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92_HB0131ham001 LRB9201579TApram01 1 AMENDMENT TO HOUSE BILL 131 2 AMENDMENT NO. . Amend House Bill 131 by replacing 3 the title with the following: 4 "AN ACT concerning public funds."; and 5 by replacing everything after the enacting clause with the 6 following: 7 "Section 5. The Public Funds Investment Act is amended 8 by changing Section 2 as follows: 9 (30 ILCS 235/2) (from Ch. 85, par. 902) 10 Sec. 2. Authorized investments. 11 (a) Any public agency may invest any public funds as 12 follows: 13 (1) in bonds, notes, certificates of indebtedness, 14 treasury bills or other securities now or hereafter 15 issued, which are guaranteed by the full faith and credit 16 of the United States of America as to principal and 17 interest; 18 (2) in bonds, notes, debentures, or other similar 19 obligations of the United States of America or its 20 agencies; 21 (3) in interest-bearing savings accounts, -2- LRB9201579TApram01 1 interest-bearing certificates of deposit or 2 interest-bearing time deposits or any other investments 3 constituting direct obligations of any bank as defined by 4 the Illinois Banking Act; 5 (4) in short term obligations of corporations 6 organized in the United States with assets exceeding 7 $500,000,000 if (i) such obligations are rated at the 8 time of purchase at one of the 3 highest classifications 9 established by at least 2 standard rating services and 10 which mature not later than 180 days from the date of 11 purchase, (ii) such purchases do not exceed 10% of the 12 corporation's outstanding obligations and (iii) no more 13 than one-third of the public agency's funds may be 14 invested in short term obligations of corporations; or 15 (5) in money market mutual funds registered under 16 the Investment Company Act of 1940, provided that the 17 portfolio of any such money market mutual fund is limited 18 to obligations described in paragraph (1) or (2) of this 19 subsection and to agreements to repurchase such 20 obligations. 21 (a-1) In addition to any other investments authorized 22 under this Act, a municipality may invest its public funds in 23 interest bearing bonds of any county, township, city, 24 village, incorporated town, municipal corporation, or school 25 district. The bonds shall be registered in the name of the 26 municipality or held under a custodial agreement at a bank. 27 The bonds shall be rated at the time of purchase within the 4 28 highest general classifications established by a rating 29 service of nationally recognized expertise in rating bonds of 30 states and their political subdivisions. 31 (a-2) In addition to the authority available to invest 32 funds, a public agency may authorize and upon that 33 authorization the treasurer of any public agency may join 34 with the treasurers of other public agencies for the purpose -3- LRB9201579TApram01 1 of jointly investing the funds of which the treasurer has 2 custody and the sole legal authority to invest. Any 3 multijurisdictional fund that is established to receive such 4 joint investments shall maintain one of the 2 highest ratings 5 available from at least one standard rating service. These 6 funds shall be limited to investment instruments that are 7 explicitly cited as authorized investments under this Act and 8 shall have a written investment policy in compliance with 9 State law. All fees, ratings, investment policies, and annual 10 accounting of these funds shall be fully disclosed and shall 11 be made publicly available through printed or electronic 12 report. A copy of this report shall be provided to the office 13 of the State Treasurer and to the General Assembly. Investors 14 in these funds shall avail themselves of current training in 15 public funds management, such as that offered by State or 16 national professional associations or by the Office of the 17 State Treasurer. 18 The joint investments shall be sufficiently liquid as to 19 be redeemable on a date or dates before the time when, in the 20 judgment of the public agency, the public funds so invested 21 will be required for expenditure by the public agency or its 22 governing authority. 23 (b) Investments may be made only in banks which are 24 insured by the Federal Deposit Insurance Corporation. Any 25 public agency may invest any public funds in short term 26 discount obligations of the Federal National Mortgage 27 Association or in shares or other forms of securities legally 28 issuable by savings banks or savings and loan associations 29 incorporated under the laws of this State or any other state 30 or under the laws of the United States. Investments may be 31 made only in those savings banks or savings and loan 32 associations the shares, or investment certificates of which 33 are insured by the Federal Deposit Insurance Corporation. Any 34 such securities may be purchased at the offering or market -4- LRB9201579TApram01 1 price thereof at the time of such purchase. All such 2 securities so purchased shall mature or be redeemable on a 3 date or dates prior to the time when, in the judgment of such 4 governing authority, the public funds so invested will be 5 required for expenditure by such public agency or its 6 governing authority. The expressed judgment of any such 7 governing authority as to the time when any public funds will 8 be required for expenditure or be redeemable is final and 9 conclusive. Any public agency may invest any public funds in 10 dividend-bearing share accounts, share certificate accounts 11 or class of share accounts of a credit union chartered under 12 the laws of this State or the laws of the United States; 13 provided, however, the principal office of any such credit 14 union must be located within the State of Illinois. 