Public Act 90-0070 of the 90th General Assembly
Public Act 90-0070
HB1168 Enrolled LRB9004729SMdv
AN ACT concerning financial transactions.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Securities Law of 1953 is
amended by changing Sections 2.3, 2.9, 2.10, 2.11, 2.12b,
2.17b, 2.26, 3, 4, 5, 6, 7, 8, 9, 10, 11, 11a, 12, and 13,
and by adding Sections 2.12c, 2.17f, 2.29, 2.30, 2.31, 2.32,
and 2a as follows:
(815 ILCS 5/2.3) (from Ch. 121 1/2, par. 137.2-3)
Sec. 2.3 "Person" means an individual, a corporation, a
partnership, an association, a joint stock company, a limited
liability company, a limited liability partnership, a trust
or any unincorporated organization. As used in this Section,
"trust" includes only a trust where the interest or interests
of the beneficiary or beneficiaries is a security.
(Source: Laws 1961, p. 3663.)
(815 ILCS 5/2.9) (from Ch. 121 1/2, par. 137.2-9)
Sec. 2.9. "Salesperson" means an individual, other than
an issuer or a dealer, employed or appointed or authorized by
a dealer, issuer or controlling person to offer, purchase or
sell securities in this State. The partners or officers of a
dealer or issuer shall not be deemed to be salespersons
within the meaning of this definition if they are not or have
not been regularly engaged in securities offering, purchasing
or selling activities other than transactions for their own
respective accounts. No individual shall be deemed to be a
salesperson solely by reason of effecting transactions in a
covered security to qualified purchasers as described in
Section 18(b)(3) of the Federal 1933 Act, effecting
transactions in a covered security as described in Section
18(b)(4)(D) of the Federal 1933 Act, or engaging in the fact
that such individual is engaged in making offers or effecting
sales of securities to employees of the issuer of such
securities or to employees of the parent or any wholly-owned
subsidiary of such issuer, provided that such individual is
an employee of such issuer, parent or subsidiary who has not
been employed primarily to make such offers or sales and who
receives no special compensation, directly or indirectly, for
or on account of any such offer or sale. "Salesperson" also
means a limited Canadian salesperson.
(Source: P.A. 84-869.)
(815 ILCS 5/2.10) (from Ch. 121 1/2, par. 137.2-10)
Sec. 2.10. "Registered salesperson" means a salesperson
registered under Section 8 of this Act. "Registered
salesperson" also means a registered limited Canadian
salesperson.
(Source: P.A. 80-556.)
(815 ILCS 5/2.11) (from Ch. 121 1/2, par. 137.2-11)
Sec. 2.11. Investment adviser. "Investment adviser"
means any person who, for compensation, engages in this State
in the business of advising others, either directly or
through publications or writings, as to the value of
securities or as to the advisability of investing in,
purchasing, or selling securities or who, in this State for
direct or indirect compensation and as part of a regular
advisory business, issues or promulgates analyses or reports
concerning securities or any financial planner or other
person who, as an integral component of other financially
related services, provides the foregoing investment advisory
services to others for compensation and as part of a business
or who holds himself or herself out as providing the
foregoing investment advisory services to others for
compensation; but "investment adviser" does not include:
(1) a bank or trust company, or the regular employees of
a bank or trust company;
(2) any lawyer, accountant, engineer, geologist or
teacher (i) whose performance of such services is solely
incidental to the practice of his or her profession or (ii)
who:
(A) does not exercise investment discretion with
respect to the assets of clients or maintain custody of
the assets of clients for the purpose of investing those
assets, except when the person is acting as a bona fide
fiduciary in a capacity such as an executor, trustee,
personal representative, estate or trust agent, guardian,
conservator, or person serving in a similar fiduciary
capacity;
(B) does not accept or receive, directly or
indirectly, any commission, fee, or other remuneration
contingent upon the purchase or sale of any specific
security by a client of such person; and
(C) does not advise on the purchase or sale of
specific securities, except that this clause (C) shall
not apply when the advice about specific securities is
based on financial statement analyses or tax
considerations that are reasonably related to and in
connection with the person's profession;
(3) any registered dealer or partner, officer, director
or regular employee of a registered dealer, or registered
salesperson, whose performance of these services, in each
case, is solely incidental to the conduct of the business of
the registered dealer or registered salesperson, as the case
may be, and who receives no special compensation, directly or
indirectly, for such services;
(4) any publisher or regular employee of such publisher
of a bona fide newspaper, news magazine or business or
financial publication of regular and established paid
circulation;
(5) any person whose advice, analyses or reports relate
only to securities which are direct obligations of, or
obligations guaranteed as to principal or interest by, the
United States, any state or any political subdivision of any
state, or any public agency or public instrumentality of any
one or more of the foregoing; or
(5.5) any person who is a federal covered investment
adviser; or
(6) any other persons who are not within the intent of
this Section as the Secretary of State may designate by rules
and regulations or order.
(Source: P.A. 87-463.)
(815 ILCS 5/2.12b) (from Ch. 121 1/2, par. 137.2-12b)
Sec. 2.12b. Investment adviser representative.
"Investment adviser representative" means any partner,
officer, director of (or a person occupying a similar status
or performing similar functions), or other natural person
employed by or associated with an investment adviser, except
clerical or ministerial personnel, who in this State:
(1) makes any recommendations or otherwise renders
advice regarding securities;
(2) manages accounts or portfolios of clients;
(3) determines what recommendation or advice regarding
securities should be given; or
(4) supervises any employee who performs any of the
foregoing.
"Investment adviser representative" does not mean a
federal covered investment adviser, a supervised person of a
federal covered investment adviser, or a person defined by
rule of the Securities and Exchange Commission under Section
203A of the Federal Investment Advisers Act as an investment
adviser representative.
(Source: P.A. 87-463.)
(815 ILCS 5/2.12c new)
Sec. 2.12c. Registered investment adviser
representative. "Registered investment adviser
representative" means an investment adviser representative
registered under Section 8 of this Act.
(815 ILCS 5/2.17b) (from Ch. 121 1/2, par. 137.2-17b)
Sec. 2.17b. Federal 1974 Act. "Federal 1974 Act" means
the Act of Congress of the United States known as the
Commodity Exchange Futures Trading Commission Act of 1974, as
amended.
(Source: P.A. 89-209, eff. 1-1-96.)
(815 ILCS 5/2.17f new)
Sec. 2.17f. Federal 1996 Act. "Federal 1996 Act" means
the Act of Congress of the United States known as the
National Securities Markets Improvement Act of 1996.
(815 ILCS 5/2.26) (from Ch. 121 1/2, par. 137.2-26)
Sec. 2.26. Mineral investment contract. "Mineral
investment contract" means any investment, account,
agreement, or contract whereby the investor's profits are
dependent upon the transportation, mining, minting, milling,
flotation, refining, hallmarking, sale, resale, or repurchase
of a metal or mineral, even if there is any potential for
profit from fluctuation in the value of the metal or mineral,
except any contract or agreement for the sale or purchase of
a metal or mineral between merchants. Nothing herein shall
affect the jurisdiction or authority of the Commodity Futures
Trading Commission under the Federal 1974 1936 Act or the
application of any provision thereof or regulation thereunder
to any person or transaction subject thereto. The Secretary
of State may, for the purposes of this Section by rules and
regulations, define the term "between merchants".
(Source: P.A. 87-463.)
(815 ILCS 5/2.29 new)
Sec. 2.29 Covered security. "Covered security" means
any security that is a covered security under Section 18(b)
of the Federal 1933 Act or rules or regulations promulgated
thereunder.
(815 ILCS 5/2.30 new)
Sec. 2.30. Federal covered investment adviser. "Federal
covered investment adviser" means a person who is (i)
registered under Section 203 of the Federal 1940 Investment
Advisers Act or (ii) is excluded from the definition of
"investment adviser" under Section 202(a)(11) of the Federal
1940 Investment Advisers Act.
(815 ILCS 5/2.31 new)
Sec. 2.31. Limited Canadian salesperson. "Limited
Canadian salesperson" means a salesperson who is a resident
of Canada, has no office or other physical presence in this
State, and complies with conditions specified by the
Secretary of State through rule or order.
(815 ILCS 5/2.32 new)
Sec. 2.32. Limited Canadian dealer. "Limited Canadian
dealer" means a dealer who is a resident of Canada, has no
office or other physical presence in this State, and complies
with conditions specified by the Secretary of State through
rule or order.
(815 ILCS 5/2a new)
Sec. 2a. Notification filing requirements of issuers of
any covered security and payment of fees. All issuers of any
covered security (except any security listed or authorized
for listing on the New York Stock Exchange or American Stock
Exchange or listed on the National Market System of the
Nasdaq Stock Market (or any successor to such entities), or
listed or authorized for listing on a national securities
exchange (or tier or segment thereof) that has listing
standards that the federal Securities and Exchange Commission
by rule (on its own initiative or on the basis of petition)
has determined are substantially similar to the listing
standards applicable to any security described in this
Section, or is a security of the same issuer that is equal in
seniority or that is a senior security described in this
Section) shall annually file a notification with the
Secretary of State in such form and manner as prescribed by
rule or order and pay the notification filing fee established
under Section 11a of this Act which shall not be returnable
in any event.
Anything in this Act to the contrary notwithstanding,
until October 10, 1999 or other date as may be legally
permissible, the refusal to file the notification or pay the
fee by an issuer of any covered security (except issuers of
securities which are being sold under Regulation D, Section
506 of the Federal 1933 Act) after written notice by the
Secretary of State (which may be by United States Postal
Service, facsimile or electronic transmission or other
similar means), shall require the issuer or his, her, or its
designee to file an application for registration with the
Secretary of State under subsection A or B of Section 5, 6,
or 7 of this Act and pay the registration fee established
under Section 11a of this Act which shall not be returnable
in any event. The failure to file any such notification
shall constitute a violation of subsection D of Section 12 of
this Act, subject to the penalties enumerated in Section 14
of this Act. The civil remedies provided for in subsection A
of Section 13 of this Act and the civil remedies of
rescission and appointment of a receiver, conservator,
ancillary receiver, or ancillary conservator provided for in
subsection F of Section 13 of this Act shall not be available
against any person by reason of the failure to file any such
notification or to pay the notification fee.
(815 ILCS 5/3) (from Ch. 121 1/2, par. 137.3)
Sec. 3. The provisions of Sections 2a, 5, 6 and 7 of
this Act shall not apply to any of the following securities:
A. Any security (including a revenue obligation) issued
or guaranteed by the United States, any state, any political
subdivision of a state, or any agency or corporation or other
instrumentality of any one or more of the foregoing, or any
certificate of deposit for any such security.
B. Any security issued or guaranteed by Canada, any
Canadian province, any political subdivision of any such
province, any agency or corporation or other instrumentality
of one or more of the foregoing, or any other foreign
government with which the United States then maintains
diplomatic relations, if the security is recognized as a
valid obligation by the issuer or guarantor.
