SB1628 EngrossedLRB101 05279 TAE 50292 b

1    AN ACT concerning business.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Securities Law of 1953 is amended
5by changing Sections 2.11, 2.12b, 8, and 12 and by adding
6Section 3.5 as follows:
 
7    (815 ILCS 5/2.11)  (from Ch. 121 1/2, par. 137.2-11)
8    Sec. 2.11. Investment adviser. "Investment adviser" means
9any person who, for compensation, engages in this State in the
10business of advising others, either directly or through
11publications or writings, as to the value of securities or as
12to the advisability of investing in, purchasing, or selling
13securities or who, in this State for direct or indirect
14compensation and as part of a regular advisory business, issues
15or promulgates analyses or reports concerning securities or any
16financial planner or other person who, as an integral component
17of other financially related services, provides the foregoing
18investment advisory services to others for compensation and as
19part of a business, or who holds himself or herself out as
20providing the foregoing investment advisory services to others
21for compensation; but "investment adviser" does not include:
22    (1) a bank or trust company, or the regular employees of a
23bank or trust company;

 

 

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1    (2) any lawyer, accountant, engineer, geologist or teacher
2(i) whose performance of such services is solely incidental to
3the practice of his or her profession or (ii) who:
4        (A) does not exercise investment discretion with
5    respect to the assets of clients or maintain custody of the
6    assets of clients for the purpose of investing those
7    assets, except when the person is acting as a bona fide
8    fiduciary in a capacity such as an executor, trustee,
9    personal representative, estate or trust agent, guardian,
10    conservator, or person serving in a similar fiduciary
11    capacity;
12        (B) does not accept or receive, directly or indirectly,
13    any commission, fee, or other remuneration contingent upon
14    the purchase or sale of any specific security by a client
15    of such person; and
16        (C) does not advise on the purchase or sale of specific
17    securities, except that this clause (C) shall not apply
18    when the advice about specific securities is based on
19    financial statement analyses or tax considerations that
20    are reasonably related to and in connection with the
21    person's profession;
22    (3) any registered dealer or partner, officer, director or
23regular employee of a registered dealer, or registered
24salesperson, whose performance of these services, in each case,
25is solely incidental to the conduct of the business of the
26registered dealer or registered salesperson, as the case may

 

 

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1be, and who receives no special compensation, directly or
2indirectly, for such services;
3    (4) any publisher or regular employee of such publisher of
4a bona fide newspaper, news magazine or business or financial
5publication of regular and established paid circulation;
6    (5) any person whose advice, analyses or reports relate
7only to securities which are direct obligations of, or
8obligations guaranteed as to principal or interest by, the
9United States, any state or any political subdivision of any
10state, or any public agency or public instrumentality of any
11one or more of the foregoing;
12    (5.5) any person who is a federal covered investment
13adviser; or
14    (6) any other persons who are not within the intent of this
15Section as the Secretary of State may designate by rules and
16regulations or order.
17(Source: P.A. 90-70, eff. 7-8-97.)
 
18    (815 ILCS 5/2.12b)  (from Ch. 121 1/2, par. 137.2-12b)
19    Sec. 2.12b. Investment adviser representative. "Investment
20adviser representative" means, with respect to an investment
21adviser who is required to register under this Act, any
22partner, officer, director of (or a person occupying a similar
23status or performing similar functions), or other natural
24person employed by or associated with an investment adviser,
25except clerical or ministerial personnel, who in this State:

 

 

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1        (1) makes any recommendations or otherwise renders
2    advice regarding securities or investment products;
3        (2) manages accounts or portfolios of clients;
4        (3) determines what recommendation or advice regarding
5    securities or investments should be given;
6        (4) supervises any employee who performs any of the
7    foregoing; or
8        (5) solicits, refers, offers, or negotiates for the
9    sale of, or sells, investment advisory services.
10    With respect to a federal covered investment adviser,
11"investment adviser representative" means any person who is an
12investment adviser representative with a place of business in
13this State as such terms are defined by the Securities and
14Exchange Commission under Section 203A of the Federal 1940
15Investment Advisers Act.
16(Source: P.A. 90-70, eff. 7-8-97; 90-667, eff. 7-30-98; 91-809,
17eff. 1-1-01.)
 
18    (815 ILCS 5/3.5 new)
19    Sec. 3.5. Authority of Secretary of State. Notwithstanding
20any other law, the Secretary of State has the authority to
21enforce this Act as it pertains to the offer, sale, or
22investment advice concerning a covered security as defined by
23Section 2.29.
 
24    (815 ILCS 5/8)  (from Ch. 121 1/2, par. 137.8)

 

 

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1    Sec. 8. Registration of dealers, limited Canadian dealers,
2Internet portals, salespersons, investment advisers, and
3investment adviser representatives.
 
4    A. Except as otherwise provided in this subsection A, every
5dealer, limited Canadian dealer, salesperson, investment
6adviser, and investment adviser representative shall be
7registered as such with the Secretary of State. No dealer or
8salesperson need be registered as such when offering or selling
9securities in transactions exempted by subsection A, B, C, D,
10E, G, H, I, J, K, M, O, P, Q, R or S of Section 4 of this Act,
11provided that such dealer or salesperson is not regularly
12engaged in the business of offering or selling securities in
13reliance upon the exemption set forth in subsection G or M of
14Section 4 of this Act. No dealer, issuer or controlling person
15shall employ a salesperson unless such salesperson is
16registered as such with the Secretary of State or is employed
17for the purpose of offering or selling securities solely in
18transactions exempted by subsection A, B, C, D, E, G, H, I, J,
19K, L, M, O, P, Q, R or S of Section 4 of this Act; provided that
20such salesperson need not be registered when effecting
21transactions in this State limited to those transactions
22described in Section 15(h)(2) of the Federal 1934 Act or
23engaging in the offer or sale of securities in respect of which
24he or she has beneficial ownership and is a controlling person.
25The Secretary of State may, by rule, regulation or order and

 

 

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1subject to such terms, conditions, and fees as may be
2prescribed in such rule, regulation or order, exempt from the
3registration requirements of this Section 8 any investment
4adviser, if the Secretary of State shall find that such
5registration is not necessary in the public interest by reason
6of the small number of clients or otherwise limited character
7of operation of such investment adviser.
 
