  intervals  the names and social security numbers of
19    natural persons registered under subsections B, C, D, and D-5
20    of this Section.  The Illinois Student Assistance  Commission
21    shall  determine  if any student loan defaulter is registered
22    as  a  dealer,  limited  Canadian  dealer,  salesperson,   or
23    investment   adviser   under   this   Act   and   report  its
24    determination to  the  Secretary  of  State  or  his  or  her
25    designee.
26    (Source:  P.A.  89-209,  eff.  1-1-96;  89-626,  eff. 8-9-96;
27    90-70,  eff.  7-8-97;  90-507,  eff.  8-22-97;  90-655,  eff.
28    7-30-98.)

29        (815 ILCS 5/11) (from Ch. 121 1/2, par. 137.11)
30        Sec. 11.  Duties and powers of the Secretary of State.
31        A. (1)  The administration of this Act is vested  in  the
32    Secretary of State, who may from time to time make, amend and
 
                            -48-               LRB9111259STsb
 1    rescind  such  rules  and  regulations as may be necessary to
 2    carry out this Act, including rules and regulations governing
 3    procedures  of  registration,  statements,  applications  and
 4    reports  for  various  classes  of  securities,  persons  and
 5    matters within his  or  her  jurisdiction  and  defining  any
 6    terms,  whether  or  not  used  in  this  Act, insofar as the
 7    definitions are not inconsistent with this  Act.   The  rules
 8    and  regulations adopted by the Secretary of State under this
 9    Act shall be effective in the  manner  provided  for  in  the
10    Illinois Administrative Procedure Act.
11        (2)  Among  other  things,  the  Secretary of State shall
12    have authority, for the purposes of this  Act,  to  prescribe
13    the  form or forms in which required information shall be set
14    forth, accounting practices, the items or details to be shown
15    in balance sheets and earning statements, and the methods  to
16    be  followed in the preparation of accounts, in the appraisal
17    or valuation of assets and liabilities, in the  determination
18    of  depreciation  and  depletion,  in  the differentiation of
19    recurring and non-recurring income, in the differentiation of
20    investment and operating income, and in  the  preparation  of
21    consolidated balance sheets or income accounts of any person,
22    directly  or  indirectly,  controlling  or  controlled by the
23    issuer, or any person under direct or indirect common control
24    with the issuer.
25        (3)  No provision of  this  Act  imposing  any  liability
26    shall  apply  to  any  act  done  or omitted in good faith in
27    conformity with any rule or regulation of  the  Secretary  of
28    State  under  this  Act,  notwithstanding  that  the  rule or
29    regulation may, after the act  or  omission,  be  amended  or
30    rescinded  or be determined by judicial or other authority to
31    be invalid for any reason.
32        (4)  The Securities  Department  of  the  Office  of  the
33    Secretary  of State shall be deemed a criminal justice agency
34    for purposes of all federal and state  laws  and  regulations
 
                            -49-               LRB9111259STsb
 1    and,  in  that  capacity,  shall be entitled to access to any
 2    information available to criminal justice agencies.
 3        (5)  The Secretary of State, by rule,  may  conditionally
 4    or   unconditionally   exempt   any   person,   security,  or
 5    transaction, or any class or classes of persons,  securities,
 6    or transactions from any provision of Section 5, 6, 7, 8, 8a,
 7    or  9  of  this  Act  or  of any rule promulgated under these
 8    Sections, to the extent that such exemption is  necessary  or
 9    appropriate  in  the  public interest, and is consistent with
10    the protection of investors.
11        B.  The Secretary of State may, anything in this  Act  to
12    the  contrary  notwithstanding,  require financial statements
13    and reports of the issuer, dealer, salesperson, or investment
14    adviser as often as circumstances may warrant.  In  addition,
15    the  Secretary  of  State may secure information or books and
16    records from or through others and may make or  cause  to  be
17    made  investigations  respecting  the  business, affairs, and
18    property of the issuer of securities, any person involved  in
19    the  sale or offer for sale, purchase or offer to purchase of
20    any mineral investment contract,  mineral  deferred  delivery
21    contract,  or  security  and  of  dealers,  salespersons, and
22    investment advisers that are registered or are the subject of
23    an application for registration under this Act.  The costs of
24    an investigation shall be borne  by  the  registrant  or  the
25    applicant,  provided  that  the registrant or applicant shall
26    not be obligated to pay the costs without  his,  her  or  its
27    consent in advance.
28        C.  Whenever  it  shall appear to the Secretary of State,
29    either upon complaint or otherwise, that  this  Act,  or  any
30    rule  or  regulation  prescribed under authority thereof, has
31    been or is about to be violated, he or she may, in his or her
32    discretion, do one or both of the following:
33             (1)  require or permit the person to file  with  the
34        Secretary  of State a statement in writing under oath, or
 
                            -50-               LRB9111259STsb
 1        otherwise,  as  to  all  the  facts   and   circumstances
 2        concerning  the  subject  matter  which  the Secretary of
 3        State  believes  to  be  in  the   public   interest   to
 4        investigate, audit, examine, or inspect; and
 5             (2)  conduct  an  investigation, audit, examination,
 6        or  inspection   as  necessary  or  advisable   for   the
 7        protection of the interests of the public.
 8        D. (1)  For  the  purpose  of all investigations, audits,
 9    examinations, or inspections which  in  the  opinion  of  the
10    Secretary   of   State  are  necessary  and  proper  for  the
11    enforcement of this Act, the Secretary of State or  a  person
12    designated by him or her is empowered to administer oaths and
13    affirmations,  subpoena witnesses, take evidence, and require
14    the production of any books and  records,  papers,  or  other
15    documents which the Secretary of State or a person designated
16    by him or her deems relevant or material to the inquiry.
17        (2)  The Secretary of State or a person designated by him
18    or   her   is  further  empowered  to  administer  oaths  and
19    affirmations, subpoena witnesses, take evidence, and  require
20    the  production  of  any  books and records, papers, or other
21    documents in this State at the request of a securities agency
22    of another state, if the activities constituting the  alleged
23    violation  for  which  the  information is sought would be in
24    violation of Section 12 of this Act  if  the  activities  had
25    occurred in this State.
26        (3)  The  Circuit Court of any County of this State, upon
27    application of the Secretary of State or a person  designated
28    by  him  or  her  may  order the attendance of witnesses, the
29    production  of  books  and  records,  papers,  accounts   and
30    documents and the giving of testimony before the Secretary of
31    State  or  a person designated by him or her; and any failure
32    to obey the order may be punished by the Circuit Court  as  a
33    contempt thereof.
34        (4)  The  fees of subpoenaed witnesses under this Act for
 
