Full Text of HB2643 96th General Assembly
HB2643sam003 96TH GENERAL ASSEMBLY
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Sen. Don Harmon
Filed: 10/22/2009
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| AMENDMENT TO HOUSE BILL 2643
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| AMENDMENT NO. ______. Amend House Bill 2643 by replacing | 3 |
| everything after the enacting clause with the following:
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| "Section 5. The Illinois Pension Code is amended by | 5 |
| changing Section 1-113.14 and by adding Section 1-113.15 as | 6 |
| follows: | 7 |
| (40 ILCS 5/1-113.14) | 8 |
| Sec. 1-113.14. Investment services for retirement systems, | 9 |
| pension funds, and investment boards, except those funds | 10 |
| established under Articles 3 and 4. | 11 |
| (a) For the purposes of this Section, "investment services" | 12 |
| means services provided by an investment adviser or a | 13 |
| consultant other than qualified fund-of-fund management | 14 |
| services as defined in Section 1-113.15 . | 15 |
| (b) The selection and appointment of an investment adviser | 16 |
| or consultant for investment services by the board of a |
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| retirement system, pension fund, or investment board subject to | 2 |
| this Code, except those whose investments are restricted by | 3 |
| Section 1-113.2, shall be made and awarded in accordance with | 4 |
| this Section. All contracts for investment services shall be | 5 |
| awarded by the board using a competitive process that is | 6 |
| substantially similar to the process required for the | 7 |
| procurement of professional and artistic services under | 8 |
| Article 35 of the Illinois Procurement Code. Each board of | 9 |
| trustees shall adopt a policy in accordance with this | 10 |
| subsection (b) within 60 days after the effective date of this | 11 |
| amendatory Act of the 96th General Assembly. The policy shall | 12 |
| be posted on its web site and filed with the Illinois | 13 |
| Procurement Policy Board. Exceptions to this Section are | 14 |
| allowed for (i) sole source procurements, (ii) emergency | 15 |
| procurements, and (iii) at the discretion of the pension fund, | 16 |
| retirement system, or board of investment, contracts that are | 17 |
| nonrenewable and one year or less in duration, so long as the | 18 |
| contract has a value of less than $20,000.
All exceptions | 19 |
| granted under this Section must be published on the system's, | 20 |
| fund's, or board's web site, shall name the person authorizing | 21 |
| the procurement, and shall include a brief explanation of the | 22 |
| reason for the exception. | 23 |
| A person, other than a trustee or an employee of a | 24 |
| retirement system, pension fund, or investment board, may not | 25 |
| act as a consultant or investment adviser under this Section | 26 |
| unless that person is registered as an investment adviser under |
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| the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1, | 2 |
| et seq.) or a bank, as defined in the federal Investment | 3 |
| Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.). | 4 |
| (c) Investment services provided by an investment adviser | 5 |
| or a consultant appointed under this Section shall be rendered | 6 |
| pursuant to a written contract between the investment adviser | 7 |
| or consultant and the board. | 8 |
| The contract shall include all of the following: | 9 |
| (1) Acknowledgement in writing by the investment | 10 |
| adviser or consultant that he or she is a fiduciary with | 11 |
| respect to the pension fund or retirement system. | 12 |
| (2) The description of the board's investment policy | 13 |
| and notice that the policy is subject to change. | 14 |
| (3) (i) Full disclosure of direct and indirect fees, | 15 |
| commissions, penalties, and other compensation, including | 16 |
| reimbursement for expenses, that may be paid by or on | 17 |
| behalf of the consultant in connection with the provision | 18 |
| of services to the pension fund or retirement system and | 19 |
| (ii) a requirement that the consultant update the | 20 |
| disclosure promptly after a modification of those payments | 21 |
| or an additional payment. | 22 |
| (4) A requirement that the investment adviser or | 23 |
| consultant, in conjunction with the board's staff, submit | 24 |
| periodic written reports, on at least a quarterly basis, | 25 |
| for the board's review at its regularly scheduled meetings. | 26 |
| All returns on investment shall be reported as net returns |
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| after payment of all fees, commissions, and any other | 2 |
| compensation. | 3 |
| (5) Disclosure of the names and addresses of (i) the | 4 |
| consultant or investment adviser; (ii) any entity that is a | 5 |
| parent of, or owns a controlling interest in, the | 6 |
| consultant or investment adviser; (iii) any entity that is | 7 |
| a subsidiary of, or in which a controlling interest is | 8 |
| owned by, the consultant or investment adviser; (iv) any | 9 |
| persons who have an ownership or distributive income share | 10 |
| in the consultant or investment adviser that is in excess | 11 |
| of 7.5%; or (v) serves as an executive officer of the | 12 |
| consultant or investment adviser. | 13 |
| (6) A disclosure of the names and addresses of all | 14 |
| subcontractors, if applicable, and the expected amount of | 15 |
| money each will receive under the contract, including an | 16 |
| acknowledgment that the contractor must promptly make | 17 |
| notification, in writing, if at any time during the term of | 18 |
| the contract a contractor adds or changes any | 19 |
| subcontractors. For purposes of this subparagraph (6), | 20 |
| "subcontractor" does not include non-investment related | 21 |
| professionals or professionals offering services that are | 22 |
| not directly related to the investment of assets, such as | 23 |
| legal counsel, actuary, proxy-voting services, services | 24 |
| used to track compliance with legal standards, and | 25 |
| investment fund of funds where the board has no direct | 26 |
| contractual relationship with the investment advisers or |
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| partnerships. | 2 |
| (7) A description of service to be performed. | 3 |
| (8) A description of the need for the service. | 4 |
| (9) A description of the plan for post-performance | 5 |
| review. | 6 |
| (10) A description of the qualifications necessary. | 7 |