8    B. An application for registration as a dealer or limited
9Canadian dealer, executed, verified, or authenticated by or on
10behalf of the applicant, shall be filed with the Secretary of
11State, in such form as the Secretary of State may by rule,
12regulation or order prescribe, setting forth or accompanied by:
13        (1) The name and address of the applicant, the location
14    of its principal business office and all branch offices, if
15    any, and the date of its organization;
16        (2) A statement of any other Federal or state licenses
17    or registrations which have been granted the applicant and
18    whether any such licenses or registrations have ever been
19    refused, cancelled, suspended, revoked or withdrawn;
20        (3) The assets and all liabilities, including
21    contingent liabilities of the applicant, as of a date not
22    more than 60 days prior to the filing of the application;
23        (4) (a) A brief description of any civil or criminal
24    proceeding of which fraud is an essential element pending
25    against the applicant and whether the applicant has ever

 

 

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1    been convicted of a felony, or of any misdemeanor of which
2    fraud is an essential element;
3        (b) A list setting forth the name, residence and
4    business address and a 10 year occupational statement of
5    each principal of the applicant and a statement describing
6    briefly any civil or criminal proceedings of which fraud is
7    an essential element pending against any such principal and
8    the facts concerning any conviction of any such principal
9    of a felony, or of any misdemeanor of which fraud is an
10    essential element;
11        (5) If the applicant is a corporation: a list of its
12    officers and directors setting forth the residence and
13    business address of each; a 10-year occupational statement
14    of each such officer or director; and a statement
15    describing briefly any civil or criminal proceedings of
16    which fraud is an essential element pending against each
17    such officer or director and the facts concerning any
18    conviction of any officer or director of a felony, or of
19    any misdemeanor of which fraud is an essential element;
20        (6) If the applicant is a sole proprietorship, a
21    partnership, limited liability company, an unincorporated
22    association or any similar form of business organization:
23    the name, residence and business address of the proprietor
24    or of each partner, member, officer, director, trustee or
25    manager; the limitations, if any, of the liability of each
26    such individual; a 10-year occupational statement of each

 

 

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1    such individual; a statement describing briefly any civil
2    or criminal proceedings of which fraud is an essential
3    element pending against each such individual and the facts
4    concerning any conviction of any such individual of a
5    felony, or of any misdemeanor of which fraud is an
6    essential element;
7        (7) Such additional information as the Secretary of
8    State may by rule or regulation prescribe as necessary to
9    determine the applicant's financial responsibility,
10    business repute and qualification to act as a dealer.
11        (8) (a) No applicant shall be registered or
12    re-registered as a dealer or limited Canadian dealer under
13    this Section unless and until each principal of the dealer
14    has passed an examination conducted by the Secretary of
15    State or a self-regulatory organization of securities
16    dealers or similar person, which examination has been
17    designated by the Secretary of State by rule, regulation or
18    order to be satisfactory for purposes of determining
19    whether the applicant has sufficient knowledge of the
20    securities business and laws relating thereto to act as a
21    registered dealer. Any dealer who was registered on
22    September 30, 1963, and has continued to be so registered;
23    and any principal of any registered dealer, who was acting
24    in such capacity on and continuously since September 30,
25    1963; and any individual who has previously passed a
26    securities dealer examination administered by the

 

 

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1    Secretary of State or any examination designated by the
2    Secretary of State to be satisfactory for purposes of
3    determining whether the applicant has sufficient knowledge
4    of the securities business and laws relating thereto to act
5    as a registered dealer by rule, regulation or order, shall
6    not be required to pass an examination in order to continue
7    to act in such capacity. The Secretary of State may by
8    order waive the examination requirement for any principal
9    of an applicant for registration under this subsection B
10    who has had such experience or education relating to the
11    securities business as may be determined by the Secretary
12    of State to be the equivalent of such examination. Any
13    request for such a waiver shall be filed with the Secretary
14    of State in such form as may be prescribed by rule or
15    regulation.
16        (b) Unless an applicant is a member of the body
17    corporate known as the Securities Investor Protection
18    Corporation established pursuant to the Act of Congress of
19    the United States known as the Securities Investor
20    Protection Act of 1970, as amended, a member of an
21    association of dealers registered as a national securities
22    association pursuant to Section 15A of the Federal 1934
23    Act, or a member of a self-regulatory organization or stock
24    exchange in Canada which the Secretary of State has
25    designated by rule or order, an applicant shall not be
26    registered or re-registered unless and until there is filed

 

 

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1    with the Secretary of State evidence that such applicant
2    has in effect insurance or other equivalent protection for
3    each client's cash or securities held by such applicant,
4    and an undertaking that such applicant will continually
5    maintain such insurance or other protection during the
6    period of registration or re-registration. Such insurance
7    or other protection shall be in a form and amount
8    reasonably prescribed by the Secretary of State by rule or
9    regulation.
10        (9) The application for the registration of a dealer or
11    limited Canadian dealer shall be accompanied by a filing
12    fee and a fee for each branch office in this State, in each
13    case in the amount established pursuant to Section 11a of
14    this Act, which fees shall not be returnable in any event.
15        (10) The Secretary of State shall notify the dealer or
16    limited Canadian dealer by written notice (which may be by
17    electronic or facsimile transmission) of the effectiveness
18    of the registration as a dealer in this State.
19        (11) Any change which renders no longer accurate any
20    information contained in any application for registration
21    or re-registration of a dealer or limited Canadian dealer
22    shall be reported to the Secretary of State within 10
23    business days after the occurrence of such change; but in
24    respect to assets and liabilities only materially adverse
25    changes need be reported.
 