                            -51-               LRB9111259STsb
 1    attendance and travel shall be the same as fees of  witnesses
 2    before  the Circuit Courts of this State, to be paid when the
 3    witness is excused from  further  attendance,  provided,  the
 4    witness  is  subpoenaed  at  the instance of the Secretary of
 5    State; and payment of the fees shall be made and  audited  in
 6    the same manner as other expenses of the Secretary of State.
 7        (5)  Whenever  a  subpoena  is issued at the request of a
 8    complainant or respondent as the case may be,  the  Secretary
 9    of  State may require that the cost of service and the fee of
10    the witness shall be borne by the party at whose instance the
11    witness is summoned.
12        (6)  The Secretary of State shall have power  at  his  or
13    her discretion, to require a deposit to cover the cost of the
14    service and witness fees and the payment of the legal witness
15    fee and mileage to the witness served with subpoena.
16        (7)  A  subpoena issued under this Act shall be served in
17    the same manner as a subpoena issued out of a circuit court.
18        (8)  The Secretary of State  may  in  any  investigation,
19    audits,  examinations,  or  inspections  cause  the taking of
20    depositions of persons residing within or without this  State
21    in  the  manner  provided  in civil actions under the laws of
22    this State.
23        E.  Anything in this Act to the contrary notwithstanding:
24             (1)  If the Secretary of State shall find  that  the
25        offer  or  sale  or  proposed  offer or sale or method of
26        offer or sale of any securities by  any  person,  whether
27        exempt  or  not,  in  this State, is fraudulent, or would
28        work or tend to work a  fraud  or  deceit,  or  is  being
29        offered  or sold in violation of Section 12, or there has
30        been a failure or  refusal  to  submit  any  notification
31        filing  or  fee required under this Act, the Secretary of
32        State may by written order prohibit or suspend the  offer
33        or  sale  of  securities by that person or deny or revoke
34        the registration of the securities or the exemption  from
 
                            -52-               LRB9111259STsb
 1        registration for the securities.
 2             (2)  If  the  Secretary of State shall find that any
 3        person has violated subsection C, D, E, F, G, H, I, J, or
 4        K of Section 12 of this Act, the Secretary of  State  may
 5        by  written  order temporarily or permanently prohibit or
 6        suspend  the  person  from  offering   or   selling   any
 7        securities,  any  mineral  investment  contract,  or  any
 8        mineral   deferred   delivery  contract  in  this  State,
 9        provided that any person who is the subject of  an  order
10        of  permanent  prohibition  may petition the Secretary of
11        State for a hearing to present evidence of rehabilitation
12        or change in circumstances justifying  the  amendment  or
13        termination of the order of permanent prohibition.
14             (3)  If  the  Secretary of State shall find that any
15        person is engaging or has  engaged  in  the  business  of
16        selling  or  offering  for sale securities as a dealer or
17        salesperson or is acting or has acted  as  an  investment
18        adviser,  investment  adviser  representative, or federal
19        covered investment adviser, without prior thereto and  at
20        the time thereof having complied with the registration or
21        notice  filing requirements of this Act, the Secretary of
22        State may by written order prohibit or suspend the person
23        from engaging in the business of selling or offering  for
24        sale  securities,  or  acting  as  an investment adviser,
25        investment adviser  representative,  or  federal  covered
26        investment adviser, in this State.
27             (4)  In  addition  to  any  other sanction or remedy
28        contained in this subsection E, the Secretary  of  State,
29        after  finding  that  any  provision of this Act has been
30        violated,  may  impose  a  fine  as  provided  by   rule,
31        regulation  or  order  not  to  exceed  $10,000  for each
32        violation of this Act, and may issue an order  of  public
33        censure against the violator.
34        F. (1)  The Secretary of State shall not deny, suspend or
 
                            -53-               LRB9111259STsb
 1    revoke  the registration of securities, suspend or revoke the
 2    registration of a dealer, salesperson or investment  adviser,
 3    prohibit  or  suspend  the  offer  or sale of any securities,
 4    prohibit or suspend any person from offering or  selling  any
 5    securities  in  this  State,  prohibit or suspend a dealer or
 6    salesperson from engaging  in  the  business  of  selling  or
 7    offering  for  sale  securities, prohibit or suspend a person
 8    from acting as  an  investment  adviser  or  federal  covered
 9    investment  adviser,  impose  any  fine for violation of this
10    Act, issue an order of  public  censure,  or  enter  into  an
11    agreed  settlement  except  after  an opportunity for hearing
12    upon not less than 10 days notice given by  personal  service
13    or    registered  mail  or  certified  mail,  return  receipt
14    requested, to the person or persons concerned.   Such  notice
15    shall  state  the  date and time and place of the hearing and
16    shall contain a brief statement of the proposed action of the
17    Secretary of State and the grounds for the  proposed  action.
18    A  failure  to  appear at the hearing or otherwise respond to
19    the allegations set forth in  the  notice  of  hearing  shall
20    constitute  an  admission  of  any  facts alleged therein and
21    shall constitute sufficient basis to enter an order.
22        (2)  Anything   herein   contained   to   the    contrary
23    notwithstanding,  the  Secretary  of  State  may  temporarily
24    prohibit  or  suspend, for a maximum period of 90 60 days, by
25    an  order  effective  immediately,  the  offer  or  sale   or
26    registration  of  securities,  the  registration of a dealer,
27    salesperson, or investment  adviser,  or  investment  adviser
28    representative,  or  the  offer  or sale of securities by any
29    person, or  the  business  of  rendering  investment  advice,
30    without  the  notice  and  prior  hearing  in this subsection
31    prescribed, if the Secretary of State shall  in  his  or  her
32    opinion,  based  on  credible  evidence, deem it necessary to
33    prevent an imminent violation  of  this  Act  or  to  prevent
34    losses  to  investors which the Secretary of State reasonably
 
                            -54-               LRB9111259STsb
 1    believes will occur as a result of a prior violation of  this
 2    Act.  Immediately after taking action without such notice and
 3    hearing,  the  Secretary of State shall deliver a copy of the
 4    temporary order to the respondent named therein  by  personal
 5    service  or registered mail or certified mail, return receipt
 6    requested.  The temporary order shall set forth  the  grounds
 7    for  the  action  and  shall  advise  that the respondent may
 8    request a hearing as soon as reasonably practicable, that the
 9    request for a hearing will not stop the effectiveness of  the
10    temporary  order  and  that respondent's failure to request a
11    hearing within 30 days after the date of  the  entry  of  the
12    temporary  order  shall  constitute an admission of any facts
13    alleged therein and shall constitute sufficient basis to make
14    the temporary order final.  Any provision of  this  paragraph
15    (2)  to  the contrary notwithstanding, the Secretary of State
16    may not pursuant to the  provisions  of  this  paragraph  (2)
17    suspend  the  registration  of  a  dealer,  limited  Canadian
18    dealer,   salesperson,   investment  adviser,  or  investment
19    adviser  representative  based  upon  sub-paragraph  (n)   of
20    paragraph  (l)  of  subsection  E of Section 8 of this Act or
21    revoke  the  registration  of  securities   or   revoke   the
22    registration  of  any dealer, salesperson, investment adviser
23    representative, or investment adviser.
24        (3)  The Secretary of State may issue a  temporary  order
25    suspending  or delaying the effectiveness of any registration
26    of securities under subsection A or B of Section 5, 6 or 7 of
27    this Act subsequent to and upon the basis of the issuance  of
28    any  stop,  suspension or similar order by the Securities and
29    Exchange Commission with respect to the securities which  are
30    the  subject  of  the registration under subsection A or B of
31    Section 5, 6 or 7 of this Act, and  the  order  shall  become
32    effective  as  of  the  date and time of effectiveness of the
33    Securities and Exchange Commission order and shall be vacated
34    automatically at such time as the order of the Securities and
 