C. (1) Any security issued by and representing an
interest in or a debt of, or guaranteed by, any bank or
savings bank organized under the laws of the United States,
or any bank, savings bank, savings institution or trust
company organized and supervised under the laws of any state,
or any interest or participation in any common trust fund or
similar fund maintained by any such bank, savings bank,
savings institution or trust company exclusively for the
collective investment and reinvestment of assets contributed
thereto by such bank, savings bank, savings institution or
trust company or any affiliate thereof, in its capacity as
fiduciary, trustee, executor, administrator or guardian.
(2) Any security issued or guaranteed to both principal
and interest by an international bank of which the United
States is a member.
D. (1) Any security issued by and representing an
interest in or a debt of, or guaranteed by, any federal
savings and loan association, or any savings and loan
association or building and loan association organized and
supervised under the laws of any state.
(2) Any security issued or guaranteed by any federal
credit union or any credit union, industrial loan
association, or similar organization organized and supervised
under the laws of any state.
E. Any security issued or guaranteed by any railroad,
other common carrier, public utility or holding company where
such issuer or guarantor is subject to the jurisdiction of
the Interstate Commerce Commission or successor entity, or is
a registered holding company under the Public Utility Holding
Company Act of 1935 or a subsidiary of such a company within
the meaning of that Act, or is regulated in respect of its
rates and charges by a governmental authority of the United
States or any state, or is regulated in respect of the
issuance or guarantee of the security by a governmental
authority of the United States, any state, Canada, or any
Canadian province.
F. Equipment trust certificates in respect of equipment
leased or conditionally sold to a person, if securities
issued by such person would be exempt under subsection E of
this Section.
G. Any security which at the time of sale is listed or
approved for listing upon notice of issuance on the New York
Stock Exchange, Inc., the American Stock Exchange, Inc., the
Pacific Stock Exchange, Inc., the Chicago Stock Exchange,
Inc., the Chicago Board of Trade, the Philadelphia Stock
Exchange, Inc., the Chicago Board Options Exchange,
Incorporated, the Nasdaq National Market System of the Nasdaq
Stock Market, or any other exchange, automated quotation
system or board of trade which the Secretary of State, by
rule or regulation, deems to have substantially equivalent
standards for listing or designation as required by any such
exchange, automated quotation system or board of trade; and
securities senior or of substantially equal rank, both as to
dividends or interest and upon liquidation, to securities so
listed or designated; and warrants and rights to purchase any
of the foregoing; provided, however, that this subsection G
shall not apply to investment fund shares or securities of
like character, which are being continually offered at a
price or prices determined in accordance with a prescribed
formula.
The Secretary of State may, after notice and opportunity
for hearing, revoke the exemption afforded by this
subparagraph with respect to any securities by issuing an
order if the Secretary of State finds that the further sale
of the securities in this State would work or tend to work a
fraud on purchasers of the securities.
H. Any security issued by a person organized and
operated not for pecuniary profit and exclusively for
religious, educational, benevolent, fraternal, agricultural,
charitable, athletic, professional, trade, social or
reformatory purposes, or as a chamber of commerce or local
industrial development corporation, or for more than one of
said purposes and no part of the net earnings of which inures
to the benefit of any private stockholder or member.
I. Instruments evidencing indebtedness under an
agreement for the acquisition of property under contract of
conditional sale.
J. A note secured by a first mortgage upon tangible
personal or real property when such mortgage is made,
assigned, sold, transferred and delivered with such note or
other written obligation secured by such mortgage, either to
or for the benefit of the purchaser or lender; or bonds or
notes not more than 10 in number secured by a first mortgage
upon the title in fee simple to real property if the
aggregate principal amount secured by such mortgage does not
exceed $500,000 and also does not exceed 75% of the fair
market value of such real property.
K. A note or notes not more than 10 in number secured by
a junior mortgage lien if the aggregate principal amount of
the indebtedness represented thereby does not exceed 50% of
the amount of the then outstanding prior lien indebtedness
and provided that the total amount of the indebtedness
(including the indebtedness represented by the subject junior
mortgage note or notes) shall not exceed 90% of the fair
market value of the property securing such indebtedness; and
provided further that each such note or notes shall bear
across the face thereof the following legend in letters at
least as large as 12 point type: "THIS NOTE IS SECURED BY A
JUNIOR MORTGAGE".
L. Any negotiable promissory note or draft, bill of
exchange or bankers' acceptance which arises out of a current
transaction or the proceeds of which have been or are to be
used for current transactions, and which evidences an
obligation to pay cash within 9 months of the date of
issuance exclusive of days of grace, or any renewal of such
note, draft, bill or acceptance which is likewise limited, or
any guarantee of such note, draft, bill or acceptance or of
any such renewal, provided that the note, draft, bill, or
acceptance is a negotiable security eligible for discounting
by banks that are members of the Federal Reserve System. Any
instrument exempted under this subsection from the
requirement of Sections 5, 6, and 7 of this Act shall bear
across the face thereof the following legend in letters at
least as large as 12 point type: "THIS INSTRUMENT IS NEITHER
GUARANTEED, NOR IS THE ISSUANCE THEREOF REGULATED BY ANY
AGENCY OR DEPARTMENT OF THE STATE OF ILLINOIS OR THE UNITED
STATES.". However, the foregoing legend shall not be
required with respect to any such instrument:
(i) sold to a person described in subsection C or H
of Section 4 of this Act;
(ii) sold to a "Qualified Institutional Buyer" as
that term is defined in Rule 144a adopted under the
Securities Act of 1933;
(iii) where the minimum initial subscription for
the purchase of such instrument is $100,000 or more; or
(iv) issued by an issuer that has any class of
securities registered under Section 12 of the Securities
Exchange Act of 1934 or has any outstanding class of
indebtedness rated in one of the 3 highest categories by
a rating agency designated by the Department;
M. Any security issued by and representing an interest
in or a debt of, or guaranteed by, any insurance company
organized under the laws of any state.
N. Any security issued pursuant to (i) a written
compensatory benefit plan (including without limitation, any
purchase, savings, option, bonus, stock appreciation, profit
sharing, thrift, incentive, pension, or similar plan) and
interests in such plans established by one or more of the
issuers thereof or its parents or majority-owned subsidiaries
for the participation of their employees, directors, general
partners, trustees (where the issuer is a business trust),
officers, or consultants or advisers of such issuers or its
parents or majority-owned subsidiaries, provided that bona
fide services are rendered by consultants or advisers and
those services are not in connection with the offer and sale
of securities in a capital-raising transaction or (ii) a
written contract relating to the compensation of any such
person.
O. Any option, put, call, spread or straddle issued by a
clearing agency registered as such under the Federal 1934
Act, if the security, currency, commodity, or other interest
underlying the option, put, call, spread or straddle is not
required to be registered under Section 5.
P. Any security which meets all of the following
conditions:
(1) If the issuer is not organized under the laws
of the United States or a state, it has appointed a duly
authorized agent in the United States for service of
process and has set forth the name and address of the
agent in its prospectus.
(2) A class of the issuer's securities is required
to be and is registered under Section 12 of the Federal
1934 Act, and has been so registered for the three years
immediately preceding the offering date.
(3) Neither the issuer nor a significant subsidiary
has had a material default during the last seven years,
or for the period of the issuer's existence if less than
seven years, in the payment of (i) principal, interest,
dividend, or sinking fund installment on preferred stock
or indebtedness for borrowed money, or (ii) rentals under
leases with terms of three years or more.
(4) The issuer has had consolidated net income,
before extraordinary items and the cumulative effect of
accounting changes, of at least $1,000,000 in four of its
last five fiscal years including its last fiscal year;
and if the offering is of interest bearing securities,
has had for its last fiscal year, net income, before
deduction for income taxes and depreciation, of at least
1-1/2 times the issuer's annual interest expense, giving
effect to the proposed offering and the intended use of
the proceeds. For the purposes of this clause "last
fiscal year" means the most recent year for which audited
financial statements are available, provided that such
statements cover a fiscal period ended not more than 15
months from the commencement of the offering.
(5) If the offering is of stock or shares other
than preferred stock or shares, the securities have
voting rights and the rights include (i) the right to
have at least as many votes per share, and (ii) the right
to vote on at least as many general corporate decisions,
as each of the issuer's outstanding classes of stock or
shares, except as otherwise required by law.
(6) If the offering is of stock or shares, other
than preferred stock or shares, the securities are owned
beneficially or of record, on any date within six months
prior to the commencement of the offering, by at least
1,200 persons, and on that date there are at least
750,000 such shares outstanding with an aggregate market
value, based on the average bid price for that day, of at
least $3,750,000. In connection with the determination
of the number of persons who are beneficial owners of the
stock or shares of an issuer, the issuer or dealer may
rely in good faith for the purposes of this clause upon
written information furnished by the record owners.
(7) The issuer meets the conditions specified in
paragraphs (2), (3) and (4) of this subsection P if
either the issuer or the issuer and the issuer's
predecessor, taken together, meet such conditions and if:
(a) the succession was primarily for the purpose of
changing the state of incorporation of the predecessor or
forming a holding company and the assets and liabilities
of the successor at the time of the succession were
substantially the same as those of the predecessor; or
(b) all predecessors met such conditions at the time of
succession and the issuer has continued to do so since
the succession.
Q. Any security appearing on the List of OTC Margin
Stocks published by the Board of Governors of the Federal
Reserve System; any other securities of the same issuer which
are of senior or substantially equal rank; any securities
called for by subscription rights or warrants so listed or
approved; or any warrants or rights to purchase or subscribe
to any of the foregoing.
R. Any security issued by a bona fide agricultural
cooperative operating in this State that is organized under
the laws of this State or as a foreign cooperative
association organized under the law of another state that has
been duly qualified to transact business in this State.
(Source: P.A. 89-209, eff. 1-1-96.)
(815 ILCS 5/4) (from Ch. 121 1/2, par. 137.4)
Sec. 4. Exempt transactions. The provisions of Sections
2a, 5, 6 and 7 of this Act shall not apply to any of the
following transactions, except where otherwise specified in
this Section 4:
A. Any offer or sale, whether through a dealer or
otherwise, of securities by a person who is not an issuer,
underwriter, dealer or controlling person in respect of such
securities, and who, being the bona fide owner of such
securities, disposes thereof for his or her own account;
provided, that such offer or sale is not made directly or
indirectly for the benefit of the issuer or of an underwriter
or controlling person.
B. Any offer, sale, issuance or exchange of securities
of the issuer to or with security holders of the issuer
except to or with persons who are security holders solely by
reason of holding transferable warrants, transferable
options, or similar transferable rights of the issuer, if no
commission or other remuneration is paid or given directly or
indirectly for or on account of the procuring or soliciting
of such sale or exchange (other than a fee paid to
underwriters based on their undertaking to purchase any
securities not purchased by security holders in connection
with such sale or exchange).