 

 

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1    C. Any registered dealer, limited Canadian dealer, issuer,
2or controlling person desiring to register a salesperson shall
3file an application with the Secretary of State, in such form
4as the Secretary of State may by rule or regulation prescribe,
5which the salesperson is required by this Section to provide to
6the dealer, issuer, or controlling person, executed, verified,
7or authenticated by the salesperson setting forth or
8accompanied by:
9        (1) the name, residence and business address of the
10    salesperson;
11        (2) whether any federal or State license or
12    registration as dealer, limited Canadian dealer, or
13    salesperson has ever been refused the salesperson or
14    cancelled, suspended, revoked, withdrawn, barred, limited,
15    or otherwise adversely affected in a similar manner or
16    whether the salesperson has ever been censured or expelled;
17        (3) the nature of employment with, and names and
18    addresses of, employers of the salesperson for the 10 years
19    immediately preceding the date of application;
20        (4) a brief description of any civil or criminal
21    proceedings of which fraud is an essential element pending
22    against the salesperson, and whether the salesperson has
23    ever been convicted of a felony, or of any misdemeanor of
24    which fraud is an essential element;
25        (5) such additional information as the Secretary of
26    State may by rule, regulation or order prescribe as

 

 

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1    necessary to determine the salesperson's business repute
2    and qualification to act as a salesperson; and
3        (6) no individual shall be registered or re-registered
4    as a salesperson under this Section unless and until such
5    individual has passed an examination conducted by the
6    Secretary of State or a self-regulatory organization of
7    securities dealers or similar person, which examination
8    has been designated by the Secretary of State by rule,
9    regulation or order to be satisfactory for purposes of
10    determining whether the applicant has sufficient knowledge
11    of the securities business and laws relating thereto to act
12    as a registered salesperson.
13        Any salesperson who was registered prior to September
14    30, 1963, and has continued to be so registered, and any
15    individual who has passed a securities salesperson
16    examination administered by the Secretary of State or an
17    examination designated by the Secretary of State by rule,
18    regulation or order to be satisfactory for purposes of
19    determining whether the applicant has sufficient knowledge
20    of the securities business and laws relating thereto to act
21    as a registered salesperson, shall not be required to pass
22    an examination in order to continue to act as a
23    salesperson. The Secretary of State may by order waive the
24    examination requirement for any applicant for registration
25    under this subsection C who has had such experience or
26    education relating to the securities business as may be

 

 

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1    determined by the Secretary of State to be the equivalent
2    of such examination. Any request for such a waiver shall be
3    filed with the Secretary of State in such form as may be
4    prescribed by rule, regulation or order.
5        (7) The application for registration of a salesperson
6    shall be accompanied by a filing fee and a Securities Audit
7    and Enforcement Fund fee, each in the amount established
8    pursuant to Section 11a of this Act, which shall not be
9    returnable in any event.
10        (8) Any change which renders no longer accurate any
11    information contained in any application for registration
12    or re-registration as a salesperson shall be reported to
13    the Secretary of State within 10 business days after the
14    occurrence of such change. If the activities are terminated
15    which rendered an individual a salesperson for the dealer,
16    issuer or controlling person, the dealer, issuer or
17    controlling person, as the case may be, shall notify the
18    Secretary of State, in writing, within 30 days of the
19    salesperson's cessation of activities, using the
20    appropriate termination notice form.
21        (9) A registered salesperson may transfer his or her
22    registration under this Section 8 for the unexpired term
23    thereof from one registered dealer or limited Canadian
24    dealer to another by the giving of notice of the transfer
25    by the new registered dealer or limited Canadian dealer to
26    the Secretary of State in such form and subject to such

 

 

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1    conditions as the Secretary of State shall by rule or
2    regulation prescribe. The new registered dealer or limited
3    Canadian dealer shall promptly file an application for
4    registration of such salesperson as provided in this
5    subsection C, accompanied by the filing fee prescribed by
6    paragraph (7) of this subsection C.
 
7    C-5. Except with respect to federal covered investment
8advisers whose only clients are investment companies as defined
9in the Federal 1940 Act, other investment advisers, federal
10covered investment advisers, or any similar person which the
11Secretary of State may prescribe by rule or order, a federal
12covered investment adviser shall file with the Secretary of
13State, prior to acting as a federal covered investment adviser
14in this State, such documents as have been filed with the
15Securities and Exchange Commission as the Secretary of State by
16rule or order may prescribe. The notification of a federal
17covered investment adviser shall be accompanied by a
18notification filing fee established pursuant to Section 11a of
19this Act, which shall not be returnable in any event. Every
20person acting as a federal covered investment adviser in this
21State shall file a notification filing and pay an annual
22notification filing fee established pursuant to Section 11a of
23this Act, which is not returnable in any event. The failure to
24file any such notification shall constitute a violation of
25subsection D of Section 12 of this Act, subject to the

 

 

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1penalties enumerated in Section 14 of this Act. Until October
210, 1999 or other date as may be legally permissible, a federal
3covered investment adviser who fails to file the notification
4or refuses to pay the fees as required by this subsection shall
5register as an investment adviser with the Secretary of State
6under Section 8 of this Act. The civil remedies provided for in
7subsection A of Section 13 of this Act and the civil remedies
8of rescission and appointment of receiver, conservator,
9ancillary receiver, or ancillary conservator provided for in
10subsection F of Section 13 of this Act shall not be available
11against any person by reason of the failure to file any such
12notification or to pay the notification fee or on account of
13the contents of any such notification.
 
