Sen. Iris Y. Martinez

Filed: 4/17/2015





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2    AMENDMENT NO. ______. Amend Senate Bill 437 by replacing
3everything after the enacting clause with the following:
4    "Section 5. The Illinois Pension Code is amended by
5changing Section 1-113.14 as follows:
6    (40 ILCS 5/1-113.14)
7    Sec. 1-113.14. Investment services for retirement systems,
8pension funds, and investment boards, except those funds
9established under Articles 3 and 4.
10    (a) For the purposes of this Section, "investment services"
11means services provided by an investment adviser or a
12consultant other than qualified fund-of-fund management
13services as defined in Section 1-113.15.
14    (b) The selection and appointment of an investment adviser
15or consultant for investment services by the board of a
16retirement system, pension fund, or investment board subject to



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1this Code, except those whose investments are restricted by
2Section 1-113.2, shall be made and awarded in accordance with
3this Section. All contracts for investment services shall be
4awarded by the board using a competitive process that is
5substantially similar to the process required for the
6procurement of professional and artistic services under
7Article 35 of the Illinois Procurement Code. Each board of
8trustees shall adopt a policy in accordance with this
9subsection (b) within 60 days after the effective date of this
10amendatory Act of the 96th General Assembly. The policy shall
11be posted on its web site and filed with the Illinois
12Procurement Policy Board. Exceptions to this Section are
13allowed for (i) sole source procurements, (ii) emergency
14procurements, (iii) at the discretion of the pension fund,
15retirement system, or board of investment, contracts that are
16nonrenewable and one year or less in duration, so long as the
17contract has a value of less than $20,000, and (iv) in the
18discretion of the pension fund, retirement system, or
19investment board, contracts for follow-on funds with the same
20fund sponsor through closed-end funds, and (v) at the
21discretion of the pension fund, retirement system, or
22investment board, contracts for the direct services of an
23emerging investment manager that has indirectly handled
24investment of assets of the pension fund, retirement system, or
25investment board under a manager of managers program in a
26successful manner satisfactory to the pension fund, retirement



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1system, or investment board. All exceptions granted under this
2Section must be published on the system's, fund's, or board's
3web site, shall name the person authorizing the procurement,
4and shall include a brief explanation of the reason for the
6    A person, other than a trustee or an employee of a
7retirement system, pension fund, or investment board, may not
8act as a consultant or investment adviser under this Section
9unless that person is registered as an investment adviser under
10the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1,
11et seq.) or a bank, as defined in the federal Investment
12Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.).
13    (c) Investment services provided by an investment adviser
14or a consultant appointed under this Section shall be rendered
15pursuant to a written contract between the investment adviser
16or consultant and the board.
17    The contract shall include all of the following:
18        (1) Acknowledgement in writing by the investment
19    adviser or consultant that he or she is a fiduciary with
20    respect to the pension fund or retirement system.
21        (2) The description of the board's investment policy
22    and notice that the policy is subject to change.
23        (3) (i) Full disclosure of direct and indirect fees,
24    commissions, penalties, and other compensation, including
25    reimbursement for expenses, that may be paid by or on
26    behalf of the consultant in connection with the provision



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1    of services to the pension fund or retirement system and
2    (ii) a requirement that the consultant update the
3    disclosure promptly after a modification of those payments
4    or an additional payment.
5        (4) A requirement that the investment adviser or
6    consultant, in conjunction with the board's staff, submit
7    periodic written reports, on at least a quarterly basis,
8    for the board's review at its regularly scheduled meetings.
9    All returns on investment shall be reported as net returns
10    after payment of all fees, commissions, and any other
11    compensation.
12        (5) Disclosure of the names and addresses of (i) the
13    consultant or investment adviser; (ii) any entity that is a
14    parent of, or owns a controlling interest in, the
15    consultant or investment adviser; (iii) any entity that is
16    a subsidiary of, or in which a controlling interest is
17    owned by, the consultant or investment adviser; (iv) any
18    persons who have an ownership or distributive income share
19    in the consultant or investment adviser that is in excess
20    of 7.5%; or (v) serves as an executive officer of the
21    consultant or investment adviser.
22        (6) A disclosure of the names and addresses of all
23    subcontractors, if applicable, and the expected amount of
24    money each will receive under the contract, including an
25    acknowledgment that the contractor must promptly make
26    notification, in writing, if at any time during the term of



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1    the contract a contractor adds or changes any
2    subcontractors. For purposes of this subparagraph (6),
3    "subcontractor" does not include non-investment related
4    professionals or professionals offering services that are
5    not directly related to the investment of assets, such as
6    legal counsel, actuary, proxy-voting services, services
7    used to track compliance with legal standards, and
8    investment fund of funds where the board has no direct
9    contractual relationship with the investment advisers or
10    partnerships.
11        (7) A description of service to be performed.
12        (8) A description of the need for the service.
13        (9) A description of the plan for post-performance
14    review.
15        (10) A description of the qualifications necessary.
16        (11) The duration of the contract.
17        (12) The method for charging and measuring cost.
18    (d) Notwithstanding any other provision of law, a
19retirement system, pension fund, or investment board subject to
20this Code, except those whose investments are restricted by
21Section 1-113.2 of this Code, shall not enter into a contract
22with a consultant that exceeds 5 years in duration. No contract
23to provide consulting services may be renewed or extended. At
24the end of the term of a contract, however, the consultant is
25eligible to compete for a new contract as provided in this
26Section. No retirement system, pension fund, or investment



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1board shall attempt to avoid or contravene the restrictions of
2this subsection (d) by any means.
3    (e) Within 60 days after the effective date of this
4amendatory Act of the 96th General Assembly, each investment
5adviser or consultant currently providing services or subject
6to an existing contract for the provision of services must
7disclose to the board of trustees all direct and indirect fees,
8commissions, penalties, and other compensation paid by or on
9behalf of the investment adviser or consultant in connection
10with the provision of those services and shall update that
11disclosure promptly after a modification of those payments or
12an additional payment. The person shall update the disclosure
13promptly after a modification of those payments or an
14additional payment. The disclosures required by this
15subsection (e) shall be in writing and shall include the date
16and amount of each payment and the name and address of each
17recipient of a payment.
18    (f) The retirement system, pension fund, or board of
19investment shall develop uniform documents that shall be used
20for the solicitation, review, and acceptance of all investment
21services. The form shall include the terms contained in
22subsection (c) of this Section. All such uniform documents
23shall be posted on the retirement system's, pension fund's, or
24investment board's web site.
25    (g) A description of every contract for investment services
26shall be posted in a conspicuous manner on the web site of the



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1retirement system, pension fund, or investment board. The
2description must include the name of the person or entity
3awarded a contract, the total amount applicable to the
4contract, the total fees paid or to be paid, and a disclosure
5approved by the board describing the factors that contributed
6to the selection of an investment adviser or consultant.
7(Source: P.A. 98-433, eff. 8-16-13.)".