C. Any offer, sale or issuance of securities to any
corporation, bank, savings bank, savings institution, savings
and loan association, trust company, insurance company,
building and loan association, or dealer; to a pension fund,
pension trust, or employees' profit sharing trust, other
financial institution or institutional investor, any
government or political subdivision or instrumentality
thereof, whether the purchaser is acting for itself or in
some fiduciary capacity; to any partnership or other
association engaged as a substantial part of its business or
operations in purchasing or holding securities; to any trust
in respect of which a bank or trust company is trustee or
co-trustee; to any entity in which at least 90% of the equity
is owned by persons described under subsection C, H, or S of
this Section 4; to any employee benefit plan within the
meaning of Title I of the Federal ERISA Act if (i) the
investment decision is made by a plan fiduciary as defined in
Section 3(21) of the Federal ERISA Act and such plan
fiduciary is either a bank, savings and loan association,
insurance company, registered investment adviser or an
investment adviser registered under the Federal 1940
Investment Advisers Act, or (ii) the plan has total assets in
excess of $5,000,000, or (iii) in the case of a self-directed
plan, investment decisions are made solely by persons that
are described under subsection C, D, H or S of this Section
4; to any plan established and maintained by, and for the
benefit of the employees of, any state or political
subdivision or agency or instrumentality thereof if such plan
has total assets in excess of $5,000,000; or to any
organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, any Massachusetts or similar business
trust, or any partnership, if such organization, trust, or
partnership has total assets in excess of $5,000,000.
D. The Secretary of State is granted authority to create
by rule or regulation a limited offering transactional
exemption that furthers the objectives of compatibility with
federal exemptions and uniformity among the states. The
Secretary of State shall prescribe by rule or regulation the
amount of the fee for filing any report required under this
subsection, but the fee shall not be less than the minimum
amount nor more than the maximum amount established under
Section 11a of this Act and shall not be returnable in any
event.
E. Any offer or sale of securities by an executor,
administrator, guardian, receiver or trustee in insolvency or
bankruptcy, or at any judicial sale, or at a public sale by
auction held at an advertised time and place, or the offer or
sale of securities in good faith and not for the purpose of
avoiding the provisions of this Act by a pledgee of
securities pledged for a bona fide debt.
F. Any offer or sale by a registered dealer, either as
principal or agent, of any securities (except face amount
certificate contracts and investment fund shares) at a price
reasonably related to the current market price of such
securities, provided:
(1)(a) the securities are issued and outstanding;
(b) the issuer is required to file reports pursuant
to Section 13 or Section 15(d) of the Federal 1934 Act
and has been subject to such requirements during the 90
day period immediately preceding the date of the offer or
sale, or is an issuer of a security covered by Section
12(g)(2)(B) or (G) of the Federal 1934 Act;
(c) the dealer has a reasonable basis for believing
that the issuer is current in filing the reports required
to be filed at regular intervals pursuant to the
provisions of Section 13 or Section 15(d), as the case
may be, of the Federal 1934 Act, or in the case of
insurance companies exempted from Section 12(g) of the
Federal 1934 Act by subparagraph 12(g)(2)(G) thereof, the
annual statement referred to in Section 12(g)(2)(G)(i) of
the Federal 1934 Act; and
(d) the dealer has in its records, and makes
reasonably available upon request to any person
expressing an interest in a proposed transaction in the
securities, the issuer's most recent annual report filed
pursuant to Section 13 or 15(d), as the case may be, of
the Federal 1934 Act or the annual statement in the case
of an insurance company exempted from Section 12(g) of
the Federal 1934 Act by subparagraph 12(g)(2)(G) thereof,
together with any other reports required to be filed at
regular intervals under the Federal 1934 Act by the
issuer after such annual report or annual statement;
provided that the making available of such reports
pursuant to this subparagraph, unless otherwise
represented, shall not constitute a representation by the
dealer that the information is true and correct, but
shall constitute a representation by the dealer that the
information is reasonably current; or
(2)(a) prior to any offer or sale, an application
for the authorization thereof and a report as set forth
under sub-paragraph (d) of this paragraph (2) has been
filed by any registered dealer with and approved by the
Secretary of State pursuant to such rules and regulations
as the Secretary of State may prescribe;
(b) the Secretary of State shall have the power by
order to refuse to approve any application or report
filed pursuant to this paragraph (2) if
(i) the application or report does not comply
with the provisions of this paragraph (2), or
(ii) the offer or sale of such securities
would work or tend to work a fraud or deceit, or
(iii) the issuer or the applicant has violated
any of the provisions of this Act;
(c) each application and report filed pursuant to
this paragraph (2) shall be accompanied by a filing fee
and an examination fee in the amount established pursuant
to Section 11a of this Act, which shall not be returnable
in any event;
(d) there shall be submitted to the Secretary of
State no later than 120 days following the end of the
issuer's fiscal year, each year during the period of the
authorization, one copy of a report which shall contain a
balance sheet and income statement prepared as of the
issuer's most recent fiscal year end certified by an
independent certified public accountant, together with
such current information concerning the securities and
the issuer thereof as the Secretary of State may
prescribe by rule or regulation or order;
(e) prior to any offer or sale of securities under
the provisions of this paragraph (2), each registered
dealer participating in the offer or sale of such
securities shall provide upon request of prospective
purchasers of such securities a copy of the most recent
report required under the provisions of sub-paragraph (d)
of this paragraph (2);
(f) approval of an application filed pursuant to
this paragraph (2) of subsection F shall expire 5 years
after the date of the granting of the approval, unless
said approval is sooner terminated by (1) suspension or
revocation by the Secretary of State in the same manner
as is provided for in subsections E, F and G of Section
11 of this Act, or (2) the applicant filing with the
Secretary of State an affidavit to the effect that (i)
the subject securities have become exempt under Section 3
of this Act or (ii) the applicant no longer is capable of
acting as the applicant and stating the reasons therefor
or (iii) the applicant no longer desires to act as the
applicant. In the event of the filing of an affidavit
under either preceding sub-division (ii) or (iii) the
Secretary of State may authorize a substitution of
applicant upon the new applicant executing the
application as originally filed. However, the
aforementioned substituted execution shall have no effect
upon the previously determined date of expiration of
approval of the application. Notwithstanding the
provisions of this subparagraph (f), approvals granted
under this paragraph (2) of subsection F prior to the
effective date of this Act shall be governed by the
provisions of this Act in effect on such date of
approval; and
(g) no person shall be considered to have violated
Section 5 of this Act by reason of any offer or sale
effected in reliance upon an approval granted under this
paragraph (2) after a termination thereof under the
foregoing subparagraph (f) if official notice of such
termination has not been circulated generally to dealers
by the Secretary of State and if such person sustains the
burden of proof that he or she did not know, and in the
exercise of reasonable care, could not have known, of the
termination; or
(3) the securities, or securities of the same
class, are the subject of an existing registration under
Section 5 of this Act.
The exemption provided in this subsection F shall apply
only if the offer or sale is made in good faith and not for
the purpose of avoiding any of the provisions of this Act,
and only if the offer or sale is not made for the direct or
indirect benefit of the issuer of the securities, or the
controlling person in respect of such issuer.
G. (1) Any offer, sale or issuance of a security,
whether to residents or to non-residents of this State,
where:
(a) all sales of such security to residents of this
State (including the most recent such sale) within the
immediately preceding 12-month period have been made to
not more than 35 persons or have involved an aggregate
sales price of not more than $1,000,000 $500,000;
(b) such security is not offered or sold by means
of any general advertising or general solicitation in
this State; and
(c) no commission, discount, or other remuneration
exceeding 20% of the sale price of such security, if sold
to a resident of this State, is paid or given directly or
indirectly for or on account of such sales.
(2) In computing the number of resident purchasers or
the aggregate sales price under paragraph (1) (a) above,
there shall be excluded any purchaser or dollar amount of
sales price, as the case may be, with respect to any security
which at the time of its sale was exempt under Section 3 or
was registered under Section 5, 6 or 7 or was sold in a
transaction exempt under other subsections of this Section 4.
(3) A prospectus or preliminary prospectus with respect
to a security for which a registration statement is pending
or effective under the Federal 1933 Act shall not be deemed
to constitute general advertising or general solicitation in
this State as such terms are used in paragraph (1) (b) above,
provided that such prospectus or preliminary prospectus has
not been sent or otherwise delivered to more than 150
residents of this State.
(4) The Secretary of State shall by rule or regulation
require the filing of a report or reports of sales made to
residents of this State in reliance upon the exemption
provided by this subsection G and prescribe the form of such
report and the time within which such report shall be filed.
Such report shall set forth the name and address of the
issuer and of the controlling person, if the sale was for the
direct or indirect benefit of such person, the total amount
of the securities sold under this subsection G to residents
of this State, the names and addresses of the resident
purchasers, a representation that sales of such securities
were not made to residents of this State in excess of those
permitted by this subsection G, and any other information
deemed necessary by the Secretary of State to enforce
compliance with this subsection G. The Secretary of State
shall prescribe by rule or regulation the amount of the fee
for filing any such report, but such fee shall not be less
than the minimum amount nor more than the maximum amount
established pursuant to Section 11a of this Act, which and
shall not be returnable in any event. The Secretary of State
may impose, in such cases as he or she may deem appropriate,
a penalty for failure to file any such report in a timely
manner, but no such penalty shall exceed an amount equal to
five times the filing fee. The contents of any such report
or portion thereof may shall be deemed confidential by the
Secretary of State by rule or order and if so deemed shall
not be disclosed to the public except by order of court or in
court proceedings. The failure to file any such report shall
not affect the availability of such exemption, but such
failure to file any such report shall constitute a violation
of subsection D of Section 12 of this Act, subject to the
penalties enumerated in Section 14 of this Act. The civil
remedies provided for in subsection A of Section 13 of this
Act and the civil remedies of rescission and appointment of a
receiver, conservator, ancillary receiver or ancillary
conservator provided for in subsection F of Section 13 of
this Act shall not be available against any person by reason
of the failure to file any such report or on account of the
contents of any such report.
H. Any offer, sale or issuance of a security to (1) any
natural person who has, or is reasonably believed by the
person relying upon this subsection H to have, a net worth or
joint net worth with that person's spouse, at the time of the
offer, sale or issuance, in excess of $1,000,000, or (2) any
natural person who had, or is reasonably believed by the
person relying upon this subsection H to have had, an income
or joint income with that person's spouse, in excess of
$200,000 in each of the two most recent years and who
reasonably expects, or is reasonably expected to have, an
income in excess of $200,000 in the current year, or (3) any
person that is not a natural person and in which at least 90%
of the equity interest is owned by persons who meet either of
the tests set forth in clauses (1) or (2) of this subsection
H; provided that such security is not offered or sold by
means of any general advertising or general solicitation in
this State.
I. Any offer, sale or issuance of securities to or for
the benefit of security holders of any person incident to a
vote by such security holders pursuant to such person's
organizational document or any applicable statute of the
jurisdiction of such person's organization, on a merger,
consolidation, reclassification of securities, or sale or
transfer of assets in consideration of or exchange for
securities of the same or another person.
