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


Sen. Iris Y. Martinez

Filed: 4/22/2015





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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 with an emerging investment
23manager that has invested assets of the pension fund,
24retirement system, or investment board within a manager of
25managers services agreement. All exceptions granted under this
26Section must be published on the system's, fund's, or board's



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1web site, shall name the person authorizing the procurement,
2and shall include a brief explanation of the reason for the
4    A person, other than a trustee or an employee of a
5retirement system, pension fund, or investment board, may not
6act as a consultant or investment adviser under this Section
7unless that person is registered as an investment adviser under
8the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1,
9et seq.) or a bank, as defined in the federal Investment
10Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.).
11    (c) Investment services provided by an investment adviser
12or a consultant appointed under this Section shall be rendered
13pursuant to a written contract between the investment adviser
14or consultant and the board.
15    The contract shall include all of the following:
16        (1) Acknowledgement in writing by the investment
17    adviser or consultant that he or she is a fiduciary with
18    respect to the pension fund or retirement system.
19        (2) The description of the board's investment policy
20    and notice that the policy is subject to change.
21        (3) (i) Full disclosure of direct and indirect fees,
22    commissions, penalties, and other compensation, including
23    reimbursement for expenses, that may be paid by or on
24    behalf of the consultant in connection with the provision
25    of services to the pension fund or retirement system and
26    (ii) a requirement that the consultant update the



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



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



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



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1awarded a contract, the total amount applicable to the
2contract, the total fees paid or to be paid, and a disclosure
3approved by the board describing the factors that contributed
4to the selection of an investment adviser or consultant.
5(Source: P.A. 98-433, eff. 8-16-13.)".