15 Investments may be made only in those credit unions the 16 accounts of which are insured by applicable law. 17 (c) For purposes of this Section, the term "agencies of 18 the United States of America" includes: (i) the federal land 19 banks, federal intermediate credit banks, banks for 20 cooperative, federal farm credit banks, or any other entity 21 authorized to issue debt obligations under the Farm Credit 22 Act of 1971 (12 U.S.C. 2001 et seq.) and Acts amendatory 23 thereto; (ii) the federal home loan banks and the federal 24 home loan mortgage corporation; and (iii) any other agency 25 created by Act of Congress. 26 (d) Except for pecuniary interests permitted under 27 subsection (f) of Section 3-14-4 of the Illinois Municipal 28 Code or under Section 3.2 of the Public Officer Prohibited 29 Practices Act, no person acting as treasurer or financial 30 officer or who is employed in any similar capacity by or for 31 a public agency may do any of the following: 32 (1) have any interest, directly or indirectly, in 33 any investments in which the agency is authorized to 34 invest. -5- LRB9201579TApram01 1 (2) have any interest, directly or indirectly, in 2 the sellers, sponsors, or managers of those investments. 3 (3) receive, in any manner, compensation of any 4 kind from any investments in which the agency is 5 authorized to invest. 6 (e) Any public agency may also invest any public funds 7 in a Public Treasurers' Investment Pool created under Section 8 17 of the State Treasurer Act. Any public agency may also 9 invest any public funds in a fund managed, operated, and 10 administered by a bank, subsidiary of a bank, or subsidiary 11 of a bank holding company or use the services of such an 12 entity to hold and invest or advise regarding the investment 13 of any public funds. 14 (f) To the extent a public agency has custody of funds 15 not owned by it or another public agency and does not 16 otherwise have authority to invest such funds, the public 17 agency may invest such funds as if they were its own. Such 18 funds must be released to the appropriate person at the 19 earliest reasonable time, but in no case exceeding 31 days, 20 after the private person becomes entitled to the receipt of 21 them. All earnings accruing on any investments or deposits 22 made pursuant to the provisions of this Act shall be credited 23 to the public agency by or for which such investments or 24 deposits were made, except as provided otherwise in Section 25 4.1 of the State Finance Act or the Local Governmental Tax 26 Collection Act, and except where by specific statutory 27 provisions such earnings are directed to be credited to and 28 paid to a particular fund. 29 (g) A public agency may purchase or invest in repurchase 30 agreements of government securities having the meaning set 31 out in the Government Securities Act of 1986 subject to the 32 provisions of said Act and the regulations issued thereunder. 33 The government securities, unless registered or inscribed in 34 the name of the public agency, shall be purchased through -6- LRB9201579TApram01 1 banks or trust companies authorized to do business in the 2 State of Illinois. 3 (h) Except for repurchase agreements of government 4 securities which are subject to the Government Securities Act 5 of 1986, no public agency may purchase or invest in 6 instruments which constitute repurchase agreements, and no 7 financial institution may enter into such an agreement with 8 or on behalf of any public agency unless the instrument and 9 the transaction meet the following requirements: 10 (1) The securities, unless registered or inscribed 11 in the name of the public agency, are purchased through 12 banks or trust companies authorized to do business in the 13 State of Illinois. 