                            -55-               LRB9111259STsb
 1    Exchange Commission is no longer in effect.
 2        (4)  When  the  Secretary  of   State   finds   that   an
 3    application  for  registration  as  a  dealer, salesperson or
 4    investment adviser should be denied, the Secretary  of  State
 5    may  enter  an  order  denying the registration.  Immediately
 6    after taking  such  action,  the  Secretary  of  State  shall
 7    deliver  a  copy of the order to the respondent named therein
 8    by personal service or registered  mail  or  certified  mail,
 9    return  receipt requested.  The order shall state the grounds
10    for the action and that the matter will be  set  for  hearing
11    upon written request filed with the Secretary of State within
12    30  days  after the receipt of the request by the respondent.
13    The respondent's failure to request a hearing within 30  days
14    after  receipt  of the order shall constitute an admission of
15    any facts alleged therein and shall make the order final.  If
16    a hearing is held,  the  Secretary  of  State  shall  affirm,
17    vacate, or modify the order.
18        (5)  The  findings and decision of the Secretary of State
19    upon the conclusion of each final hearing  held  pursuant  to
20    this  subsection shall be set forth in a written order signed
21    on behalf of the Secretary of State by his  or  her  designee
22    and shall be filed as a public record.  All hearings shall be
23    held  before  a  person designated by the Secretary of State,
24    and appropriate records thereof shall be kept.
25        (6)  Notwithstanding  the  foregoing,  the  Secretary  of
26    State, after notice and opportunity for hearing, may  at  his
27    or   her   discretion   enter   into  an  agreed  settlement,
28    stipulation or consent order with a respondent in  accordance
29    with  the provisions of the Illinois Administrative Procedure
30    Act.  The provisions of the agreed settlement, stipulation or
31    consent order shall have the full  force  and  effect  of  an
32    order issued by the Secretary of State.
33        (7)  Anything    in    this    Act    to   the   contrary
34    notwithstanding, whenever the Secretary of State finds that a
 
                            -56-               LRB9111259STsb
 1    person is currently expelled from, refused membership  in  or
 2    association  with,  or  limited in any material capacity by a
 3    self-regulatory organization  registered  under  the  Federal
 4    1934  Act  or the Federal 1974 Act because of a fraudulent or
 5    deceptive  act  or  a  practice  in  violation  of  a   rule,
 6    regulation,    or    standard   duly   promulgated   by   the
 7    self-regulatory organization, the Secretary of State may,  at
 8    his  or her discretion, enter a Summary Order of Prohibition,
 9    which shall prohibit the offer or  sale  of  any  securities,
10    mineral  investment  contract,  or  mineral deferred delivery
11    contract by the person in this State.  The order  shall  take
12    effect  immediately upon its entry.  Immediately after taking
13    the action the Secretary of State shall deliver a copy of the
14    order  to  the  named  Respondent  by  personal  service   or
15    registered  mail or certified mail, return receipt requested.
16    A person who is the subject of an Order  of  Prohibition  may
17    petition  the  Secretary  of  State  for a hearing to present
18    evidence  of  rehabilitation  or  change   in   circumstances
19    justifying  the  amendment  or  termination  of  the Order of
20    Prohibition.
21        G.  No administrative action  shall  be  brought  by  the
22    Secretary  of  State  for  relief  under  this Act or upon or
23    because of any of the matters for which relief is granted  by
24    this  Act  after the earlier to occur of (i) 3 years from the
25    date upon which the Secretary of State had  notice  of  facts
26    which  in  the exercise of reasonable diligence would lead to
27    actual knowledge of the alleged violation of the Act, or (ii)
28    5  years  from  the  date  on  which  the  alleged  violation
29    occurred.
30        H.  The action of the  Secretary  of  State  in  denying,
31    suspending, or revoking the registration of a dealer, limited
32    Canadian   dealer,   salesperson,   investment   adviser,  or
33    investment adviser representative, in prohibiting any  person
34    from   engaging  in  the  business  of  offering  or  selling
 
                            -57-               LRB9111259STsb
 1    securities  as  a  dealer,  limited   Canadian   dealer,   or
 2    salesperson,  in  prohibiting or suspending the offer or sale
 3    of securities by any person, in  prohibiting  a  person  from
 4    acting  as  an investment adviser, federal covered investment
 5    adviser, or investment adviser  representative,  in  denying,
 6    suspending,  or  revoking  the registration of securities, in
 7    prohibiting or suspending the offer or sale or proposed offer
 8    or sale of securities, in imposing any fine for violation  of
 9    this  Act,  or  in  issuing  any  order  shall  be subject to
10    judicial review in the Circuit Court of any  county  in  this
11    State.   The  Administrative  Review  Law  shall apply to and
12    govern every action for the judicial review of final  actions
13    or decisions of the Secretary of State under this Act.
14        I.  Notwithstanding  any  other provisions of this Act to
15    the contrary, whenever it shall appear to  the  Secretary  of
16    State  that  any  person is engaged or about to engage in any
17    acts or practices  which  constitute  or  will  constitute  a
18    violation of this Act or of any rule or regulation prescribed
19    under  authority  of  this Act, the Secretary of State may at
20    his or her discretion, through the Attorney General:
21             (1)  file a complaint  and  apply  for  a  temporary
22        restraining  order  without  notice,  and  upon  a proper
23        showing the court may enter a temporary restraining order
24        without bond, to enforce this Act; and
25             (2)  file a complaint and apply for a preliminary or
26        permanent injunction, and, after notice and a hearing and
27        upon a proper showing, the court may grant a  preliminary
28        or  permanent  injunction  and may order the defendant to
29        make an offer of rescission with respect to any sales  or
30        purchases of securities, mineral investment contracts, or
31        mineral  deferred  delivery  contracts  determined by the
32        court to be unlawful under this Act.
33        The court shall further have jurisdiction and  authority,
34    in  addition  to the penalties and other remedies in this Act
 