14    D. An application for registration as an investment
15adviser, executed, verified, or authenticated by or on behalf
16of the applicant, shall be filed with the Secretary of State,
17in such form as the Secretary of State may by rule or
18regulation prescribe, setting forth or accompanied by:
19        (1) The name and form of organization under which the
20    investment adviser engages or intends to engage in
21    business; the state or country and date of its
22    organization; the location of the adviser's principal
23    business office and branch offices, if any; the names and
24    addresses of the adviser's principal, partners, officers,
25    directors, and persons performing similar functions or, if

 

 

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1    the investment adviser is an individual, of the individual;
2    and the number of the adviser's employees who perform
3    investment advisory functions;
4        (2) The education, the business affiliations for the
5    past 10 years, and the present business affiliations of the
6    investment adviser and of the adviser's principal,
7    partners, officers, directors, and persons performing
8    similar functions and of any person controlling the
9    investment adviser;
10        (3) The nature of the business of the investment
11    adviser, including the manner of giving advice and
12    rendering analyses or reports;
13        (4) The nature and scope of the authority of the
14    investment adviser with respect to clients' funds and
15    accounts;
16        (5) The basis or bases upon which the investment
17    adviser is compensated;
18        (6) Whether the investment adviser or any principal,
19    partner, officer, director, person performing similar
20    functions or person controlling the investment adviser (i)
21    within 10 years of the filing of the application has been
22    convicted of a felony, or of any misdemeanor of which fraud
23    is an essential element, or (ii) is permanently or
24    temporarily enjoined by order or judgment from acting as an
25    investment adviser, underwriter, dealer, principal or
26    salesperson, or from engaging in or continuing any conduct

 

 

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1    or practice in connection with any such activity or in
2    connection with the purchase or sale of any security, and
3    in each case the facts relating to the conviction, order or
4    judgment;
5        (7) (a) A statement as to whether the investment
6    adviser is engaged or is to engage primarily in the
7    business of rendering investment supervisory services; and
8        (b) A statement that the investment adviser will
9    furnish his, her, or its clients with such information as
10    the Secretary of State deems necessary in the form
11    prescribed by the Secretary of State by rule or regulation;
12        (8) Such additional information as the Secretary of
13    State may, by rule, regulation or order prescribe as
14    necessary to determine the applicant's financial
15    responsibility, business repute and qualification to act
16    as an investment adviser.
17        (9) No applicant shall be registered or re-registered
18    as an investment adviser under this Section unless and
19    until each principal of the applicant who is actively
20    engaged in the conduct and management of the applicant's
21    advisory business in this State has passed an examination
22    or completed an educational program conducted by the
23    Secretary of State or an association of investment advisers
24    or similar person, which examination or educational
25    program has been designated by the Secretary of State by
26    rule, regulation or order to be satisfactory for purposes

 

 

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1    of determining whether the applicant has sufficient
2    knowledge of the securities business and laws relating
3    thereto to conduct the business of a registered investment
4    adviser.
5        Any person who was a registered investment adviser
6    prior to September 30, 1963, and has continued to be so
7    registered, and any individual who has passed an investment
8    adviser examination administered by the Secretary of
9    State, or passed an examination or completed an educational
10    program designated by the Secretary of State by rule,
11    regulation or order to be satisfactory for purposes of
12    determining whether the applicant has sufficient knowledge
13    of the securities business and laws relating thereto to
14    conduct the business of a registered investment adviser,
15    shall not be required to pass an examination or complete an
16    educational program in order to continue to act as an
17    investment adviser. The Secretary of State may by order
18    waive the examination or educational program requirement
19    for any applicant for registration under this subsection D
20    if the principal of the applicant who is actively engaged
21    in the conduct and management of the applicant's advisory
22    business in this State has had such experience or education
23    relating to the securities business as may be determined by
24    the Secretary of State to be the equivalent of the
25    examination or educational program. Any request for a
26    waiver shall be filed with the Secretary of State in such

 

 

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1    form as may be prescribed by rule or regulation.
2        (10) No applicant shall be registered or re-registered
3    as an investment adviser under this Section 8 unless the
4    application for registration or re-registration is
5    accompanied by an application for registration or
6    re-registration for each person acting as an investment
7    adviser representative on behalf of the adviser and a
8    Securities Audit and Enforcement Fund fee that shall not be
9    returnable in any event is paid with respect to each
10    investment adviser representative.
11        (11) The application for registration of an investment
12    adviser shall be accompanied by a filing fee and a fee for
13    each branch office in this State, in each case in the
14    amount established pursuant to Section 11a of this Act,
15    which fees shall not be returnable in any event.
16        (12) The Secretary of State shall notify the investment
17    adviser by written notice (which may be by electronic or
18    facsimile transmission) of the effectiveness of the
19    registration as an investment adviser in this State.
20        (13) Any change which renders no longer accurate any
21    information contained in any application for registration
22    or re-registration of an investment adviser shall be
23    reported to the Secretary of State within 10 business days
24    after the occurrence of the change. In respect to assets
25    and liabilities of an investment adviser that retains
26    custody of clients' cash or securities or accepts

 

 

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1    pre-payment of fees in excess of $500 per client and 6 or
2    more months in advance only materially adverse changes need
3    be reported by written notice (which may be by electronic
4    or facsimile transmission) no later than the close of
5    business on the second business day following the discovery
6    thereof.
7        (14) Each application for registration as an
8    investment adviser shall become effective automatically on
9    the 45th day following the filing of the application,
10    required documents or information, and payment of the
11    required fee unless (i) the Secretary of State has
12    registered the investment adviser prior to that date or
13    (ii) an action with respect to the applicant is pending
14    under Section 11 of this Act.
 
