Illinois General Assembly - Full Text of SB0437
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Full Text of SB0437  99th General Assembly



SB0437 EngrossedLRB099 03097 RPS 23105 b

1    AN ACT concerning public employee benefits.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 5. The Illinois Pension Code is amended by changing
5Section 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
17this Code, except those whose investments are restricted by
18Section 1-113.2, shall be made and awarded in accordance with
19this Section. All contracts for investment services shall be
20awarded by the board using a competitive process that is
21substantially similar to the process required for the
22procurement of professional and artistic services under
23Article 35 of the Illinois Procurement Code. Each board of



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1trustees shall adopt a policy in accordance with this
2subsection (b) within 60 days after the effective date of this
3amendatory Act of the 96th General Assembly. The policy shall
4be posted on its web site and filed with the Illinois
5Procurement Policy Board. Exceptions to this Section are
6allowed for (i) sole source procurements, (ii) emergency
7procurements, (iii) at the discretion of the pension fund,
8retirement system, or board of investment, contracts that are
9nonrenewable and one year or less in duration, so long as the
10contract has a value of less than $20,000, and (iv) in the
11discretion of the pension fund, retirement system, or
12investment board, contracts for follow-on funds with the same
13fund sponsor through closed-end funds, and (v) at the
14discretion of the pension fund, retirement system, or
15investment board, contracts with an emerging investment
16manager that has invested assets of the pension fund,
17retirement system, or investment board within a manager of
18managers services agreement. All exceptions granted under this
19Section must be published on the system's, fund's, or board's
20web site, shall name the person authorizing the procurement,
21and shall include a brief explanation of the reason for the
23    A person, other than a trustee or an employee of a
24retirement system, pension fund, or investment board, may not
25act as a consultant or investment adviser under this Section
26unless that person is registered as an investment adviser under



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1the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1,
2et seq.) or a bank, as defined in the federal Investment
3Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.).
4    (c) Investment services provided by an investment adviser
5or a consultant appointed under this Section shall be rendered
6pursuant to a written contract between the investment adviser
7or 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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1    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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1    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
10retirement system, pension fund, or investment board subject to
11this Code, except those whose investments are restricted by
12Section 1-113.2 of this Code, shall not enter into a contract
13with a consultant that exceeds 5 years in duration. No contract
14to provide consulting services may be renewed or extended. At
15the end of the term of a contract, however, the consultant is
16eligible to compete for a new contract as provided in this
17Section. No retirement system, pension fund, or investment
18board shall attempt to avoid or contravene the restrictions of
19this subsection (d) by any means.
20    (e) Within 60 days after the effective date of this
21amendatory Act of the 96th General Assembly, each investment
22adviser or consultant currently providing services or subject
23to an existing contract for the provision of services must
24disclose to the board of trustees all direct and indirect fees,
25commissions, penalties, and other compensation paid by or on
26behalf of the investment adviser or consultant in connection



SB0437 Engrossed- 6 -LRB099 03097 RPS 23105 b

1with the provision of those services and shall update that
2disclosure promptly after a modification of those payments or
3an additional payment. The person shall update the disclosure
4promptly after a modification of those payments or an
5additional payment. The disclosures required by this
6subsection (e) shall be in writing and shall include the date
7and amount of each payment and the name and address of each
8recipient of a payment.
9    (f) The retirement system, pension fund, or board of
10investment shall develop uniform documents that shall be used
11for the solicitation, review, and acceptance of all investment
12services. The form shall include the terms contained in
13subsection (c) of this Section. All such uniform documents
14shall be posted on the retirement system's, pension fund's, or
15investment board's web site.
16    (g) A description of every contract for investment services
17shall be posted in a conspicuous manner on the web site of the
18retirement system, pension fund, or investment board. The
19description must include the name of the person or entity
20awarded a contract, the total amount applicable to the
21contract, the total fees paid or to be paid, and a disclosure
22approved by the board describing the factors that contributed
23to the selection of an investment adviser or consultant.
24(Source: P.A. 98-433, eff. 8-16-13.)