                            -58-               LRB9111259STsb
 1    provided, to enter an order for the appointment of the  court
 2    or a person as a receiver, conservator, ancillary receiver or
 3    ancillary  conservator  for  the defendant or the defendant's
 4    assets located in this  State,  or  to  require  restitution,
 5    damages or disgorgement of profits on behalf of the person or
 6    persons  injured  by  the  act  or  practice constituting the
 7    subject matter of the action, and may  assess  costs  against
 8    the  defendant  for  the use of the State; provided, however,
 9    that the civil remedies of rescission and  appointment  of  a
10    receiver,   conservator,   ancillary  receiver  or  ancillary
11    conservator shall not be  available  against  any  person  by
12    reason of the failure to file with the Secretary of State, or
13    on  account  of  the contents of, any report of sale provided
14    for in subsection G or P  of  Section  4,  paragraph  (2)  of
15    subsection  D  of  Sections  5  and  6,  or  paragraph (2) of
16    subsection F of Section 7 of this Act. Appeals may  be  taken
17    as in other civil cases.
18        J.  In  no  case  shall the Secretary of State, or any of
19    his or her employees or agents, in the administration of this
20    Act, incur any official or personal liability by  instituting
21    an  injunction  or other proceeding or by denying, suspending
22    or revoking the registration of a dealer or  salesperson,  or
23    by  denying,  suspending  or  revoking  the  registration  of
24    securities or prohibiting the offer or sale of securities, or
25    by  suspending  or  prohibiting  any  person from acting as a
26    dealer,  limited  Canadian  dealer,  salesperson,  investment
27    adviser,  or  investment  adviser  representative   or   from
28    offering or selling securities.
29        K.  No  provision  of  this  Act  shall  be  construed to
30    require or to authorize the Secretary of State to require any
31    investment adviser  or  federal  covered  investment  adviser
32    engaged  in  rendering  investment  supervisory  services  to
33    disclose  the identity, investments, or affairs of any client
34    of the  investment  adviser  or  federal  covered  investment
 
                            -59-               LRB9111259STsb
 1    adviser, except insofar as the disclosure may be necessary or
 2    appropriate  in  a  particular  proceeding  or  investigation
 3    having as its object the enforcement of this Act.
 4        L.  Whenever,  after  an  examination,  investigation  or
 5    hearing,  the  Secretary of State deems it of public interest
 6    or advantage, he or she may certify a record to  the  State's
 7    Attorney  of  the  county  in  which  the  act complained of,
 8    examined or investigated occurred.  The State's  Attorney  of
 9    that  county within 90 days after receipt of the record shall
10    file a written statement at the Office of  the  Secretary  of
11    State,  which statement shall set forth the action taken upon
12    the record, or if no action has been taken  upon  the  record
13    that  fact,  together  with  the  reasons  therefor, shall be
14    stated.
15        M.  The Secretary of State may initiate, take, pursue, or
16    prosecute any action authorized or permitted under Section 6d
17    of the Federal 1974 Act.
18        N. (1)  Notwithstanding any provision of this Act to  the
19    contrary,     to     encourage     uniform    interpretation,
20    administration, and enforcement of  the  provisions  of  this
21    Act, the Secretary of State may cooperate with the securities
22    agencies  or  administrators  of one or more states, Canadian
23    provinces or territories, or another country, the  Securities
24    and   Exchange  Commission,  the  Commodity  Futures  Trading
25    Commission, the Securities Investor  Protection  Corporation,
26    any  self-regulatory  organization,  and any governmental law
27    enforcement or regulatory agency.
28        (2)  The cooperation authorized by paragraph (1) of  this
29    subsection includes, but is not limited to, the following:
30             (a)  establishing  or  participating  in  a  central
31        depository  or  depositories  for registration under this
32        Act and for documents or records required under this Act;
33             (b)  making a joint audit, inspection,  examination,
34        or investigation;
 
                            -60-               LRB9111259STsb
 1             (c)  holding a joint administrative hearing;
 2             (d)  filing   and   prosecuting  a  joint  civil  or
 3        criminal proceeding;
 4             (e)  sharing and exchanging personnel;
 5             (f)  sharing   and   exchanging   information    and
 6        documents; or
 7             (g)  issuing any joint statement or policy.
 8    (Source:  P.A.  89-209,  eff.  1-1-96;  89-626,  eff. 8-9-96;
 9    90-70, eff. 7-8-97.)

10        (815 ILCS 5/12) (from Ch. 121 1/2, par. 137.12)
11        Sec. 12.  Violation.  It shall  be  a  violation  of  the
12    provisions of this Act for any person:
13        A.  To  offer  or  sell any security except in accordance
14    with the provisions of this Act.
15        B.  To deliver to a purchaser any security required to be
16    registered under Section 5, Section 6  or  Section  7  hereof
17    unless accompanied or preceded by a prospectus that meets the
18    requirements  of  the pertinent subsection of Section 5 or of
19    Section 6 or of Section 7.
20        C.  To  act  as  a  dealer,  salesperson,  or  investment
21    adviser,  or  investment   adviser   representative,   unless
22    registered  as  such,  where  such  registration is required,
23    under the provisions of this Act.
24        D.  To fail to file  with  the  Secretary  of  State  any
25    application,  report  or  document required to be filed under
26    the provisions of this Act or any rule or regulation made  by
27    the  Secretary  of  State  pursuant to this Act or to fail to
28    comply with the terms of any order of the Secretary of  State
29    issued pursuant to Section 11 hereof.
30        E.  To make, or cause to be made, (1) in any application,
31    report  or  document  filed  under  this  Act  or any rule or
32    regulation made by the Secretary of State  pursuant  to  this
33    Act, any statement which was false or misleading with respect
 
                            -61-               LRB9111259STsb
 1    to  any material fact or (2) any statement to the effect that
 2    a security (other than a security  issued  by  the  State  of
 3    Illinois)  has  been  in  any way endorsed or approved by the
 4    Secretary of State or the State of Illinois.
 5        F.  To engage in any transaction, practice or  course  of
 6    business   in   connection  with  the  sale  or  purchase  of
 7    securities which works or tends to work  a  fraud  or  deceit
 8    upon the purchaser or seller thereof.
 9        G.  To  obtain  money  or  property  through  the sale of
10    securities by means of any untrue  statement  of  a  material
11    fact  or  any  omission to state a material fact necessary in
12    order to make the  statements  made,  in  the  light  of  the
13    circumstances under which they were made, not misleading.
14        H.  To  sign  or  circulate any statement, prospectus, or
15    other paper or document required by any provision of this Act
16    knowing or having reasonable grounds  to  know  any  material
17    representation therein contained to be false or untrue.
18        I.  To  employ  any device, scheme or artifice to defraud
19    in connection with the sale  or  purchase  of  any  security,
20    directly or indirectly.
21        J.  When  acting  as  an  investment  adviser, investment
22    adviser  representative,  or   federal   covered   investment
23    adviser,   by  any  means  or  instrumentality,  directly  or
24    indirectly:
25             (1)  To employ any device,  scheme  or  artifice  to
26        defraud any client or prospective client;
27             (2)  To  engage  in  any  transaction,  practice, or
28        course of business which operates as a  fraud  or  deceit
29        upon any client or prospective client; or
30             (3)  To  engage  in  any act, practice, or course of
31        business which is fraudulent, deceptive or  manipulative.
32        The  Secretary  of  State  shall for the purposes of this
33        paragraph (3),  by  rules  and  regulations,  define  and
34        prescribe means reasonably designed to prevent such acts,
 