15    D-5. A registered investment adviser or federal covered
16investment adviser desiring to register an investment adviser
17representative shall file an application with the Secretary of
18State, in the form as the Secretary of State may by rule or
19order prescribe, which the investment adviser representative
20is required by this Section to provide to the investment
21adviser, executed, verified, or authenticated by the
22investment adviser representative and setting forth or
23accompanied by:
24        (1) The name, residence, and business address of the
25    investment adviser representative;

 

 

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1        (2) A statement whether any federal or state license or
2    registration as a dealer, salesperson, investment adviser,
3    or investment adviser representative has ever been
4    refused, canceled, suspended, revoked or withdrawn;
5        (3) The nature of employment with, and names and
6    addresses of, employers of the investment adviser
7    representative for the 10 years immediately preceding the
8    date of application;
9        (4) A brief description of any civil or criminal
10    proceedings, of which fraud is an essential element,
11    pending against the investment adviser representative and
12    whether the investment adviser representative has ever
13    been convicted of a felony or of any misdemeanor of which
14    fraud is an essential element;
15        (5) Such additional information as the Secretary of
16    State may by rule or order prescribe as necessary to
17    determine the investment adviser representative's business
18    repute or qualification to act as an investment adviser
19    representative;
20        (6) Documentation that the individual has passed an
21    examination conducted by the Secretary of State, an
22    organization of investment advisers, or similar person,
23    which examination has been designated by the Secretary of
24    State by rule or order to be satisfactory for purposes of
25    determining whether the applicant has sufficient knowledge
26    of the investment advisory or securities business and laws

 

 

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1    relating to that business to act as a registered investment
2    adviser representative; and
3        (7) A Securities Audit and Enforcement Fund fee
4    established under Section 11a of this Act, which shall not
5    be returnable in any event.
6    The Secretary of State may by order waive the examination
7requirement for an applicant for registration under this
8subsection D-5 who has had the experience or education relating
9to the investment advisory or securities business as may be
10determined by the Secretary of State to be the equivalent of
11the examination. A request for a waiver shall be filed with the
12Secretary of State in the form as may be prescribed by rule or
13order.
14    A change that renders no longer accurate any information
15contained in any application for registration or
16re-registration as an investment adviser representative must
17be reported to the Secretary of State within 10 business days
18after the occurrence of the change. If the activities that
19rendered an individual an investment adviser representative
20for the investment adviser are terminated, the investment
21adviser shall notify the Secretary of State in writing (which
22may be by electronic or facsimile transmission), within 30 days
23of the investment adviser representative's termination, using
24the appropriate termination notice form as the Secretary of
25State may prescribe by rule or order.
26    A registered investment adviser representative may

 

 

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1transfer his or her registration under this Section 8 for the
2unexpired term of the registration from one registered
3investment adviser to another by the giving of notice of the
4transfer by the new investment adviser to the Secretary of
5State in the form and subject to the conditions as the
6Secretary of State shall prescribe. The new registered
7investment adviser shall promptly file an application for
8registration of the investment adviser representative as
9provided in this subsection, accompanied by the Securities
10Audit and Enforcement Fund fee prescribed by paragraph (7) of
11this subsection D-5.
 
12    E. (1) Subject to the provisions of subsection F of Section
1311 of this Act, the registration of a dealer, limited Canadian
14dealer, salesperson, investment adviser, or investment adviser
15representative may be denied, suspended or revoked if the
16Secretary of State finds that the dealer, limited Canadian
17dealer, Internet portal, salesperson, investment adviser, or
18investment adviser representative or any principal officer,
19director, partner, member, trustee, manager or any person who
20performs a similar function of the dealer, limited Canadian
21dealer, Internet portal, or investment adviser:
22        (a) has been convicted of any felony during the 10 year
23    period preceding the date of filing of any application for
24    registration or at any time thereafter, or of any
25    misdemeanor of which fraud is an essential element;

 

 

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1        (b) has engaged in any unethical practice in connection
2    with any security, or in any fraudulent business practice;
3        (c) has failed to account for any money or property, or
4    has failed to deliver any security, to any person entitled
5    thereto when due or within a reasonable time thereafter;
6        (d) in the case of a dealer, limited Canadian dealer,
7    or investment adviser, is insolvent;
8        (e) in the case of a dealer, limited Canadian dealer,
9    salesperson, or registered principal of a dealer or limited
10    Canadian dealer (i) has failed reasonably to supervise the
11    securities activities of any of its salespersons or other
12    employees and the failure has permitted or facilitated a
13    violation of Section 12 of this Act or (ii) is offering or
14    selling or has offered or sold securities in this State
15    through a salesperson other than a registered salesperson,
16    or, in the case of a salesperson, is selling or has sold
17    securities in this State for a dealer, limited Canadian
18    dealer, issuer or controlling person with knowledge that
19    the dealer, limited Canadian dealer, issuer or controlling
20    person has not complied with the provisions of this Act or
21    (iii) has failed reasonably to supervise the
22    implementation of compliance measures following notice by
23    the Secretary of State of noncompliance with the Act or
24    with the regulations promulgated thereunder or both or (iv)
25    has failed to maintain and enforce written procedures to
26    supervise the types of business in which it engages and to