J. Any offer, sale or issuance of securities in exchange
for one or more outstanding securities, claims or property
interests, or partly in such exchange and partly for cash,
where such offer, sale or issuance is incident to a
reorganization, recapitalization, readjustment, composition
or settlement of a claim, as approved by a court of competent
jurisdiction of the United States, or any state.
K. Any offer, sale or issuance of securities for
patronage, or as patronage refunds, or in connection with
marketing agreements by cooperative associations organized
exclusively for agricultural, producer, marketing,
purchasing, or consumer purposes; and the sale of
subscriptions for or shares of stock of cooperative
associations organized exclusively for agricultural,
producer, marketing, purchasing, or consumer purposes, if no
commission or other remuneration is paid or given directly or
indirectly for or on account of such subscription, sale or
resale, and if any person does not own beneficially more than
5% of the aggregate amount of issued and outstanding capital
stock of such cooperative association.
L. Offers for sale or solicitations of offers to buy
(but not the acceptance thereof), of securities which are the
subject of a pending registration statement filed under the
Federal 1933 Act and which are the subject of a pending
application for registration under this Act.
M. Any offer or sale of preorganization subscriptions
for any securities prior to the incorporation, organization
or formation of any issuer under the laws of the United
States, or any state, or the issuance by such issuer, after
its incorporation, organization or formation, of securities
pursuant to such preorganization subscriptions, provided the
number of subscribers does not exceed 25 and either (1) no
commission or other remuneration is paid or given directly or
indirectly for or on account of such sale or sales or
issuance, or (2) if any commission or other remuneration is
paid or given directly or indirectly for or on account of
such sale or sales or issuance, the securities are not
offered or sold by any means of general advertising or
general solicitation in this State.
N. The execution of orders for purchase of securities by
a registered salesperson and dealer, provided such persons
act as agent for the purchaser, have made no solicitation of
the order to purchase the securities, have no direct interest
in the sale or distribution of the securities ordered,
receive no commission, profit, or other compensation other
than the commissions involved in the purchase and sale of the
securities and deliver to the purchaser written confirmation
of the order which clearly identifies the commissions paid to
the registered dealer.
O. Any offer, sale or issuance of securities, other than
fractional undivided interests in an oil, gas or other
mineral lease, right or royalty, for the direct or indirect
benefit of the issuer thereof, or of a controlling person,
whether through a dealer (acting either as principal or
agent) or otherwise, if the securities sold, immediately
following the sale or sales, together with securities already
owned by the purchaser, would constitute 50% or more of the
equity interest of any one issuer, provided that the number
of purchasers is not more than 5 and provided further that no
commission, discount or other remuneration exceeding 15% of
the aggregate sale price of the securities is paid or given
directly or indirectly for or on account of the sale or
sales.
P. Any offer, sale or issuance of securities (except
face amount certificate contracts and investment fund shares)
issued by and representing an interest in an issuer which is
a business corporation incorporated under the laws of this
State, the purposes of which are to provide capital and
supervision solely for the redevelopment of blighted urban
areas located in a municipality in this State and whose
assets are located entirely within that municipality,
provided: (1) no commission, discount or other remuneration
is paid or given directly or indirectly for or on account of
the sale or sales of such securities; (2) the aggregate
amount of any securities of the issuer owned of record or
beneficially by any one person will not exceed the lesser of
$5,000 or 4% of the equity capitalization of the issuer; (3)
the officers and directors of the corporation have been bona
fide residents of the municipality not less than 3 years
immediately preceding the effectiveness of the offering sheet
for the securities under this subsection P; and (4) the
issuer files with the Secretary of State an offering sheet
descriptive of the securities setting forth:
(a) the name and address of the issuer;
(b) the title and total amount of securities to be
offered;
(c) the price at which the securities are to be
offered; and
(d) such additional information as the Secretary of
State may prescribe by rule and regulation.
The Secretary of State shall within a reasonable time
examine the offering sheet so filed and, unless the Secretary
of State shall make a determination that the offering sheet
so filed does not conform to the requirements of this
subsection P, shall declare the offering sheet to be
effective, which offering sheet shall continue effective for
a period of 12 months from the date it becomes effective.
The fee for examining the offering sheet shall be as
established pursuant to Section 11a of this Act, and shall
not be returnable in any event. The Secretary of State shall
by rule or regulation require the filing of a report or
reports of sales made to residents of this State in reliance
upon the exemption provided by this subsection P and
prescribe the form of such report and the time within which
such report shall be filed. The Secretary of State shall
prescribe by rule or regulation the amount of the fee for
filing any such report, but such fee shall not be less than
the minimum amount nor more than the maximum amount
established pursuant to Section 11a of this Act, and shall
not be returnable in any event. The Secretary of State may
impose, in such cases as he or she may deem appropriate, a
penalty for failure to file any such report in a timely
manner, but no such penalty shall exceed an amount equal to
five times the filing fee. The contents of any such report
shall be deemed confidential and shall not be disclosed to
the public except by order of court or in court proceedings.
The failure to file any such report shall not affect the
availability of such exemption, but such failure to file any
such report shall constitute a violation of subsection D of
Section 12 of this Act, subject to the penalties enumerated
in Section 14 of this Act. The civil remedies provided for
in subsection A of Section 13 of this Act and the civil
remedies of rescission and appointment of a receiver,
conservator, ancillary receiver or ancillary conservator
provided for in subsection F of Section 13 of this Act shall
not be available against any person by reason of the failure
to file any such report or on account of the contents of any
such report.
Q. Any isolated transaction, whether effected by a
dealer or not.
R. Any offer, sale or issuance of a security to any
person who purchases at least $150,000 of the securities
being offered, where the purchaser's total purchase price
does not, or it is reasonably believed by the person relying
upon this subsection R that said purchase price does not,
exceed 20 percent of the purchaser's net worth at the time of
sale, or if a natural person a joint net worth with that
person's spouse, for one or any combination of the following:
(i) cash, (ii) securities for which market quotations are
readily available, (iii) an unconditional obligation to pay
cash or securities for which quotations are readily
available, which obligation is to be discharged within five
years of the sale of the securities to the purchaser, or (iv)
the cancellation of any indebtedness owed by the issuer to
the purchaser; provided that such security is not offered or
sold by means of any general advertising or general
solicitation in this State.
S. Any offer, sale or issuance of a security to any
person who is, or who is reasonably believed by the person
relying upon this subsection S to be, a director, executive
officer, or general partner of the issuer of the securities
being offered or sold, or any director, executive officer, or
general partner of a general partner of that issuer. For
purposes of this subsection S, "executive officer" shall mean
the president, any vice president in charge of a principal
business unit, division or function (such as sales,
administration or finance), any other officer who performs a
policy making function, or any other person who performs
similar policy making functions for the issuer. Executive
officers of subsidiaries may be deemed executive officers of
the issuer if they perform such policy making functions for
the issuer.
A document being filed pursuant to this Section 4 shall
be deemed filed, and any fee paid pursuant to this Section 4
shall be deemed paid, upon the date of actual receipt thereof
by the Secretary of State.
(Source: P.A. 89-209, eff. 1-1-96; 89-626, eff. 8-9-96.)
(815 ILCS 5/5) (from Ch. 121 1/2, par. 137.5)
Sec. 5. Registration of Securities. All securities
except those set forth under Section 2a of this Act, or those
exempt under Section 3 of this Act, or those offered or sold
in transactions exempt under Section 4 of this Act, or face
amount certificate contracts required to be registered under
Section 6 of this Act, or investment fund shares required to
be registered under Section 7 of this Act, shall be
registered either by coordination or by qualification, as
hereinafter in this Section provided, prior to their offer or
sale in this State.
A. Registration by Coordination.
(1) Securities which are being or have been
registered under the Federal 1933 Act may be registered
by coordination in the manner provided in this subsection
A, if the effective date of the registration under the
Federal 1933 Act is not more than 30 days before the
filing with the Secretary of State.
(2) Securities may be registered by coordination by
the filing with the Secretary of State by the issuer, by
a controlling person or by a registered dealer of:
(a) One copy of the registration statement
(without exhibits) descriptive of the securities on
file with the Securities and Exchange Commission in
its most recent form as of the date of the initial
filing under this subsection A.;
(b) An application, in such form and executed,
verified, or authenticated by such person as the
Secretary of State shall by rule or regulation
prescribe, setting forth the title and the total
amount of securities to be offered, the amount of
securities and the proposed maximum aggregate price
thereof to be offered in this State under this
subsection A and, if the applicant is electing the
date of effectiveness of a post-effective amendment
as its effective date as provided in Section 2.13 of
this Act, specifying such date as the effective date
for purposes of registration under this subsection
A;
(c) An undertaking to forward to the Secretary
of State, in writing (which may be by electronic
telegraphic or facsimile transmission), any and all
subsequent amendments of and supplements to the
registration statement not later than the 7th day
after the forwarding thereof to the Securities and
Exchange Commission, or such longer period as the
Secretary of State may permit by rule, regulation or
order; and
(d) If the applicant is not a registered
dealer, the name of at least one registered dealer
for the securities being registered under this
subsection A (except that, in the case of securities
being offered and sold on a delayed or continuous
basis pursuant to Rule 415 under the Federal 1933
Act, 17 C.F.R. Section 230.415, or any similar or
successor rule thereto as may be designated by the
Secretary of State by rule or regulation, the name
of the registered dealer may be furnished no later
than the close of business on the second business
day following the commencement of sales of the
registered securities in this State) or a written
statement setting forth the method of offer and sale
in this State of the securities being registered in
compliance with Section 8 of this Act.
(3) Registration of securities by coordination
shall take effect automatically as of the effective date
of the registration statement (or post-effective
amendment) filed under the Federal 1933 Act, provided
that on the effective date, the information required by
sub-paragraphs (a), (b), and (d) and the undertaking
required by sub-paragraph (c) of paragraph (2) of this
subsection A have been on file with the Secretary of
State for at least 10 business days, or such shorter
period as the Secretary of State may permit by rule,
regulation or order. If, however, the time period
referred to in the preceding sentence shall not have
expired on the effective date of the registration
statement (or post-effective amendment) filed under the
Federal 1933 Act, registration of such securities by
coordination shall, upon the expiration of such time
period, take effect automatically as of the effective
date of the registration statement (or post-effective
amendment) filed under the Federal 1933 Act.
(4) If the information required by sub-paragraphs
(a), (b), and (d) and the undertaking required by
sub-paragraph (c) of paragraph (2) of this subsection A
are not filed with the Secretary of State prior to the
effective date of the registration statement (or
post-effective amendment) filed under the Federal 1933
Act, any registration of securities by coordination under
this subsection A shall take effect automatically as soon
as all of the following conditions have been satisfied:
(a) the information required by sub-paragraphs
(a), (b), and (d) and the undertaking required by
sub-paragraph (c) of paragraph (2) of this
subsection A have been on file with the Secretary of
State for 10 business days, or for such shorter
period as the Secretary of State may permit by rule,
regulation or order;
(b) the registration statement or
post-effective amendment filed under the Federal
1933 Act is then in effect; and
(c) the prospectus then on file with the
Secretary of State satisfies the requirements of
Section 10(a)(3) of the Federal 1933 Act.