| (11) The duration of the contract. | 8 |
| (12) The method for charging and measuring cost. | 9 |
| (d) Notwithstanding any other provision of law, a | 10 |
| retirement system, pension fund, or investment board subject to | 11 |
| this Code, except those whose investments are restricted by | 12 |
| Section 1-113.2 of this Code, shall not enter into a contract | 13 |
| with a consultant that exceeds 5 years in duration. No contract | 14 |
| to provide consulting services may be renewed or extended. At | 15 |
| the end of the term of a contract, however, the consultant is | 16 |
| eligible to compete for a new contract as provided in this | 17 |
| Section. No retirement system, pension fund, or investment | 18 |
| board shall attempt to avoid or contravene the restrictions of | 19 |
| this subsection (d) by any means. | 20 |
| (e) Within 60 days after April 3, 2009 ( the effective date | 21 |
| of Public Act 96-6) this amendatory Act of the 96th General | 22 |
| Assembly , each investment adviser or consultant currently | 23 |
| providing services or subject to an existing contract for the | 24 |
| provision of services must disclose to the board of trustees | 25 |
| all direct and indirect fees, commissions, penalties, and other | 26 |
| compensation that the investment adviser or consultant |
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| directly pays to a third party on behalf of the board of | 2 |
| trustees and specifically in connection with the provision of | 3 |
| services to the board of trustees. The investment adviser or | 4 |
| consultant must promptly disclose to the board of trustees any | 5 |
| modification in the schedule of fees, commissions, penalties, | 6 |
| and other compensation previously disclosed to the board of | 7 |
| trustees, excluding general overhead costs and expenses | 8 |
| incurred by a fund under management, where those expenses are | 9 |
| reflected in the valuation of the assets within the portfolio | 10 |
| paid by or on behalf of the investment adviser or consultant in | 11 |
| connection with the provision of those services and shall | 12 |
| update that disclosure promptly after a modification of those | 13 |
| payments or an additional payment. The person shall update the | 14 |
| disclosure promptly after a modification of those payments or | 15 |
| an additional payment . The disclosures required by this | 16 |
| subsection (e) shall be in writing and shall include the date , | 17 |
| the and amount of each cost directly paid by the investment | 18 |
| adviser or consultant to a third party, payment and the name | 19 |
| and address of each recipient of a payment. | 20 |
| (f) The retirement system, pension fund, or board of | 21 |
| investment shall develop uniform documents that shall be used | 22 |
| for the solicitation, review, and acceptance of all investment | 23 |
| services. The form shall include the terms contained in | 24 |
| subsection (c) of this Section. All such uniform documents | 25 |
| shall be posted on the retirement system's, pension fund's, or | 26 |
| investment board's web site. |
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| (g) A description of every contract for investment services | 2 |
| shall be posted in a conspicuous manner on the web site of the | 3 |
| retirement system, pension fund, or investment board. The | 4 |
| description must include the name of the person or entity | 5 |
| awarded a contract, the total amount applicable to the | 6 |
| contract, the total fees paid or to be paid, and a disclosure | 7 |
| approved by the board describing the factors that contributed | 8 |
| to the selection of an investment adviser or consultant. | 9 |
| (Source: P.A. 96-6, eff. 4-3-09.) | 10 |
| (40 ILCS 5/1-113.15 new) | 11 |
| Sec. 1-113.15. Qualified fund-of-fund management services. | 12 |
| (a) As used in this Section: | 13 |
| "Qualified fund-of-fund management services" means either | 14 |
| (i) the services of an investment adviser acting in its | 15 |
| capacity as an investment manager of a fund-of-funds or (ii) an | 16 |
| investment adviser acting in its capacity as an investment | 17 |
| manager of a separate account that is invested on a | 18 |
| side-by-side basis in a substantially identical manner to a | 19 |
| fund-of-funds, in each case pursuant to qualified written | 20 |
| agreements. | 21 |
| "Qualified written agreements" means one or more written | 22 |
| contracts to which the investment adviser and the board are | 23 |
| parties and includes all of the following: (i) the matters | 24 |
| described in items (1), (4), (5), (7), (11) and (12) of | 25 |
| subsection (c) of Section 1-113.14; (ii) a description of any |
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| fees, commissions, penalties, and other compensation payable, | 2 |
| if any, directly by the retirement system, pension fund, or | 3 |
| investment board (which shall not include any fees, | 4 |
| commissions, penalties, and other compensation payable from | 5 |
| the assets of the fund-of-funds or separate account); (iii) a | 6 |
| description (or method of calculation) of the fees and expenses | 7 |
| payable by the Fund to the investment adviser, and the timing | 8 |
| of the payment of the fees or expenses; and (iv) a description | 9 |
| (or method of calculation) of any carried interest or other | 10 |
| performance based interests, fees or payments allocable by the | 11 |
| Fund to the investment adviser or an affiliate of the | 12 |
| investment adviser, and the priority of distributions with | 13 |
| respect to such interest. | 14 |
| (b) A description of every contract for qualified | 15 |
| fund-of-fund management services must be posted in a | 16 |
| conspicuous manner on the web site of the retirement system, | 17 |
| pension fund, or investment board. The description must include | 18 |
| the name of the fund-of-funds, the name of its investment | 19 |
| adviser, the total investment commitment of the retirement | 20 |
| system, pension fund, or investment board to invest in such | 21 |
| fund-of-funds, and a disclosure approved by the board | 22 |
| describing the factors that contributed to the investment in | 23 |
| such fund-of-funds. No information that is exempt from | 24 |
| inspection pursuant to Section 7 of the Freedom of Information | 25 |
| Act shall be disclosed under this Section.
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| Section 99. Effective date. This Act takes effect upon | 2 |
| becoming law.".
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