 

 

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1    supervise the activities of its salespersons that are
2    reasonably designed to achieve compliance with applicable
3    securities laws and regulations;
4        (f) in the case of an investment adviser, has failed
5    reasonably to supervise the advisory activities of any of
6    its investment adviser representatives or employees and
7    the failure has permitted or facilitated a violation of
8    Section 12 of this Act;
9        (g) has violated any of the provisions of this Act;
10        (h) has made any material misrepresentation to the
11    Secretary of State in connection with any information
12    deemed necessary by the Secretary of State to determine a
13    dealer's, limited Canadian dealer's, or investment
14    adviser's financial responsibility or a dealer's, limited
15    Canadian dealer's, investment adviser's, salesperson's, or
16    investment adviser representative's business repute or
17    qualifications, or has refused to furnish any such
18    information requested by the Secretary of State;
19        (i) has had a license or registration under any Federal
20    or State law regulating securities, commodity futures
21    contracts, or stock futures contracts refused, cancelled,
22    suspended, withdrawn, revoked, or otherwise adversely
23    affected in a similar manner;
24        (j) has had membership in or association with any
25    self-regulatory organization registered under the Federal
26    1934 Act or the Federal 1974 Act suspended, revoked,

 

 

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1    refused, expelled, cancelled, barred, limited in any
2    capacity, or otherwise adversely affected in a similar
3    manner arising from any fraudulent or deceptive act or a
4    practice in violation of any rule, regulation or standard
5    duly promulgated by the self-regulatory organization;
6        (k) has had any order entered against it after notice
7    and opportunity for hearing by a securities agency of any
8    state, any foreign government or agency thereof, the
9    Securities and Exchange Commission, or the Federal
10    Commodities Futures Trading Commission arising from any
11    fraudulent or deceptive act or a practice in violation of
12    any statute, rule or regulation administered or
13    promulgated by the agency or commission;
14        (l) in the case of a dealer or limited Canadian dealer,
15    fails to maintain a minimum net capital in an amount which
16    the Secretary of State may by rule or regulation require;
17        (m) has conducted a continuing course of dealing of
18    such nature as to demonstrate an inability to properly
19    conduct the business of the dealer, limited Canadian
20    dealer, salesperson, investment adviser, or investment
21    adviser representative;
22        (n) has had, after notice and opportunity for hearing,
23    any injunction or order entered against it or license or
24    registration refused, cancelled, suspended, revoked,
25    withdrawn, limited, or otherwise adversely affected in a
26    similar manner by any state or federal body, agency or

 

 

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1    commission regulating banking, insurance, finance or small
2    loan companies, real estate or mortgage brokers or
3    companies, if the action resulted from any act found by the
4    body, agency or commission to be a fraudulent or deceptive
5    act or practice in violation of any statute, rule or
6    regulation administered or promulgated by the body, agency
7    or commission;
8        (o) has failed to file a return, or to pay the tax,
9    penalty or interest shown in a filed return, or to pay any
10    final assessment of tax, penalty or interest, as required
11    by any tax Act administered by the Illinois Department of
12    Revenue, until such time as the requirements of that tax
13    Act are satisfied;
14        (p) (blank);
15        (q) has failed to maintain the books and records
16    required under this Act or rules or regulations promulgated
17    under this Act or under any requirements established by the
18    Securities and Exchange Commission or a self-regulatory
19    organization;
20        (r) has refused to allow or otherwise impeded designees
21    of the Secretary of State from conducting an audit,
22    examination, inspection, or investigation provided for
23    under Section 8 or 11 of this Act;
24        (s) has failed to maintain any minimum net capital or
25    bond requirement set forth in this Act or any rule or
26    regulation promulgated under this Act;

 

 

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1        (t) has refused the Secretary of State or his or her
2    designee access to any office or location within an office
3    to conduct an investigation, audit, examination, or
4    inspection;
5        (u) has advised or caused a public pension fund or
6    retirement system established under the Illinois Pension
7    Code to make an investment or engage in a transaction not
8    authorized by that Code;
9        (v) if a corporation, limited liability company, or
10    limited liability partnership has been suspended,
11    canceled, revoked, or has failed to register as a foreign
12    corporation, limited liability company, or limited
13    liability partnership with the Secretary of State;
14        (w) is permanently or temporarily enjoined by any court
15    of competent jurisdiction, including any state, federal,
16    or foreign government, from engaging in or continuing any
17    conduct or practice involving any aspect of the securities
18    or commodities business or in any other business where the
19    conduct or practice enjoined involved investments,
20    franchises, insurance, banking, or finance;
21    (2) If the Secretary of State finds that any registrant or
22applicant for registration is no longer in existence or has
23ceased to do business as a dealer, limited Canadian dealer,
24Internet portal, salesperson, investment adviser, or
25investment adviser representative, or is subject to an
26adjudication as a person under legal disability or to the

 

 

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1control of a guardian, or cannot be located after reasonable
2search, or has failed after written notice to pay to the
3Secretary of State any additional fee prescribed by this
4Section or specified by rule or regulation, the Secretary of
5State may by order cancel the registration or application.
6    (3) Withdrawal of an application for registration or
7withdrawal from registration as a dealer, limited Canadian
8dealer, salesperson, investment adviser, or investment adviser
9representative becomes effective 30 days after receipt of an
10application to withdraw or within such shorter period of time
11as the Secretary of State may determine, unless any proceeding
12is pending under Section 11 of this Act when the application is
13filed or a proceeding is instituted within 30 days after the
14application is filed. If a proceeding is pending or instituted,
15withdrawal becomes effective at such time and upon such
16conditions as the Secretary of State by order determines. If no
17proceeding is pending or instituted and withdrawal
18automatically becomes effective, the Secretary of State may
19nevertheless institute a revocation or suspension proceeding
20within 2 years after withdrawal became effective and enter a
21revocation or suspension order as of the last date on which
22registration was effective.
 