(5) The applicant shall furnish to the Secretary of
State written notice (which may be by electronic,
telegraphic, or facsimile transmission) confirming the
date of effectiveness and the title of the securities
registered under the Federal 1933 Act, final pricing
information, the total amount of securities registered
under the Federal 1933 Act, and the amount registered in
this State if different than the amounts then on file
with the Secretary of State, no later than the close of
business on the second business day following the date on
which the registration statement becomes effective under
the Federal 1933 Act.
(6) No action by the Secretary of State shall be
necessary to evidence the effectiveness of the
registration by coordination under this subsection A.
The Secretary of State may, at his or her discretion,
provide a statement attesting to such registration, which
statement shall be in such form as the Secretary of State
may deem appropriate.
(7) Notwithstanding the foregoing, the issuer,
controlling person or registered dealer who filed the
application set forth in subparagraph (b) of paragraph
(2) of this subsection A may request, in writing (which
may be by electronic, telegraphic, or facsimile
transmission) prior to or upon notice of effectiveness
under the Federal 1933 Act, a waiver of automatic
effectiveness of the registration of securities and the
Secretary of State may, at his or her discretion, grant
such waiver of automatic effectiveness. Upon the grant
by the Secretary of State of the request of waiver of
automatic effectiveness, such registration of securities
shall become effective automatically on the date that the
issuer, controlling person or registered dealer who filed
the application set forth in subparagraph (b) of
paragraph (2) of this subsection A notifies the Secretary
of State in writing.
B. Registration by Qualification. Securities may be
registered by qualification in the manner provided in this
subsection B.
(1) An application for registration by
qualification shall be made by the issuer, by a
controlling person or by a registered dealer together
with the examination fee established pursuant to Section
11a of this Act, which is not returnable in any event.
Such application shall be executed, verified, or
authenticated by the applicant and filed with the
Secretary of State. The application shall set forth:
(a) The name and address of the issuer;
(b) The title and total amount of the
securities to be offered;
(c) The amount of the securities to be offered
in this State;
(d) The price at which the securities are to
be offered, or the method by which such price is to
be determined, provided that such price or method
may be furnished by written notice (which may be by
electronic, telegraphic, or facsimile transmission)
to the Secretary of State subsequent to the filing
of the application but prior to registration of the
securities under this Law; and
(e) The aggregate underwriting commissions,
remuneration or discount.
(2) If the issuer, dealer, or controlling person
has not filed a registration statement that is then in
effect under the Federal 1933 Act, there shall be filed
with the application:
(a) (Blank); If the issuer is a corporation, a
copy of its charter or articles of incorporation as
then in effect, unless then on file with the
Secretary of State; if other than a corporation, a
copy of all instruments, if any, by which the issuer
was created and all amendments thereto;
(b) (Blank); A copy of the by-laws, or other
code of regulations, if any, of the issuer;
(c) A copy of the indenture or other
instrument, if any, under which the securities are
to be or have been issued;
(d) A specimen copy of the securities or a
copy of the form of the instrument to evidence the
securities;
(e) An opinion of counsel as to the legality
of the securities;
(f) A copy of the underwriting and selling
agreements, if any;
(g) An undertaking to file promptly (no later
than 2 business days after the occurrence of any
event which requires a material change in the
prospectus) with the Secretary of State all
amendments of and supplements to the prospectus as
theretofore filed under this subsection B, together
with any additional information, document or
undertaking which the Secretary of State, at his or
her discretion, deems material, accompanied by the
amendment filing fee established pursuant to Section
11a of this Act or, in lieu thereof, a notification
in writing that all offers and sales of the
securities have been suspended pending the filing
with the Secretary of State of such amendment of or
supplement to the prospectus; and
(h) A written statement setting forth the name
of at least one registered dealer for the securities
being registered under this subsection B, or an
application for registration of a salesperson or a
written statement setting forth the method of offer
and sale in this State of the securities being
registered in compliance with Section 8 of this Act.
(3) In addition, there shall be filed with the
application such additional information and material in
such form as the Secretary of State may by rule,
regulation or order prescribe and a prospectus which
contains but is not limited to the following:
(a) The date and form of organization of the
issuer;
(b) A brief description of the business
conducted and intended to be conducted by the issuer
and by its subsidiaries and the general development
of such business during the past 5 years or such
shorter period as the issuer and such subsidiaries
may have been in existence;
(c) The location and general character of the
physical properties of the issuer and of its
subsidiaries;
(d) The authorized and issued capitalization
of the issuer and a description of the securities
being registered and of all authorized securities;
(e) The proposed method of sale of the
securities, the price thereof to the public or the
method by which such price is to be computed, and
the underwriting and selling discounts and
commissions;
(f) The intended use by the issuer of the
proceeds of the securities;
(g) The names and addresses of all of the
issuer's officers and directors, or persons
performing similar functions, their business
experience during the preceding 5 years and the
remuneration paid to each by the issuer and its
subsidiaries during the fiscal year last past and
proposed to be paid for the then current fiscal
year;
(h) The names and addresses of all persons
owning of record, and of all persons owning
beneficially, to the extent known to the applicant,
10% or more of any class of equity securities of the
issuer, and the percentage owned by each;
(i) A brief description of any pending
material legal proceeding, and of any material legal
proceeding known to be contemplated by governmental
authorities, involving the issuer or its
subsidiaries;
(j) The following financial statements of the
issuer:
(i) A balance sheet as of a date
within 135 days prior to the date of
submitting the application. If such
balance sheet is not certified by an
independent certified public accountant,
the prospectus shall also contain a
balance sheet certified by an independent
certified public accountant as of the
close of the issuer's last fiscal year,
unless such fiscal year ended within 135
days prior to the time of filing the
application, in which case the certified
balance sheet may be as of the end of the
preceding fiscal year.
(ii) An income statement for each of
the issuer's 3 fiscal years (or for the
period of existence of the issuer if less
than 3 years) next preceding the date of
the certified balance sheet and for the
period, if any, between the date of the
certified balance sheet and the date of
the most recent balance sheet. Such
statement shall be certified by an
independent certified public accountant
for the periods ending with the date of
the certified balance sheet.
(iii) An analysis of each surplus
account of the issuer for each period for
which an income statement is filed,
certified by an independent certified
public accountant for the periods for
which certified income statements are
filed.
(iv) An analysis (which need not be
certified to by independent certified
public accountants and which may be in
narrative form if desired by the
applicant) of all surplus accounts of the
issuer for a period beginning on a date
not less than 8 years prior to the date of
the certified balance sheet required by
the above sub-division (i) of this
sub-paragraph (j), or from the date of the
organization of the issuer, whichever is
later, and ending on the day before the
first day of the earliest period covered
by the analysis of surplus accounts
furnished pursuant to the above
sub-division (iii) of this sub-paragraph
(j); and
(k) If the issuer owns more than 50% of the
voting securities of one or more entities, there
shall also be included in the prospectus either (i)
like financial statements for each such entity, or
(ii) like consolidated financial statements for the
issuer and such entities;
(l) Anything in sub-paragraphs (j) and (k) of
this paragraph (3) to the contrary notwithstanding,
the financial statements contained in the prospectus
need not be certified by an independent certified
public accountant if the securities being registered
under this subsection B are covered by a
Notification under Regulation A or an Offering Sheet
under Regulation D adopted pursuant to the Federal
1933 Act or any other regulation so adopted which
the Secretary of State may by rule or regulation or
by order determine to have filing or disclosure
requirements substantially similar to such
Regulation A or Regulation D unless the financial
statements furnished pursuant to any such Federal
regulation are required to be or are certified by an
independent certified public accountant.
(4) If the securities being registered under this
subsection B are certificates of deposit, voting trust
certificates, collateral-trust certificates, certificates
of interest, fractional interests in oil, gas or other
mineral rights of unincorporated issuers or like
securities, the prospectus may omit such of the foregoing
items in sub-paragraphs (a) through (k) of paragraph (3)
of this subsection B, but shall include such pertinent
information, as the Secretary of State may by rule,
regulation or order prescribe; such prospectus shall
contain a description of the properties and businesses
from which such certificates, shares or interests derive
value.
(5) The Secretary of State may, upon written
request by the applicant and where consistent with the
protection of investors, permit the omission of one or
more of the financial statements required by this
subsection B or the filing in substitution therefor of
appropriate financial statements of comparable character
or permit the omission of any of the information required
by this subsection B. The Secretary of State may also by
written notice require the filing of other financial
statements or information in addition to, or in
substitution for, the financial statements or information
required by this subsection B in any case where such
additional financial statements or information is
necessary or appropriate for an adequate presentation of
the financial condition of any issuer or otherwise
required for fair disclosure respecting the business and
property of any issuer.
(6) The Secretary of State shall within a
reasonable time examine the application and documents
filed with him or her, and unless the Secretary of State
makes a determination that the application and documents
so filed do not conform to the requirements of this
subsection B, or there is a proceeding pending under
Section 11 of this Act, shall register the securities for
offer and sale in this State under this subsection B. If
the securities registered shall not have been sold and
distributed at the expiration of a period of 6 months
following the date of registration, the Secretary of
State may require the filing of such current information
concerning the securities and the issuer thereof as he or
she may by rule, regulation or order prescribe.
(7) The Secretary of State is granted authority to
create by rule or regulation a limited offering
registration provision that furthers the objectives of
compatibility with federal exemptions and uniformity
among the states. The Secretary of State shall prescribe
by rule or regulation the amount of the fees for
examining and filing any documents required under this
subparagraph, but each fee shall not be less than the
minimum amount nor more than the maximum amount
established under Section 11a of this Act and shall not
be returnable in any event.
C. Pending Application, Filing Fee and Oversales of
Securities.
(1) No application shall be deemed to be filed or
pending and no securities covered by such application
shall be deemed to be registered under subsection A of
this Section 5 unless a filing fee has been paid. No
application shall be deemed to be filed or pending and no
securities covered by such application shall be deemed to
be registered under subsection B of this Section 5 unless
the examination fee and filing fee have been paid. The
filing fee payable under the provisions of subsections A
and B of this Section 5 shall be established by rule or
regulation, but in no event shall the fee be less than
the minimum amount nor more than the maximum amount of
filing fee established pursuant to Section 11a of this
Act, and in no case shall such fee be returnable. The
"maximum aggregate price" as used in subsection A of this
Section 5 and in this subsection C shall be the
applicant's bona fide estimate thereof, determined in the
manner prescribed by the Secretary of State by rule or
regulation.