                            -62-               LRB9111259STsb
 1        practices,  and  courses  of  business as are fraudulent,
 2        deceptive, or manipulative.
 3        K.  When  offering  or  selling  any  mineral  investment
 4    contract or mineral deferred delivery contract:
 5             (1)  To employ any device, scheme,  or  artifice  to
 6        defraud any customer, prospective customer, or offeree;
 7             (2)  To  engage  in  any  transaction,  practice, or
 8        course of business that operates as  a  fraud  or  deceit
 9        upon any customer, prospective customer, or offeree; or
10             (3)  To  engage  in  any act, practice, or course of
11        business that is fraudulent, deceptive, or  manipulative.
12        The  Secretary  of  State  shall for the purposes of this
13        paragraph (3),  by  rules  and  regulations,  define  and
14        prescribe  means  reasonably  designed  to  prevent acts,
15        practices, and courses of  business  as  are  fraudulent,
16        deceptive, or manipulative.
17    (Source: P.A. 90-70, eff. 7-8-97.)

18        Section  10.  The  Illinois  Loan  Brokers Act of 1995 is
19    amended by  changing  Sections  15-15,  15-40  and  15-80  as
20    follows:

21        (815 ILCS 175/15-15)
22        Sec.  15-15.   Application  for  registration;  contents;
23    bond; issuance; effective date; consent to Secretary of State
24    as process agent.
25        (a)  In  order  to  be  registered  under this Act a loan
26    broker shall file an application for  registration  with  the
27    Secretary  of  State.  The application for registration shall
28    contain:
29             (1)  the   disclosure   document   required    under
30        subsection  (b) of Section 15-30 of this Act and the form
31        of disclosure statement proposed to be  used  under  item
32        (1) of subsection (b) of Section 15-30 of this Act;
 
                            -63-               LRB9111259STsb
 1             (2)  consent  to service of process under subsection
 2        (e) of this Section;
 3             (3)  (blank);  evidence  of  the  bond  required  in
 4        subsection (b) of this Section;
 5             (4)  a fee in the amount as specified in  subsection
 6        (a)  of  Section  15-25  of  this  Act,  and shall not be
 7        returnable in any event.
 8        (b)  (Blank). A loan  broker  who  engages  in  any  loan
 9    brokerage  transactions  where  the  loan  is  subject to the
10    Truth-in-Lending Act must maintain a bond satisfactory to the
11    Secretary of State in the amount of $25,000, which  shall  be
12    in favor of the State.
13        (c)  Whenever  the  provisions  of  this  Act  have  been
14    complied   with,   the  Secretary  of  State  shall  issue  a
15    certificate of registration to the applicant, authorizing the
16    applicant to engage in the business of loan brokering.
17        (d)  An application for registration becomes effective 30
18    days after it is filed, unless a certificate of the Secretary
19    of  State  establishes  an  earlier  effective  date.   Every
20    registration is effective until January 1 of the  year  after
21    it goes into effect.
22        (e)  Every applicant for registration shall file with the
23    Secretary  of  State,  in such form as the Secretary of State
24    may prescribe by rule or regulation, an  irrevocable  consent
25    appointing the Secretary of State to be the applicant's agent
26    to  receive  service of any lawful process in any noncriminal
27    suit, action or proceeding against the applicant arising from
28    the violation of any provision of this Act.
29        (f)  An application shall be considered  filed  when  all
30    required documentation and fees are received by the Office of
31    the Secretary of State.
32    (Source: P.A. 90-70, eff. 7-8-97; 91-357, eff. 7-29-99.)

33        (815 ILCS 175/15-40)
 
                            -64-               LRB9111259STsb
 1        Sec.   15-40.    Denial,   suspension  or  revocation  of
 2    registration; orders and hearing.
 3        (a)  The Secretary of State may deny, suspend  or  revoke
 4    the registration of a loan broker if the loan broker:
 5             (1)  (Blank).  Fails  to  maintain the bond required
 6        under subsection (b) of Section 15-15 of this Act.
 7             (2)  Is insolvent.
 8             (3)  Has violated any provision of this Act.
 9             (4)  Has filed  with  the  Secretary  of  State  any
10        document or statement containing any false representation
11        of a material fact or omitting to state a material fact.
12             (5)  Has  been convicted, within 10 years before the
13        date of the application, renewal or review, of any  crime
14        involving fraud or deceit.
15        (b)  The  Secretary  of State may not enter a final order
16    denying, suspending or revoking the registration  of  a  loan
17    broker  without  prior  notice  to  all  interested  parties,
18    opportunity  for  a  hearing and written findings of fact and
19    conclusions of law.  The Secretary of State  may  by  summary
20    order  deny,  suspend  or revoke a registration pending final
21    determination of any proceeding under this Section.  Upon the
22    entry of a  summary  order,  the  Secretary  of  State  shall
23    promptly  notify  all  interested  parties  that  it has been
24    entered, of the reasons for the summary order and, that  upon
25    receipt by the Secretary of State of a written request from a
26    party,  the  matter  will  be  set for hearing which shall be
27    conducted in accordance with the provisions of  the  Illinois
28    Administrative  Procedure  Act.   If  no hearing is requested
29    within 30 days of the entry of the order and none is  ordered
30    by  the Secretary of State, the order remains in effect until
31    it is modified vacated, or superseded by  a  final  order.  A
32    final  order may be entered by the Secretary of State against
33    any party who fails to request a hearing within  30  days  of
34    the entry of the summary order.  If a hearing is requested or
 
                            -65-               LRB9111259STsb
 1    ordered,  the Secretary of State, after notice of the hearing
 2    has been given to all interested persons and the hearing  has
 3    been  held,  may  modify or vacate the order, extend it until
 4    final determination, or issue a final order.
 5    (Source: P.A. 89-209, eff. 1-1-96; 90-70, eff. 7-8-97.)