23    F. The Secretary of State shall make available upon request
24the date that each dealer, investment adviser, salesperson, or
25investment adviser representative was granted registration,

 

 

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1together with the name and address of the dealer, limited
2Canadian dealer, or issuer on whose behalf the salesperson is
3registered, and all orders of the Secretary of State denying or
4abandoning an application, or suspending or revoking
5registration, or censuring the persons. The Secretary of State
6may designate by rule, regulation or order the statements,
7information or reports submitted to or filed with him or her
8pursuant to this Section 8 which the Secretary of State
9determines are of a sensitive nature and therefore should be
10exempt from public disclosure. Any such statement, information
11or report shall be deemed confidential and shall not be
12disclosed to the public except upon the consent of the person
13filing or submitting the statement, information or report or by
14order of court or in court proceedings.
 
15    G. The registration or re-registration of a dealer or
16limited Canadian dealer and of all salespersons registered upon
17application of the dealer or limited Canadian dealer shall
18expire on the next succeeding anniversary date of the
19registration or re-registration of the dealer; and the
20registration or re-registration of an investment adviser and of
21all investment adviser representatives registered upon
22application of the investment adviser shall expire on the next
23succeeding anniversary date of the registration of the
24investment adviser; provided, that the Secretary of State may
25by rule or regulation prescribe an alternate date which any

 

 

SB1628 Engrossed- 31 -LRB101 05279 TAE 50292 b

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

 

 

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1information as may be required by the Secretary of State upon
2initial application with such omission therefrom or addition
3thereto as the Secretary of State may authorize or prescribe.
4Each application for re-registration of a dealer, limited
5Canadian dealer, Internet portal, or investment adviser shall
6be accompanied by a filing fee, each application for
7re-registration as a salesperson shall be accompanied by a
8filing fee and a Securities Audit and Enforcement Fund fee
9established pursuant to Section 11a of this Act, and each
10application for re-registration as an investment adviser
11representative shall be accompanied by a Securities Audit and
12Enforcement Fund fee established under Section 11a of this Act,
13which shall not be returnable in any event. Notwithstanding the
14foregoing, applications for re-registration of dealers,
15limited Canadian dealers, Internet portals, and investment
16advisers may be filed within 30 days following the expiration
17of the registration provided that the applicant pays the annual
18registration fee together with an additional amount equal to
19the annual registration fee and files any other information or
20documents that the Secretary of State may prescribe by rule or
21regulation or order. Any application filed within 30 days
22following the expiration of the registration shall be
23automatically effective as of the time of the earlier
24expiration provided that the proper fee has been paid to the
25Secretary of State.
26    Each registered dealer, limited Canadian dealer, Internet

 

 

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1portal, or investment adviser shall continue to be registered
2if the registrant changes his, her, or its form of organization
3provided that the dealer or investment adviser files an
4amendment to his, her, or its application not later than 30
5days following the occurrence of the change and pays the
6Secretary of State a fee in the amount established under
7Section 11a of this Act.
 
8    I. (1) (a) Every registered dealer, limited Canadian
9dealer, Internet portal, and investment adviser shall make and
10keep for such periods, such accounts, correspondence,
11memoranda, papers, books and records as the Secretary of State
12may by rule or regulation prescribe. All records so required
13shall be preserved for 3 years unless the Secretary of State by
14rule, regulation or order prescribes otherwise for particular
15types of records.
16    (b) Every registered dealer, limited Canadian dealer,
17Internet portal, and investment adviser shall provide to the
18Secretary of State, upon request, such accounts,
19correspondence, memoranda, papers, books, and records as the
20Secretary of State may by rule or regulation prescribe, that it
21possesses and that it preserves for periods of longer than 3
22years.
23    (2) Every registered dealer, limited Canadian dealer,
24Internet portal, and investment adviser shall file such
25financial reports as the Secretary of State may by rule or

 

 

SB1628 Engrossed- 34 -LRB101 05279 TAE 50292 b

1regulation prescribe.
2    (3) All the books and records referred to in paragraph (1)
3of this subsection I are subject at any time or from time to
4time to such reasonable periodic, special or other audits,
5examinations, or inspections by representatives of the
6Secretary of State, within or without this State, as the
7Secretary of State deems necessary or appropriate in the public
8interest or for the protection of investors.
9    (4) At the time of an audit, examination, or inspection,
10the Secretary of State, by his or her designees, may conduct an
11interview of any person employed or appointed by or affiliated
12with a registered dealer, limited Canadian dealer, Internet
13portal, or investment advisor, provided that the dealer,
14limited Canadian dealer, Internet portal, or investment
15advisor shall be given reasonable notice of the time and place
16for the interview. At the option of the dealer, limited
17Canadian dealer, Internet portal, or investment advisor, a
18representative of the dealer or investment advisor with
19supervisory responsibility over the individual being
20interviewed may be present at the interview.
 