(2) If after an offering of securities is
registered under this Section 5 (except for securities
registered under subsection B of this Section 5 wherein
the entire offering of securities was registered), the
offeror sells or determines that it will sell, prior to
the expiration of the period during which the offeror
intends the registration of the securities together with
any renewals thereof to remain in effect in this State,
an amount of that offering in excess of the amount
registered, the applicant may amend the registration and
register the excess securities by filing an amended
application and paying a filing fee equal to the
difference between the initial filing fee paid and the
filing fee which would have been paid under paragraph (1)
of this subsection C for the entire amount registered
together with an additional fee established pursuant to
Section 11a of this Act. The fees shall not be
returnable in any event. With respect to the excess
securities being registered, the "maximum aggregate
price" shall be the actual sales price of such
securities. Upon receipt of such amended application,
filing fee, and additional fee by the Secretary of
State, registration of the excess securities shall become
effective retroactively to the date of the initial
registration.
D. Effective Period and Sales Reports.
(1) A registration effected under Section 5 of this
Act shall continue effective for a period of one year
from the date of registration or renewal of registration
unless sooner terminated by (1) suspension or revocation
by the Secretary of State; or (2) the applicant filing
with the Secretary of State an affidavit evidencing
either that (a) the securities have been fully sold and
distributed to the public or (b) that it is no longer
desired to offer such securities in this State or (c)
that such securities have become exempt from the
registration requirements under Section 3 or paragraph
(1) of subsection F of Section 4 of this Act.
(2) The Secretary of State may, at his or her
discretion, require each issuer, controlling person or
registered dealer on whose behalf a registration of
securities is effected under this Section 5 to file a
report, in such form and of such content and for such
time period as the Secretary of State may by rule or
regulation prescribe, stating the aggregate dollar amount
of securities sold to Illinois residents. The civil
remedies provided for in subsection A of Section 13 of
this Act and the civil remedies of rescission and
appointment of a receiver, conservator, ancillary
receiver or ancillary conservator provided for in
subsection I of Section 11 and in subsection F and G of
Section 13 of this Act and the civil remedies of
restitution, damages and disgorgement of profits provided
for in subsection I of Section 11 of this Act shall not
be available against any person by reason of the failure
to file any such report or on account of the contents of
any such report.
E. Renewal of Registration. A registration of securities
in effect under subsection A of this Section 5 or subsection
B of this Section 5 if a registration statement or
post-effective amendment is then in effect under the Federal
1933 Act may be renewed for the amount of securities which
remain unsold under such registration as then in effect, by
the issuer, by a controlling person or by a registered dealer
by filing an application for renewal with the Secretary of
State no later than 10 business days prior to the date (or
such lesser period as the Secretary of State may prescribe by
rule or regulation) upon which such registration would
otherwise expire, in such form and executed, verified, or
authenticated by such person as the Secretary of State shall
prescribe by rule or regulation. Such application shall be
accompanied by a prospectus in its most current form together
with a renewal fee equal in amount to a registration fee
calculated in accordance with paragraph (1) of subsection C
of this Section 5 and based upon the amount of securities
initially registered for sale in this State but which remain
unsold; except that the "maximum aggregate price" of such
securities shall be the applicant's bona fide estimate
thereof at the time the application for renewal of
registration is filed with the Secretary of State pursuant to
this subsection E. A renewal of registration of securities
shall take effect as of the date and time that the prior
registration under subsection A of this Section 5 or prior
renewal under this subsection E would otherwise have expired
and thereafter shall be deemed to be a new registration of
the amount of unsold securities specified in the application
for renewal. The Secretary of State may by rule or
regulation prescribe an additional fee for the failure to
file timely an application for renewal and limit the number
of times that a registration may be renewed.
F. The applicant or registrant shall notify the
Secretary of State, by written notice (which may be by
electronic, telegraphic, or facsimile transmission), within 2
business days after its receipt of any stop order, denial,
order to show cause, suspension or revocation order,
injunction or restraining order, or similar order entered or
issued by any state, federal or other regulatory authority or
by any court, concerning the securities which are being or
have been registered in this State or any other securities of
the issuer currently being or proposed to be offered to the
public, if the matter which is the subject of, or the failure
to disclose the existence of, such order would in this State
constitute a violation of subsection E, F, G, H, I or J of
Section 12 of this Act. The obligation contained in this
subsection F shall continue until such time as offers and
sales of the securities registered under this Section 5 are
no longer being made in this State by the applicant or
registrant.
G. Any document being filed pursuant to this Section 5
shall be deemed filed, and any fee being paid pursuant to
this Section 5 shall be deemed paid, upon the date of actual
receipt thereof by the Secretary of State.
H. The Secretary of State may require by rule or
regulation the payment of an additional fee for the filing of
information or documents required to be filed by this Section
5 which have not been filed in a timely manner. Such fees
shall be deposited into the Securities Investors Education
Fund, a special fund hereby created in the State treasury.
The amounts deposited into such Fund shall be used to promote
public awareness of the dangers of securities fraud.
(Source: P.A. 89-209, eff. 1-1-96; 89-626, eff. 8-9-96.)
(815 ILCS 5/6) (from Ch. 121 1/2, par. 137.6)
Sec. 6. Registration of Face Amount Certificate
Contracts. All face amount certificate contracts except
those set forth under Section 2a of this Act, or those exempt
under Section 3 of this Act, or those offered or sold in
transactions exempt under Section 4 of this Act, shall be
registered either by coordination or by qualification, as
hereinafter in this Section provided, prior to their offer or
sale in this State.
A. Registration of Face Amount Certificate Contracts by
Coordination.
(1) Face amount certificate contracts which are
being or have been registered under the Federal 1933 Act
may be registered by coordination in the manner provided
in this subsection A, if the effective date of the
registration under the Federal 1933 Act is not more than
30 days before the filing with the Secretary of State.
(2) Face amount certificate contracts may be
registered by coordination by the filing with the
Secretary of State by the issuer, by a controlling person
or by a registered dealer of:
(a) One copy of the registration statement
(without exhibits) descriptive of the face amount
certificate contracts on file with the Securities
and Exchange Commission in its most recent form as
of the date of the initial filing under this
subsection A;
(b) An application, in such form and executed,
verified, or authenticated by such person as the
Secretary of State shall by rule or regulation
prescribe, setting forth the title of every series,
type or class of face amount certificate contracts
to be offered in this State under this subsection A
and, if the applicant is electing the date of
effectiveness of a post-effective amendment as its
effective date as provided in Section 2.13 of this
Act, specifying such date as the effective date for
purposes of registration under this subsection A;
(c) An undertaking to forward to the Secretary
of State, in writing (which may be by electronic
telegraphic or facsimile transmission), any and all
subsequent amendments of and supplements to the
registration statement not later than the 7th day
after the forwarding thereof to the Securities and
Exchange Commission, or such longer period as the
Secretary of State may permit by rule, regulation or
order; and
(d) If the applicant is not a registered
dealer, the name of at least one registered dealer
for the face amount certificate contracts being
registered under this subsection A or a written
statement setting forth the method of offer and sale
in this State of the face amount certificate
contracts being registered in compliance with
Section 8 of this Act.
(3) Registration of face amount certificate
contracts by coordination shall take effect automatically
as of the effective date of the registration statement
(or post-effective amendment) filed under the Federal
1933 Act, provided that on the effective date, the
information required by sub-paragraphs (a), (b), and (d)
and the undertaking required by sub-paragraph (c) of
paragraph (2) of this subsection A have been on file with
the Secretary of State for at least 10 business days, or
such shorter period as the Secretary of State may permit
by rule, regulation or order. If, however, the time
period referred to in the preceding sentence shall not
have expired on the effective date of the registration
statement (or post-effective amendment) filed under the
Federal 1933 Act, registration of such face amount
certificate contracts by coordination shall, upon the
expiration of such time period, take effect automatically
as of the effective date of the registration statement
(or post-effective amendment) filed under the Federal
1933 Act.
(4) If the information required by sub-paragraphs
(a), (b), and (d) and the undertaking required by
sub-paragraph (c) of paragraph (2) of this subsection A
are not filed with the Secretary of State prior to the
effective date of the registration statement (or
post-effective amendment) filed under the Federal 1933
Act, any registration of face amount certificate
contracts by coordination under this subsection A shall
take effect automatically as soon as all of the following
conditions have been satisfied:
(a) the information required by sub-paragraphs
(a), (b), and (d) and the undertaking required by
sub-paragraph (c) of paragraph (2) of this
subsection A have been on file with the Secretary of
State for 10 business days, or for such shorter
period as the Secretary of State may permit by rule,
regulation or order;
(b) the registration statement or
post-effective amendment filed under the Federal
1933 Act is then in effect; and
(c) the prospectus then on file with the
Secretary of State satisfies the requirements of
Section 10(a)(3) of the Federal 1933 Act.
(5) The applicant shall furnish to the Secretary of
State written notice (which may be by electronic,
telegraphic, or facsimile transmission) confirming the
date of effectiveness and the title of the face amount
certificate contracts registered under the Federal 1933
Act, no later than the close of business on the second
business day following the date on which registration
becomes effective under the Federal 1933 Act.
(6) No action by the Secretary of State shall be
necessary to evidence the effectiveness of the
registration by coordination under this subsection A.
The Secretary of State may, at his or her discretion,
provide a statement attesting to such registration, which
statement shall be in such form as the Secretary of State
may deem appropriate.
(7) Notwithstanding the foregoing, the issuer,
controlling person or registered dealer who filed the
application set forth in subparagraph (b) of paragraph
(2) of this subsection A may request, in writing (which
may be by electronic, telegraphic, or facsimile
transmission) prior to or upon notice of effectiveness
under the Federal 1933 Act, a waiver of automatic
effectiveness of the registration of the face amount
certificate contracts and the Secretary of State may, at
his or her discretion, grant such waiver of automatic
effectiveness. Upon the grant by the Secretary of State
of the request of waiver of automatic effectiveness, such
registration of the face amount certificate contracts
shall become effective automatically on the date that the
issuer, controlling person or registered dealer who filed
the application set forth in subparagraph (b) of
paragraph (2) of this subsection A notifies the Secretary
of State in writing.
B. Registration of Face Amount Certificate Contracts by
Qualification. Face amount certificate contracts may be
registered by qualification in the manner provided in this
subsection B.
(1) An application for registration by
qualification shall be made by the issuer, by a
controlling person or by a registered dealer together
with the examination fee established pursuant to Section
11a of the Act, which shall not be returnable in any
event. Such application shall be executed, verified, or
authenticated by the applicant and filed with the
Secretary of State. The application shall set forth:
(a) The names and addresses of the persons
creating or sponsoring the face amount certificate
contracts; and
(b) The title of each series, type or class of
face amount certificate contracts to be offered.