 6        (815 ILCS 175/15-80)
 7        Sec. 15-80. Persons exempt from  registration  and  other
 8    duties; burden of proof thereof.
 9        (a)  The   following   persons   are   exempt   from  the
10    requirements of Sections 15-10, 15-15, 15-20,  15-25,  15-30,
11    15-35, 15-40, and 15-75 of this Act:
12             (1)  Any  attorney while engaging in the practice of
13        law.
14             (2)  Any certified  public  accountant  licensed  to
15        practice  in  Illinois,  while  engaged  in practice as a
16        certified public accountant and whose service in relation
17        to procurement of a loan is  incidental  to  his  or  her
18        practice.
19             (3)  Any  person licensed to engage in business as a
20        real estate  broker  or  salesperson  in  Illinois  while
21        rendering   services   in   the   ordinary  course  of  a
22        transaction in which a license as a real estate broker or
23        salesperson is required.
24             (4)  Any dealer, salesperson or  investment  adviser
25        registered  under the Illinois Securities Law of 1953, or
26        an investment advisor, representative, or any person  who
27        is  regularly  engaged  in  the  business  of offering or
28        selling  securities  in  a  transaction  exempted   under
29        subsection  C,  H,  M,  R,  Q,  or  S of Section 4 of the
30        Illinois Securities  Law  of  1953  or  subsection  G  of
31        Section 4 of the Illinois Securities Law of 1953 provided
32        that   such   person  is  registered  under  the  federal
33        securities law.
 
                            -66-               LRB9111259STsb
 1             (4.1)  An associated person described in subdivision
 2        (h)(2) of Section 15 of the Federal 1934 Act.
 3             (4.2)  An investment adviser registered pursuant  to
 4        Section 203 of the Federal 1940 Investment Advisors Act.
 5             (4.3)  A  person described in subdivision (a)(11) of
 6        Section 202 of the Federal 1940 Investment Advisors Act.
 7             (5)  (Blank).  Any  person  whose  fee   is   wholly
 8        contingent on the successful procurement of a loan from a
 9        third  party  and  to whom no fee, other than a bona fide
10        third party fee, is paid before the procurement.
11             (6)  Any person who is a creditor, or proposed to be
12        a creditor, for any loan.
13             (7)  (Blank).
14             (8)  Any  person  regulated  by  the  Department  of
15        Financial Institutions or the Office of  Banks  and  Real
16        Estate,  or  any insurance producer or company authorized
17        to do business in this State.
18        (b)  As used in this Section, "bona fide third party fee"
19    includes fees for:
20             (1)  Credit reports, appraisals and investigations.
21             (2)  If the loan is to be secured by real  property,
22        title   examinations,   an   abstract   of  title,  title
23        insurance, a property survey and similar purposes.
24        (c)  As used in this Section, "successful procurement  of
25    a  loan"  means  that a binding commitment from a creditor to
26    advance money has been received and accepted by the borrower.
27        (d)  The burden of proof of  any  exemption  provided  in
28    this Act shall be on the party claiming the exemption.
29    (Source: P.A. 90-70, eff. 7-8-97; 91-435, eff. 8-6-99.)

30        Section 15.  The Illinois Business Brokers Act of 1995 is
31    amended by changing Sections 10-25 and 10-60 as follows:

32        (815 ILCS 307/10-25)
 
                            -67-               LRB9111259STsb
 1        Sec. 10-25.  Fees and funds.  All fees and funds accruing
 2    for  the administration of this Act shall be accounted for by
 3    the Secretary of State and shall be deposited with the  State
 4    Treasurer  who shall deposit them in the Securities Audit and
 5    Enforcement Fund.
 6        (a)  The Secretary of State shall, by rule or regulation,
 7    impose and collect fees necessary for the  administration  of
 8    this  Act,  including  but  not  limited  to,  fees  for  the
 9    following purposes:
10             (1)  Filing an application pursuant to Section 10-10
11        of this Act;
12             (2)  Examining  an  application pursuant to Sections
13        10-10 and 10-20 of this Act;
14             (3)  Registering a  business  broker  under  Section
15        10-10 of this Act;
16             (4)  Renewing  registration  of  a  business  broker
17        pursuant to Section 10-20 of this Act;
18             (5)  Failure  to file or file timely any document or
19        information required under this Act;
20             (6)  (Blank). Filing  a  notice  of  lien  with  the
21        Secretary  of  State  pursuant  to Section 10-115 of this
22        Act.
23        (b)  The Secretary of State may, by rule  or  regulation,
24    raise  or  lower  any  fee imposed by, and which he or she is
25    authorized by law to collect under, this Act.
26    (Source: P.A.  90-70,  eff.  7-8-97;  91-194,  eff.  7-20-99;
27    91-534, eff. 1-1-00.)

28        (815 ILCS 307/10-60)
29        Sec.  10-60.  Violations; liability of business broker to
30    damaged parties; rights of prospective client.  A person  who
31    commits  a material violation of this Act, in connection with
32    a contract for the services of a business broker,  is  liable
33    to any client damaged by the violation, for the amount of the
 
                            -68-               LRB9111259STsb
 1    actual  damages suffered, but not more than the fees actually
 2    paid by the client seeking relief, together with interest  at
 3    the  legal  rate,  and  attorney  fees.  If a business broker
 4    commits a  material  violation  of  Section  Sections  10-10,
 5    10-20,  or  and  10-30  of  this  Act,  in  connection with a
 6    contract for business brokering  services,  the  contract  is
 7    void,  and the prospective client is entitled to receive from
 8    the business broker all sums paid  to  the  business  broker,
 9    with interest and any attorney's fee required to enforce this
10    Section.
11    (Source: P.A. 89-209, eff. 1-1-96; 90-70, eff. 7-8-97.)

12        Section 20. The Business Opportunity Sales Law of 1995 is
13    amended  by  changing  Sections  5-5.10,  5-10,  and  5-45 as
14    follows:

15        (815 ILCS 602/5-5.10)
16        Sec. 5-5.10. Business opportunity.
17        (a)  "Business   opportunity"   means   a   contract   or
18    agreement,  between  a  seller  and  purchaser,  express   or
19    implied,  orally or in writing, wherein it is agreed that the
20    seller or a person recommended by the seller shall provide to
21    the purchaser any product, equipment,  supplies  or  services
22    enabling the purchaser to start a business when the purchaser
23    is  required  to  make  a  payment  to the seller or a person
24    recommended by the seller of more than $500  and  the  seller
25    represents  directly  or  indirectly,  orally  or in writing,
26    that:
27             (1)  the seller  or  a  person  recommended  by  the
28        seller  will  provide  or assist the purchaser in finding
29        locations for the use or operation of  vending  machines,
30        racks,   display  cases  or  other  similar  devices,  on
31        premises neither owned nor leased  by  the  purchaser  or
32        seller;
 