21    J. The Secretary of State may require by rule or regulation
22the payment of an additional fee for the filing of information
23or documents required to be filed by this Section which have
24not been filed in a timely manner. The Secretary of State may
25also require by rule or regulation the payment of an

 

 

SB1628 Engrossed- 35 -LRB101 05279 TAE 50292 b

1examination fee for administering any examination which it may
2conduct pursuant to subsection B, C, D, or D-5 of this Section
38.
 
4    K. The Secretary of State may declare any application for
5registration or limited registration under this Section 8
6abandoned by order if the applicant fails to pay any fee or
7file any information or document required under this Section 8
8or by rule or regulation for more than 30 days after the
9required payment or filing date. The applicant may petition the
10Secretary of State for a hearing within 15 days after the
11applicant's receipt of the order of abandonment, provided that
12the petition sets forth the grounds upon which the applicant
13seeks a hearing.
 
14    L. Any document being filed pursuant to this Section 8
15shall be deemed filed, and any fee being paid pursuant to this
16Section 8 shall be deemed paid, upon the date of actual receipt
17thereof by the Secretary of State or his or her designee.
 
18    M. (Blank).
19(Source: P.A. 99-182, eff. 1-1-16; 100-872, eff. 8-14-18.)
 
20    (815 ILCS 5/12)  (from Ch. 121 1/2, par. 137.12)
21    Sec. 12. Violation. It shall be a violation of the
22provisions of this Act for any person:

 

 

SB1628 Engrossed- 36 -LRB101 05279 TAE 50292 b

1        A. To offer or sell any security except in accordance
2    with the provisions of this Act.
3        B. To deliver to a purchaser any security required to
4    be registered under Section 5, Section 6 or Section 7
5    hereof unless accompanied or preceded by a prospectus that
6    meets the requirements of the pertinent subsection of
7    Section 5 or of Section 6 or of Section 7.
8        C. To act as a dealer, Internet portal, salesperson,
9    investment adviser, or investment adviser representative,
10    unless registered as such, where such registration is
11    required, under the provisions of this Act.
12        D. To fail to file with the Secretary of State any
13    application, report or document required to be filed under
14    the provisions of this Act or any rule or regulation made
15    by the Secretary of State pursuant to this Act or to fail
16    to comply with the terms of any order of the Secretary of
17    State issued pursuant to Section 11 hereof.
18        E. To make, or cause to be made, (1) in any sworn
19    testimony before the Secretary of State or the Illinois
20    Securities Department within the Office of the Secretary,
21    or application, report or document filed under this Act or
22    any rule or regulation made by the Secretary of State
23    pursuant to this Act, any statement which was false or
24    misleading with respect to any material fact or (2) any
25    statement to the effect that a security (other than a
26    security issued by the State of Illinois) has been in any

 

 

SB1628 Engrossed- 37 -LRB101 05279 TAE 50292 b

1    way endorsed or approved by the Secretary of State or the
2    State of Illinois.
3        F. To engage in any transaction, practice or course of
4    business in connection with the sale or purchase of
5    securities which works or tends to work a fraud or deceit
6    upon the purchaser or seller thereof.
7        G. To obtain money or property through the sale of
8    securities by means of any untrue statement of a material
9    fact or any omission to state a material fact necessary in
10    order to make the statements made, in the light of the
11    circumstances under which they were made, not misleading.
12        H. To sign or circulate any statement, prospectus, or
13    other paper or document required by any provision of this
14    Act or pertaining to any security knowing or having
15    reasonable grounds to know any material representation
16    therein contained to be false or untrue.
17        I. To employ any device, scheme or artifice to defraud
18    in connection with the sale or purchase of any security,
19    directly or indirectly.
20        J. When acting as an investment adviser, investment
21    adviser representative, or federal covered investment
22    adviser, by any means or instrumentality, directly or
23    indirectly:
24        (1) To employ any device, scheme or artifice to defraud
25        any client or prospective client;
26            (2) To engage in any transaction, practice, or

 

 

SB1628 Engrossed- 38 -LRB101 05279 TAE 50292 b

1        course of business which operates as a fraud or deceit
2        upon any client or prospective client; or
3            (3) To engage in any act, practice, or course of
4        business which is fraudulent, deceptive or
5        manipulative. The Secretary of State shall for the
6        purposes of this paragraph (3), by rules and
7        regulations, define and prescribe means reasonably
8        designed to prevent such acts, practices, and courses
9        of business as are fraudulent, deceptive, or
10        manipulative.
11        K. When offering or selling any mineral investment
12    contract or mineral deferred delivery contract:
13        (1) To employ any device, scheme, or artifice to
14        defraud any customer, prospective customer, or
15        offeree;
16        (2) To engage in any transaction, practice, or course
17        of business that operates as a fraud or deceit upon any
18        customer, prospective customer, or offeree; or
19        (3) To engage in any act, practice, or course of
20        business that is fraudulent, deceptive, or
21        manipulative. The Secretary of State shall for the
22        purposes of this paragraph (3), by rules and
23        regulations, define and prescribe means reasonably
24        designed to prevent acts, practices, and courses of
25        business as are fraudulent, deceptive, or
26        manipulative.

 

 

SB1628 Engrossed- 39 -LRB101 05279 TAE 50292 b

1        L. To knowingly influence, coerce, manipulate, or
2    mislead any person engaged in the preparation or audit of
3    financial statements or appraisals to be used in the offer
4    or sale of securities for the purpose of rendering such
5    financial statements or appraisals materially misleading.
6(Source: P.A. 99-182, eff. 1-1-16.)
 
7    (815 ILCS 5/2.10a rep.)
8    Section 10. The Illinois Securities Law of 1953 is amended
9by repealing Section 2.10a.
 
10    Section 99. Effective date. This Act takes effect July 1,
112019.