(2) If the issuer, dealer, or controlling person
has not filed a registration statement or post-effective
amendment which is then in effect under the Federal 1933
Act, there shall be filed with the application:
(a) Specimen copies of each and every series,
type or class of face amount certificate contract
proposed to be offered in this State, and specimen
copies of each and every form of face amount
certificate contract or other security being issued
or proposed to be offered and issued elsewhere;
(b) (Blank); If the issuer is a corporation, a
copy of its charter or articles of incorporation and
all amendments thereto, unless then on file with the
Secretary of State; or if other than a corporation,
a copy of all instruments, if any, by which the
issuer was created, and all amendments thereto;
(c) (Blank); A copy of the by-laws or other
code of regulations, if any, of the issuer;
(d) An opinion of counsel as to the legality
of the face amount certificate contracts;
(e) An undertaking to file promptly (no later
than 2 business days after the occurrence of any
event which requires a material change in the
prospectus) with the Secretary of State any and all
amendments of and supplements to the prospectus as
theretofore filed under this subsection B, together
with any additional information, document or
undertaking which the Secretary of State at his or
her discretion, deems material, accompanied by the
amendment filing fee established pursuant to Section
11a of this Act or, in lieu thereof, a notification
in writing that all offers and sales of the face
amount certificate contracts have been suspended
pending the filing with the Secretary of State of
such amendment of or supplement to the prospectus;
and
(3) In addition, there shall be filed with the
application such additional information and material in
such form as the Secretary of State may by rule,
regulation or order prescribe and a prospectus which
contains, but is not limited to the following:
(a) The date and form of organization of the
issuer;
(b) A brief description of the business
conducted and intended to be conducted by the issuer
and by its subsidiaries and the general development
of such business during the past 5 years or such
shorter period as the issuer and such subsidiaries
may have been in existence;
(c) The location and general character of the
physical properties of the issuer and of its
subsidiaries;
(d) A complete description of the terms and
conditions of each and every series, type or class
of face amount certificate contracts being issued or
proposed to be offered in this State or elsewhere,
which description shall include appropriate tables
of initial or periodic installment payments required
of the purchaser, surrender or liquidation values,
maturity values, optional plans of extended contract
periods and schedules of annuity payments which may
be elected by a face amount certificate contract
holder;
(e) A schedule of all types of deductions
which may be made from plan payments or the income
therefrom or the avails thereof as charges prior to
distributions to holders of the face amount
certificate contracts;
(f) The names and addresses of all of the
issuer's officers and directors, or persons
performing similar functions, their business
experience during the preceding 5 years and the
remuneration paid to each by the issuer and its
subsidiaries during the fiscal year last past and
proposed to be paid for the then current fiscal
year;
(g) The names and addresses of all persons
owning of record, and of all persons owning
beneficially, to the extent known to the applicant,
10% or more of any class of equity securities of the
issuer, and the percentage owned by each;
(h) A brief description of any pending
material legal proceeding, and of any material legal
proceeding known to be contemplated by governmental
authorities, involving the issuer or its
subsidiaries; and
(i) The following financial statements of the
issuer:
(i) a balance sheet as of a date within
135 days prior to the date application for
registration is received by the Secretary of
State, which balance sheet, if not certified by
an independent certified public accountant,
shall be accompanied by a certified balance
sheet of the issuer as of the close of the last
prior fiscal year;
(ii) a detailed statement of income and
expenses, including income from investments,
service fees, loading and other sources,
operating expenses and provisions for contract
reserves or any additional credits to contract
liabilities, profits realized and losses
sustained in transactions in investments, and
all other charges to operations, for a period
of not less than 3 fiscal years (or for the
period of existence of the issuer if less than
3 years) last preceding the date of the balance
sheet presented under subdivision (i) of this
subparagraph (i), which statement of income and
expenses, if not certified by an independent
certified public accountant, shall be
accompanied by a certified statement of income
and expenses for a period of 3 years last
preceding the uncertified period or periods
presented as and for this subdivision (ii);
(iii) a detailed analysis of each surplus
and reserve account for the same period or
periods covered by subdivision (ii) of this
subparagraph (i), with like requirement for
independent certification; and
(iv) such other financial data as the
Secretary of State may reasonably require in
any specific case or by rule or regulation.
(4) The Secretary of State shall within a
reasonable time examine the application and related
documents filed with him or her and, unless the Secretary
of State makes a determination that the application and
related documents so filed do not conform to the
requirements of this subsection B or there is a
proceeding pending under Section 11 of this Act, shall
upon receipt of the deposit required by subsection G of
this Section 6 and upon receipt of the registration fee
as hereinafter prescribed, register the face amount
certificate contracts, as described by series, type or
class within the application, for offer and sale in this
State under this subsection B.
C. Pending Application and Filing Fee. No application
for registration of face amount certificate contracts shall
be deemed to be filed or pending and no face amount
certificate contracts covered by such application shall be
deemed to be registered under subsection A of this Section 6
unless a filing fee in the amount established pursuant to
Section 11a of this Act has been paid, which shall not be
returnable in any event. No application for registration of
face amount certificate contracts shall be deemed to be filed
or pending and no face amount certificate contracts covered
by such application shall be deemed to be registered under
subsection B of this Section 6 unless the examination fee and
filing fee established pursuant to Section 11a of this Act
have been paid, which fees shall not be returnable in any
event.
D. Effective Period and Sales Reports.
(1) A registration under subsection A or B of this
Section 6, unless sooner terminated by the voluntary
action of the issuer, or by suspension or revocation by
the Secretary of State, shall continue in force and
effect for a period of one year from the date of
registration or renewal of registration or such other
period of time as the Secretary of State may prescribe by
rule or regulation, and shall permit the offer and sale
of face amount certificate contracts so registered
without limitation as to number or aggregate amount
during such period of registration; provided, however,
that, in the case of face amount certificate contracts
registered under subsection B of this Section 6, the
issuer shall promptly file with the Secretary of State,
throughout such registration year, (i) one specimen copy
of each monthly, quarterly, semi-annual or other periodic
or special report and of each financial statement
distributed to contract holders; (ii) one certified copy
of all statements and reports filed with any regulatory
authority or agency of the Federal Government which
relate to the issuer or the issuance of the securities
registered pursuant to this Section 6 and (iii) one copy
of each independently certified audit report pertaining
to the financial affairs and position of the issuer
covering the issuer's fiscal year ending during the
registration year, to be supplied to the Secretary of
State as soon as available after the close of the
issuer's fiscal year.
(2) The Secretary of State may, at his or her
discretion, require each issuer, controlling person or
registered dealer on whose behalf a registration of face
amount certificate contracts is effective under this
Section 6 to file a report, in such form and of such
content and for such time period as the Secretary of
State may by rule or regulation prescribe, stating the
aggregate dollar amount of face amount certificate
contracts sold to Illinois residents. The civil remedies
provided for in subsection A of Section 13 of this Act
and the civil remedies of rescission and appointment of a
receiver, conservator, ancillary receiver or ancillary
conservator provided for in subsection I of Section 11
and in subsections F and G of Section 13 of this Act and
the civil remedies of restitution, damages and
disgorgement of profits provided for in subsection I of
Section 11 of this Act shall not be available against any
person by reason of the failure to file any such report
or on account of the contents of any such report.
E. Amendatory statements and required fees. The
Secretary of State may by rule or regulation require the
filing of an amendatory statement and prescribe its form and
content. The fee for filing the statement shall be
established pursuant to Section 11a of this Act. The fee
shall not be returnable in any event.
F. Renewal of Registration. A registration of face
amount certificate contracts in effect under subsection A or
B of this Section 6 may be renewed by the issuer by filing an
application for renewal with the Secretary of State no later
than 10 business days prior to the date upon which such
registration would otherwise expire, (or such lesser period
as the Secretary of State may prescribe by rule or
regulation) in such form and executed, verified, or
authenticated by such person as the Secretary of State shall
prescribe by rule or regulation. Such application shall be
accompanied by a prospectus in its most current form together
with a renewal fee established pursuant to Section 11a of
this Act, which shall not be returnable in any event. A
renewal of registration of face amount certificate contracts
shall take effect as of the date and time that the prior
registration under subsection A of this Section 6 or prior
renewal under this subsection F would otherwise have expired
and (or such alternative date as the Secretary of State may
prescribe by rule or regulation) thereafter shall be deemed
to be a new registration of the face amount certificate
contracts covered thereby. The Secretary of State may by
rule or regulation prescribe an additional fee for the
failure to file timely an application for renewal and limit
the number of times a registration may be renewed.
G. Deposit of Securities. No face amount certificate
contract shall be registered under subsection B of this
Section 6 unless the issuer shall establish and maintain with
the Secretary of State, for the benefit of the holders of
such contracts residing in this State, a deposit of
securities representing debt obligations of the kind in which
life insurance companies organized under the laws of this
State are permitted to invest their funds, in an amount
having a fair market value of not less than $100,000 and at
no time less than the current contract liability on all such
face amount certificate contracts held by persons residing in
this State, and provided further that deposited securities,
other than those secured by entire first mortgage or trust
deeds on improved unencumbered real estate, are issued by an
issuer required to file reports pursuant to Section 13 or
15(d) of the Federal 1934 Act or are covered by Section
12(g)(2)(B) or (G) of the Federal 1934 Act, or appear in
current quotations in transactions on exchanges recognized by
subsection G of Section 3 of this Act, and provided further,
that bonds or notes secured by mortgages or trust deeds be
limited to those (i) constituting the entire indebtedness
secured thereby, (ii) establishing a first lien on improved
real estate held in fee simple, and (iii) insured by the
Federal Housing Administrator under an Act of Congress of the
United States entitled "National Housing Act". Debentures
issued by the Federal Housing Administrator under an Act of
Congress of the United States entitled the "National Housing
Act" may be included in the deposit prescribed by this
subsection in amounts related to, and in substitution for,
specific insured mortgage loans then included in the subject
deposit which are in default, but at no time shall the
aggregate principal amount of such debentures included in the
subject deposit exceed 5% of the fair market value of
securities comprising the subject deposit. The current
contract liability in respect of contracts held by persons
residing in this State shall be that as determined in such
contracts as computed by the issuer and regularly certified
to the Secretary of State, on or before the last day of each
calendar month as of the close of the month last prior to the
date of reporting.
Securities deposited as hereinabove required may be
withdrawn by the depositor at any time, and from time to
time, whenever other securities eligible for deposit and of a
fair market value not less than that withdrawn are deposited
in substitution for securities withdrawn.
The Secretary of State may, upon receipt of appropriate
certification in writing, deemed by the Secretary of State to
be competent and adequate, evidencing the reduction of
contract liability on contracts held by persons residing in
this State to an aggregate amount representing not more than
90% of the fair market value of the securities then on
deposit, permit an equivalent reduction in the deposited
securities.