                            -69-               LRB9111259STsb
 1             (2)  the  seller  or  a  person  recommended  by the
 2        seller will provide or assist the  purchaser  in  finding
 3        outlets  or  accounts  for  the  purchaser's  products or
 4        services;
 5             (3)  the seller or a person specified by the  seller
 6        will   purchase  any  or  all  products  made,  produced,
 7        fabricated, grown, bred or modified by the purchaser;
 8             (4)  the seller guarantees that the  purchaser  will
 9        derive  income  from the business which exceeds the price
10        paid to the seller;
11             (5)  the seller will refund all or part of the price
12        paid to the seller, or repurchase any  of  the  products,
13        equipment  or supplies provided by the seller or a person
14        recommended  by  the  seller,   if   the   purchaser   is
15        dissatisfied with the business; or
16             (6)  the  seller  will  provide  a  marketing  plan,
17        provided  that  this Law shall not apply to the sale of a
18        marketing plan made in conjunction with the licensing  of
19        a  federally registered trademark or federally registered
20        service mark.
21        (b)  "Business opportunity" does not include:
22             (1)  any  offer  or  sale  of  an  ongoing  business
23        operated by the seller and to be sold in its entirety;
24             (2)  any offer or sale of a business opportunity  to
25        an   ongoing  business  where  the  seller  will  provide
26        products,  equipment,  supplies  or  services  which  are
27        substantially  similar  to   the   products,   equipment,
28        supplies  or services sold by the purchaser in connection
29        with the purchaser's ongoing business;
30             (3)  any offer or sale  of  a  business  opportunity
31        which   is  a  franchise  as  defined  by  the  Franchise
32        Disclosure Act of 1987;
33             (4)  any offer or sale  of  a  business  opportunity
34        which  is  registered pursuant to the Illinois Securities
 
                            -70-               LRB9111259STsb
 1        Law of 1953;
 2             (5)  (blank);  any  offer  or  sale  of  a  business
 3        opportunity which  involves  a  marketing  plan  made  in
 4        conjunction  with the licensing of a federally registered
 5        trademark or federally registered service  mark  provided
 6        that  the seller had a minimum net worth of $1,000,000 as
 7        determined on the  basis  of  the  seller's  most  recent
 8        audited  financial statement prepared within 13 months of
 9        the  first  offer  in  this  State.  Net  worth  may   be
10        determined on a consolidated basis where the seller is at
11        least  80%  owned by one person and that person expressly
12        guarantees the obligations of the seller with  regard  to
13        the  offer or sale of any business opportunity claimed to
14        be excluded under this item;
15             (6)  any offer or sale of a business opportunity  by
16        an  executor,  administrator, sheriff, marshal, receiver,
17        trustee in  bankruptcy,  guardian  or  conservator  or  a
18        judicial offer or sale, of a business opportunity; or
19             (7)  cash payments made by a purchaser not exceeding
20        $500  and the payment is made for the not-for-profit sale
21        of sales demonstration equipment, material or samples, or
22        the payment is made for product  inventory  sold  to  the
23        purchaser at a bona fide wholesale price.
24    (Source: P.A. 90-70, eff. 7-8-97; 91-357, eff. 7-29-99.)

25        (815 ILCS 602/5-10)
26        Sec.  5-10.  Exemptions. Registration pursuant to Section
27    5-30 This Law shall not apply to any of the following:
28        (a)  Any offer or sale  of  a  business  opportunity  for
29    which  the  immediate  cash payment made by the purchaser for
30    any business opportunity is at least $25,000 if the immediate
31    cash payment does not exceed   20%  of  the  purchaser's  net
32    worth   as   determined  exclusive  of  principal  residence,
33    furnishings therein, and automobiles; provided, however,  the
 
                            -71-               LRB9111259STsb
 1    Secretary  of  State  may  by  rule or regulation withdraw or
 2    further condition the availability of this exemption.
 3        (b)  Any offer or sale  of  a  business  opportunity  for
 4    which    the  seller does not advertise, solicit, or sell for
 5    purchaser is not required to make an initial payment  to  the
 6    seller or a person recommended by the seller exceeding $500.
 7        (c)  Any  offer  or  sale of a business opportunity where
 8    the seller has a net worth of not  less  than  $1,000,000  as
 9    determined  on  the basis of the seller's most recent audited
10    financial statement, prepared within 13 months of  the  first
11    offer  in  this  State.  Net  worth  may  be  determined on a
12    consolidated basis where the seller is at least 80% owned  by
13    one   person   and   that  person  expressly  guarantees  the
14    obligations of the seller with regard to the offer or sale of
15    any business opportunity claimed  to  be  exempt  under  this
16    subsection.  The Secretary of State may by rule or regulation
17    withdraw  or  further  condition  the  availability  of  this
18    exemption.
19        (d)  Any offer or sale of a  business  opportunity  where
20    the  purchaser has a net worth of not less than $250,000. Net
21    worth shall be determined exclusive of  principal  residence,
22    furnishings  therein, and automobiles. The Secretary of State
23    may by rule or regulation withdraw or further  condition  the
24    availability of this exemption.
25        (e)  Any  offer  or  sale of a business opportunity where
26    the purchaser is a bank, savings and loan association,  trust
27    company,  insurance  company,  credit  union,  or  investment
28    company  as  defined by the federal Investment Company Act of
29    1940, pension or profit sharing  trust,  or  other  financial
30    institution  or  institutional  buyer, or a dealer registered
31    under  the  Illinois  Securities  Law  of  1953,  where   the
32    purchaser is acting for itself or in a fiduciary capacity.
33        (f)  Any offer or sale of a business opportunity which is
34    defined  as a franchise under the Franchise Disclosure Act of
 
                            -72-               LRB9111259STsb
 1    1987 provided that the seller delivers to each  purchaser  at
 2    the  earlier  of  the  first personal meeting, or 10 business
 3    days prior to the earlier of the execution by a purchaser  of
 4    any contract or agreement imposing a binding legal obligation
 5    on  the  purchaser  or  the  payment  by  a  purchaser of any
 6    consideration in connection with the offer  or  sale  of  the
 7    business   opportunity,   one  of  the  following  disclosure
 8    documents:
 9             (1)  The Franchise Offering  Circular  provided  for
10        under  the  Franchise  Disclosure  Act  of 1987 which the
11        Secretary of State may adopt by rule or regulation; or
12             (2)  A disclosure document prepared pursuant to  the
13        Federal   Trade   Commission   rule  entitled  Disclosure
14        Requirements and Prohibitions Concerning Franchising  and
15        Business Opportunity Ventures, 16 C.F.R. Sec. 436 (1979).
16        For  the  purposes of this subsection, a personal meeting
17        shall mean a face-to-face meeting between  the  purchaser
18        and  the  seller  or their representatives, which is held
19        for the purpose of discussing the  offer  or  sale  of  a
20        business opportunity.
21        (g)  Any  offer  or  sale  of  a business opportunity for
22    which the cash payment required to be made by a purchaser for
23    any business opportunity does not exceed $500 and the payment
24    is made for the not-for-profit sale  of  sales  demonstration
25    equipment,  material,  or  samples or the payment is made for
26    product inventory sold  to  the  purchaser  at  a  bona  fide
27    wholesale price.
28        (h)  Any  offer  or  sale of a business opportunity which
29    the Secretary of  State  exempts  by  order  or  a  class  of
30    business  opportunities  which the Secretary of State exempts
31    by rule or regulation upon the finding  that  such  exemption
32    would   not   be   contrary   to  public  interest  and  that
33    registration would not be necessary or  appropriate  for  the
34    protection of purchasers.
 