14 (2) An authorized public officer after ascertaining 15 which firm will give the most favorable rate of interest, 16 directs the custodial bank to "purchase" specified 17 securities from a designated institution. The "custodial 18 bank" is the bank or trust company, or agency of 19 government, which acts for the public agency in 20 connection with repurchase agreements involving the 21 investment of funds by the public agency. The State 22 Treasurer may act as custodial bank for public agencies 23 executing repurchase agreements. To the extent the 24 Treasurer acts in this capacity, he is hereby authorized 25 to pass through to such public agencies any charges 26 assessed by the Federal Reserve Bank. 27 (3) A custodial bank must be a member bank of the 28 Federal Reserve System or maintain accounts with member 29 banks. All transfers of book-entry securities must be 30 accomplished on a Reserve Bank's computer records through 31 a member bank of the Federal Reserve System. These 32 securities must be credited to the public agency on the 33 records of the custodial bank and the transaction must be 34 confirmed in writing to the public agency by the -7- LRB9201579TApram01 1 custodial bank. 2 (4) Trading partners shall be limited to banks or 3 trust companies authorized to do business in the State of 4 Illinois or to registered primary reporting dealers. 5 (5) The security interest must be perfected. 6 (6) The public agency enters into a written master 7 repurchase agreement which outlines the basic 8 responsibilities and liabilities of both buyer and 9 seller. 10 (7) Agreements shall be for periods of 330 days or 11 less. 12 (8) The authorized public officer of the public 13 agency informs the custodial bank in writing of the 14 maturity details of the repurchase agreement. 15 (9) The custodial bank must take delivery of and 16 maintain the securities in its custody for the account of 17 the public agency and confirm the transaction in writing 18 to the public agency. The Custodial Undertaking shall 19 provide that the custodian takes possession of the 20 securities exclusively for the public agency; that the 21 securities are free of any claims against the trading 22 partner; and any claims by the custodian are subordinate 23 to the public agency's claims to rights to those 24 securities. 25 (10) The obligations purchased by a public agency 26 may only be sold or presented for redemption or payment 27 by the fiscal agent bank or trust company holding the 28 obligations upon the written instruction of the public 29 agency or officer authorized to make such investments. 30 (11) The custodial bank shall be liable to the 31 public agency for any monetary loss suffered by the 32 public agency due to the failure of the custodial bank to 33 take and maintain possession of such securities. 34 (i) Notwithstanding the foregoing restrictions on -8- LRB9201579TApram01 1 investment in instruments constituting repurchase agreements 2 the Illinois Housing Development Authority may invest in, and 3 any financial institution with capital of at least 4 $250,000,000 may act as custodian for, instruments that 5 constitute repurchase agreements, provided that the Illinois 6 Housing Development Authority, in making each such 7 investment, complies with the safety and soundness guidelines 8 for engaging in repurchase transactions applicable to 9 federally insured banks, savings banks, savings and loan 10 associations or other depository institutions as set forth in 11 the Federal Financial Institutions Examination Council Policy 12 Statement Regarding Repurchase Agreements and any regulations 13 issued, or which may be issued by the supervisory federal 14 authority pertaining thereto and any amendments thereto; 15 provided further that the securities shall be either (i) 16 direct general obligations of, or obligations the payment of 17 the principal of and/or interest on which are unconditionally 18 guaranteed by, the United States of America or (ii) any 19 obligations of any agency, corporation or subsidiary thereof 20 controlled or supervised by and acting as an instrumentality 21 of the United States Government pursuant to authority granted 22 by the Congress of the United States and provided further 23 that the security interest must be perfected by either the 24 Illinois Housing Development Authority, its custodian or its 25 agent receiving possession of the securities either 26 physically or transferred through a nationally recognized 27 book entry system. 28 (j) In addition to all other investments authorized 29 under this Section, a community college district may invest 30 public funds in any mutual funds that invest primarily in 31 corporate investment grade or global government short term 32 bonds. Purchases of mutual funds that invest primarily in 33 global government short term bonds shall be limited to funds 34 with assets of at least $100 million and that are rated at -9- LRB9201579TApram01 1 the time of purchase as one of the 10 highest classifications 2 established by a recognized rating service. The investments 3 shall be subject to approval by the local community college 4 board of trustees. Each community college board of trustees 5 shall develop a policy regarding the percentage of the 6 college's investment portfolio that can be invested in such 7 funds. 8 Nothing in this Section shall be construed to authorize 9 an intergovernmental risk management entity to accept the 10 deposit of public funds except for risk management purposes. 11 (Source: P.A. 90-319, eff. 8-1-97.)".
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