H. Minimum Deposit; Annual Fee; Transaction Charge. The
initial and continuing deposit required hereby shall, so long
as the face amount certificate contracts registered under
subsection B of this Section 6 are being offered and sold in
this State, and until all contract liability on all contracts
outstanding in this State has been discharged, include
obligations of the United States or the State of Illinois in
bearer form or fully registered, or registered as to
principal, in the title of Treasurer of the State of
Illinois, and his or her successors in office, in the minimum
principal amount of $50,000. An issuer of face amount
certificate contracts, in respect of which a deposit is
required to be established and maintained under this Section
6, and an issuer of face amount certificate contracts
heretofore qualified for issuance to persons residing in this
State under "An Act relating to the sale or other disposition
of securities and providing penalties for the violation
thereof and to repeal Acts in conflict therewith", approved
June 10, 1919, as amended, and in respect of which a deposit
of securities was established and has been maintained under
the Act approved June 10, 1919, as cited above, shall pay to
the Secretary of State an annual fee determined at the rate
of 1/30th of one percent on the average of quarterly
computations on the aggregate of principal amounts of
market-quoted or listed securities and the original loan
amounts of real estate loans insured by the Federal Housing
Administrator, and in addition each such issuer shall pay to
the Secretary of State, against quarterly billings therefor,
a transaction charge in the amount established pursuant to
Section 11a of this Act, which annual fee and transaction
charge shall not be returnable in any event, for each
separate issue or loan included in additions to and
withdrawals from such deposits, provided however that the
transaction charge established pursuant to Section 11a of
this Act for each separate issue of market-quoted or listed
securities shall apply to all the items of that issue
included in a single transaction, regardless of the aggregate
principal amount, and in respect of real estate loans such
transaction charge shall apply to the group of documents
pertaining to each separate loan, and not to the separate
items and documents included in such group.
Nothing herein contained in respect of prescribed custody
of deposited securities with the State Treasurer and of
permissible procedures of liquidation of deposited securities
by the Secretary of State in the event of insolvency of an
issuer of face amount certificate contracts, or the
appointment of a trustee in bankruptcy, shall preclude the
surrender of deposited securities to a duly qualified trustee
under appointment by a Court having jurisdiction under the
Federal Bankruptcy Code under an appropriate order of such
Court.
I. Liquidation of Securities. Upon the insolvency of
the issuer of face amount certificate contracts or
appointment of a receiver or trustee in bankruptcy, the
Secretary of State, if not required otherwise under Federal
law or under an order of a Federal Court of competent
jurisdiction, may apply to the Circuit Court of Sangamon
County, or any other court of competent jurisdiction, for
authority to proceed for the liquidation of such securities
held for the benefit of the holders of such contracts who
reside in this State. The Secretary of State is hereby
authorized to deal with such securities on deposit in this
State for the benefit of the holders of such face amount
certificate contracts, in his or her name or, if the Court
shall so order, in the name of the issuer. The Secretary of
State may, subject to the approval of the Court, sell or
otherwise dispose of the securities so deposited or any part
thereof. The Secretary of State shall as soon as may be
conveniently possible, give notice by publication as provided
by law, and as the Court may direct, to all contract holders
residing in this State who may have claims against the issuer
under such face amount certificate contracts and for whose
benefit such deposit is held, to file and prove their claims
in the manner and within the time the Court shall direct. In
order to preserve so far as possible the rights and interests
of the holders of outstanding contracts of such issuer who
reside in this State, the Secretary of State may liquidate
such securities on deposit in this State by entering into
contracts with any issuer or person able to buy such
securities in whole, or in part. Upon receiving an offer or
offers for the purchase of such securities in whole, or in
part, the Secretary of State shall submit such offer or
offers to the Court, and if, after a full hearing upon the
petition filed by the Secretary of State, the court shall
find that the Secretary of State endeavored to obtain the
best contract price for the benefit of the contract holders,
and if the court shall find that the best contract price in
the interests of the contract holders has been obtained, and
that it is for the best interests of the holders of such
contracts that such securities be sold, the court shall, by
written order approve the acts of the Secretary of State and
authorize him or her to dispose of such securities. Upon the
conversion of such securities to cash, the Secretary of State
may then proceed to dispose of the sum received for such
securities among the respective holders of such contracts as
their interests may appear. Upon the liquidation and
distribution of such funds, the Secretary of State may make
proper liquidation of such securities and the distribution or
disposition thereof or of the proceeds therefrom as herein
provided.
For the purpose of liquidation of such securities, the
Secretary of State shall have the power to appoint one or
more special deputies as his or her agent or agents and to
employ such clerks, assistants or attorneys as may by him or
her be deemed necessary and to give each of such persons such
power to assist him or her as he or she may consider wise.
The compensation of every such special deputy, agent, clerk,
assistant or attorney shall be fixed, and all expenses of
taking possession of such securities of the issuer and the
administration thereof shall be approved, by the Secretary of
State subject to the approval of the court and shall be paid
out of the funds or assets received from the liquidation of
such securities.
J. The applicant or registrant shall notify the
Secretary of State, by written notice (which may be by
electronic, telegraphic, or facsimile transmission), within 2
business days after its receipt of any stop order, denial,
order to show cause, suspension or revocation order,
injunction or restraining order, or similar order entered or
issued by any state, federal or other regulatory authority or
by any court, concerning the face amount certificate
contracts which are being or have been registered in this
State or any other securities of the issuer currently being
or proposed to be offered to the public, if the matter which
is the subject of, or the failure to disclose the existence
of, such order would in this State constitute a violation of
subsection E, F, G, H, I or J of Section 12 of this Act. The
obligation contained in this subsection J shall continue
until such time as offers and sales of the face amount
certificate contracts registered under this Section 6 are no
longer being made in this State by the applicant or
registrant.
K. Any document being filed pursuant to this Section 6
shall be deemed filed, and any fee being paid pursuant to
this Section 6 shall be deemed paid, upon the date of actual
receipt thereof by the Secretary of State.
L. The Secretary of State may require by rule or
regulation the payment of an additional fee for the filing of
information or documents required to be filed by this Section
6 which have not been filed in a timely manner. Such fees
shall be deposited into the Securities Investors Education
Fund and used to promote public awareness of the dangers of
securities fraud.
(Source: P.A. 89-209, eff. 1-1-96.)
(815 ILCS 5/7) (from Ch. 121 1/2, par. 137.7)
Sec. 7. Registration of Investment Fund Shares. All
investment fund shares except those set forth under Section
2a of this Act, or those exempt under Section 3 of this Act,
or those offered or sold in transactions exempt under Section
4 of this Act, or face amount certificate contracts required
to be registered under Section 6 of this Act, shall be
registered either by coordination or by qualification, as
hereinafter in this Section provided, prior to their offer or
sale in this State. Additional classes of shares that are of
the same rank, general description, and characteristics as
those currently registered may be added to a current
registration under this Section upon the filing of an
amendment and the payment of the additional fees as
prescribed by the Secretary of State by rule or regulation.
Any change in organization or plans of operation shall be
disclosed to the Secretary of State by filing an amendment to
a current registration and the payment of the additional fees
as prescribed by the Secretary of State by rule or
regulation.
A. Registration of Investment Fund Shares by
Coordination.
(1) Investment fund shares which are being or have
been registered under the Federal 1933 Act and the
Federal 1940 Investment Company Act may be registered by
coordination in the manner provided in this subsection A,
if the effective date of the registration under the
Federal 1933 Act is not more than 30 days before the
filing with the Secretary of State.
(2) Investment fund shares may be registered by
coordination by the filing with the Secretary of State by
the issuer, by a controlling person or by a registered
dealer of:
(a) One copy of the registration statement
(without exhibits) descriptive of the investment
fund shares on file with the Securities and Exchange
Commission in its most recent form as of the date of
the initial filing under this subsection A;
(b) An application, in such form and executed,
verified, or authenticated by such person as the
Secretary of State shall by rule or regulation
prescribe, setting forth the title of the investment
fund shares to be offered in this State under this
subsection A and, if the applicant is electing the
date of effectiveness of a post-effective amendment
as its effective date as provided in Section 2.13 of
this Act, specifying such date as the effective date
for purposes of registration under this subsection
A; and
(c) An undertaking to forward to the Secretary
of State, in writing (which may be by electronic
telegraphic or facsimile transmission), any and all
subsequent amendments of and supplements to the
registration statement not later than the 7th day
after the forwarding thereof to the Securities and
Exchange Commission, or such longer period as the
Secretary of State may permit by rule, regulation or
order; and
(d) if the applicant is not a registered
dealer, the name of at least one registered dealer
for the investment fund shares being registered
under this subsection A or a written statement
setting forth the method of offer and sale in this
State of the investment fund shares being registered
in compliance with Section 8 of this Act.
(3) Registration of investment fund shares by
coordination shall take effect automatically as of the
effective date of the registration statement (or
post-effective amendment) filed under the Federal 1933
Act, provided that on the effective date, the information
required by sub-paragraphs (a), (b), and (d) and the
undertaking required by sub-paragraph (c) of paragraph
(2) of this subsection A have been on file with the
Secretary of State for at least 10 business days, or such
shorter period as the Secretary of State may permit by
rule, regulation or order. If, however, the time period
referred to in the preceding sentence shall not have
expired on the effective date of the registration
statement (or post-effective amendment) filed under the
Federal 1933 Act, registration of such investment fund
shares by coordination shall, upon the expiration of such
time period, take effect automatically as of the
effective date of the registration statement (or
post-effective amendment) filed under the Federal 1933
Act.
(4) If the information required by sub-paragraphs
(a), (b), and (d) and the undertaking required by
sub-paragraph (c) of paragraph (2) of this subsection A
are not filed with the Secretary of State prior to the
effective date of the registration statement (or
post-effective amendment) filed under the Federal 1933
Act, any registration of investment fund shares by
coordination under this subsection A shall take effect
automatically as soon as all of the following conditions
have been satisfied:
(a) the information required by sub-paragraphs
(a), (b), and (d) and the undertaking required by
sub-paragraph (c) of paragraph (2) of this
subsection A have been on file with the Secretary of
State for 10 business days, or for such shorter
period as the Secretary of State may permit by rule,
regulation or order;
(b) the registration statement or
post-effective amendment filed under the Federal
1933 Act is then in effect; and
(c) the prospectus then on file with the
Secretary of State satisfies the requirements of
Section 10(a)(3) of the Federal 1933 Act.
(5) The applicant shall furnish to the Secretary of
State written notice (which may be by electronic,
telegraphic, or facsimile transmission) confirming the
date of effectiveness and the title of the investment
fund shares registered under the Federal 1933 Act, no
later than the close of business on the second business
day following the date on which registration statement
becomes effective under the Federal 1933 Act.
(6) No action by the Secretary of State shall be
necessary to evidence the effectiveness of the
registration by coordination under this subsection A.
The Secretary of State may, at his or her discretion,
provide a statement attesting to such registration, which
statement shall be in such form as the Secretary of State
may deem appropriate.
(7) Notwithstanding the foregoing, the issuer,
controlling person or registered dealer who filed the
application set forth in subparagraph (b) of paragraph
(2) of this subsection A may request, in writing (which
may be by electronic, telegraphic, or facsimile
transmission) prior to or upon notice of effectiveness
under the Federal 1933 Act, a waiver of automatic
effectiveness of the registration of investment fund
shares and the Secretary of State may, at his or her
discretion, grant such waiver of automatic effectiveness.
Upon the grant by the Secretary of State of the request
of waiver of automatic effectiveness, such registration
of investment fund shares shall become effective
automatically on the date that the issuer, controlling
person or registered dealer who filed the application set
forth in subparagraph (b) of paragraph (2) of this
subsection A notifies the Secretary of State in writing.
B. Registration of Investment Fund Shares by
Qualification. Investment fund shar