                            -73-               LRB9111259STsb
 1    (Source: P.A. 89-209, eff. 1-1-96.)

 2        (815 ILCS 602/5-45)
 3        Sec.   5-45.   Denial,   suspension,   or  revocation  of
 4    registration.
 5        (a)  The Secretary of State may issue  an  order  denying
 6    effectiveness to, or suspending or revoking the effectiveness
 7    of,  a  registration if the Secretary of State finds that the
 8    order is in the public interest and that any of the following
 9    exist:
10             (1)  The registration as of its effective date or as
11        of any earlier date in  the  case  of  an  order  denying
12        effectiveness, or any amendment as of its effective date,
13        or  any  report  is incomplete in any material respect or
14        contains any statement which was, in  the  light  of  the
15        circumstances   under   which   it  was  made,  false  or
16        misleading with respect to any material fact.
17             (2)  Any  provision  of  this  Law  or   any   rule,
18        regulation,  order,  or  condition lawfully imposed under
19        this Law has been willfully violated, in connection  with
20        the business opportunity:
21                  (A)  by the person filing the registration; or
22                  (B)  by  the  seller,  any partner, officer, or
23             director of  the  seller,  any  person  occupying  a
24             similar  status  or performing similar functions, or
25             any person directly  or  indirectly  controlling  or
26             controlled  by  the  seller,  but only if the person
27             filing the registration is  directly  or  indirectly
28             controlled by or acting for the seller.
29             (3)  The  business  opportunity registered or sought
30        to be registered is  the  subject  of  an  administrative
31        order denying, suspending or revoking a registration or a
32        permanent  or  temporary injunction or final order of any
33        court of competent jurisdiction;  but  the  Secretary  of
 
                            -74-               LRB9111259STsb
 1        State:
 2                  (A)  may  not institute a proceeding against an
 3             effective registration  under  this  paragraph  more
 4             than  one  year  from  the  date  of  the  order  or
 5             injunction relied on; and
 6                  (B)  may   not   enter   an  order  under  this
 7             paragraph on the basis of  an  order  or  injunction
 8             entered  under any other State Act unless that order
 9             or  injunction  was  based  on  facts  which   would
10             currently  constitute  a  ground  for an order under
11             this Section.
12             (4)  The seller's enterprise or method of  business,
13        or  that  of  the business opportunity, includes or would
14        include activities which are illegal where performed.
15             (5)  The business opportunity or the offering  of  a
16        business opportunity has worked or tended to work a fraud
17        upon purchasers or would so operate.
18             (6)  There  has been a failure to file any documents
19        or information required by Section 5-30 of this Law.
20             (7)  The seller has failed to pay the proper  filing
21        fee  but  the  Secretary of State may enter only a denial
22        order under this paragraph and  the  Secretary  of  State
23        shall  vacate any such order when the deficiency has been
24        corrected.
25             (8)  The  seller's  literature  or  advertising   is
26        misleading, incorrect, incomplete or deceptive.
27        (b)  The   Secretary   of   State  may  not  institute  a
28    proceeding  under   this   Section   against   an   effective
29    registration  on  the basis of a fact or transaction known to
30    the Secretary of State when the registration became effective
31    unless the proceeding is instituted within the next 30 days.
32        (c)  The Secretary of State may by summary order postpone
33    or suspend the  effectiveness  of  the  registration  pending
34    final  determination  of  any proceeding under this  Section.
 
                            -75-               LRB9111259STsb
 1    Upon the entry of the order, the  Secretary  of  State  shall
 2    promptly  notify  the  seller that the order has been entered
 3    and of the reasons therefor and that within 15 days after the
 4    receipt of a written request the matter will be set down  for
 5    hearing.  The  written request must be made within 30 days of
 6    the entry of the order. If no hearing is requested  and  none
 7    is  ordered  by the Secretary of State, the order will remain
 8    in effect until it is modified or vacated by the Secretary of
 9    State. If a hearing is requested or ordered, the Secretary of
10    State, after notice of an  opportunity  for  hearing  to  the
11    seller,  may  modify  or  vacate the order or extend it until
12    final determination.
13        (d)  No summary order may be entered under  any  part  of
14    this  Section, except the first sentence of subsection (c) of
15    this Section, without appropriate prior notice to the seller,
16    opportunity for hearing, and written  findings  of  fact  and
17    conclusions of law.
18        (e)  The Secretary of State may vacate or modify an order
19    issued  under  this  Section  if the Secretary of State finds
20    that the conditions which prompted its entry have changed  or
21    that it is otherwise in the public interest to do so.
22        (f)  Notwithstanding   anything   in   this  Act  to  the
23    contrary,  the  Secretary  of   State,   after   notice   and
24    opportunity  for  hearing,  may,  at the Secretary of State's
25    discretion, enter into an agreed settlement, stipulation,  or
26    consent  order  with  a  respondent  in  accordance  with the
27    provisions of the Illinois Administrative Procedure Act.  The
28    provisions of the agreed settlement, stipulation, or  consent
29    order shall have the full force and effect of an order issued
30    by the Secretary of State.
31        (g)  The  action of the Secretary of State in issuing any
32    order under this Section shall be subject to judicial  review
33    under the Administrative Review Law.
34    (Source: P.A. 90-70, eff. 7-8-97; 91-357, eff. 7-29-99.)
 
                            -76-               LRB9111259STsb
 1                                INDEX
 2               Statutes amended in order of appearance
 3    815 ILCS 5/2.5a           from Ch. 121 1/2, par. 137.2-5a
 4    815 ILCS 5/2.9            from Ch. 121 1/2, par. 137.2-9
 5    815 ILCS 5/2.12b          from Ch. 121 1/2, par. 137.2-12b
 6    815 ILCS 5/3              from Ch. 121 1/2, par. 137.3
 7    815 ILCS 5/4              from Ch. 121 1/2, par. 137.4
 8    815 ILCS 5/8              from Ch. 121 1/2, par. 137.8
 9    815 ILCS 5/11             from Ch. 121 1/2, par. 137.11
10    815 ILCS 5/12             from Ch. 121 1/2, par. 137.12
11    815 ILCS 175/15-15
12    815 ILCS 175/15-40
13    815 ILCS 175/15-80
14    815 ILCS 307/10-25
15    815 ILCS 307/10-60
16    815 ILCS 602/5-5.10
17    815 ILCS 602/5-10
18    815 ILCS 602/5-45

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