Full Text of SB1671 101st General Assembly
SB1671sam001 101ST GENERAL ASSEMBLY | Sen. Iris Y. Martinez Filed: 4/5/2019
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| 1 | | AMENDMENT TO SENATE BILL 1671
| 2 | | AMENDMENT NO. ______. Amend Senate Bill 1671 by replacing | 3 | | everything after the enacting clause with the following:
| 4 | | "Section 5. The Illinois Pension Code is amended by | 5 | | changing Sections 1-109.1 and 1-113.14 and by adding Section | 6 | | 1-113.15a as follows:
| 7 | | (40 ILCS 5/1-109.1) (from Ch. 108 1/2, par. 1-109.1)
| 8 | | Sec. 1-109.1. Allocation and delegation of fiduciary | 9 | | duties.
| 10 | | (1) Subject to the provisions of Section 22A-113 of this | 11 | | Code and
subsections (2) and (3) of this Section, the board of | 12 | | trustees of a
retirement system or pension fund established | 13 | | under this Code may:
| 14 | | (a) Appoint one or more investment managers as | 15 | | fiduciaries to manage
(including the power to acquire and | 16 | | dispose of) any assets of the
retirement system or pension |
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| 1 | | fund; and
| 2 | | (b) Allocate duties among themselves and designate | 3 | | others as fiduciaries
to carry out specific fiduciary | 4 | | activities other than the management of the
assets of the | 5 | | retirement system or pension fund.
| 6 | | (2) The board of trustees of a pension fund established | 7 | | under Article 5, 6,
8, 9, 10, 11, 12 or 17 of this Code may not | 8 | | transfer its investment authority,
nor transfer the assets of | 9 | | the fund to any other person or entity for the
purpose of | 10 | | consolidating or merging its assets and management with any | 11 | | other
pension fund or public investment authority, unless the | 12 | | board resolution
authorizing such transfer is submitted for | 13 | | approval to the contributors and
pensioners of the fund at | 14 | | elections held not less than 30 days after the
adoption of such | 15 | | resolution by the board, and such resolution is approved by a
| 16 | | majority of the votes cast on the question in both the | 17 | | contributors election
and the pensioners election. The | 18 | | election procedures and qualifications
governing the election | 19 | | of trustees shall govern the submission of resolutions
for | 20 | | approval under this paragraph, insofar as they may be made | 21 | | applicable.
| 22 | | (3) Pursuant to subsections (h) and (i) of Section 6 of | 23 | | Article VII of
the Illinois Constitution, the investment | 24 | | authority of boards of trustees
of retirement systems and | 25 | | pension funds established under this Code is declared
to be a | 26 | | subject of exclusive State jurisdiction, and the concurrent |
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| 1 | | exercise
by a home rule unit of any power affecting such | 2 | | investment authority is
hereby specifically denied and | 3 | | preempted.
| 4 | | (4) For the purposes of this Code, "emerging investment | 5 | | manager" means a
qualified investment adviser that manages an | 6 | | investment portfolio of at
least $10,000,000 but less than | 7 | | $20,000,000,000 at the time of the initial contract with the | 8 | | retirement system, pension fund, or investment board | 9 | | $10,000,000,000 and is a
"minority-owned business", | 10 | | "women-owned business" or "business owned by a person with a | 11 | | disability" as those terms are
defined in the Business | 12 | | Enterprise for Minorities, Women, and Persons with | 13 | | Disabilities Act.
| 14 | | It is hereby declared to be the public policy of the State | 15 | | of Illinois to
encourage the trustees of public employee | 16 | | retirement systems, pension funds, and investment boards
to use | 17 | | emerging investment managers in managing their system's | 18 | | assets, encompassing all asset classes, and increase the | 19 | | racial, ethnic, and gender diversity of its fiduciaries, to the
| 20 | | greatest extent feasible within the bounds of financial and | 21 | | fiduciary
prudence, and to take affirmative steps to remove any | 22 | | barriers to the full
participation in investment opportunities
| 23 | | afforded by those retirement systems, pension funds, and | 24 | | investment boards.
| 25 | | On or before January 1, 2010, a retirement system, pension | 26 | | fund, or investment board subject to this Code, except those |
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| 1 | | whose investments are restricted by Section 1-113.2 of this | 2 | | Code, shall adopt a policy that sets forth goals for | 3 | | utilization of emerging investment managers. This policy shall | 4 | | include quantifiable goals for the management of assets in | 5 | | specific asset classes by emerging investment managers. The | 6 | | retirement system, pension fund, or investment board shall | 7 | | establish 3 separate goals for: (i) emerging investment | 8 | | managers that are minority-owned businesses; (ii) emerging | 9 | | investment managers that are women-owned businesses; and (iii) | 10 | | emerging investment managers that are businesses owned by a | 11 | | person with a disability. The goals established shall be based | 12 | | on the percentage of total dollar amount of investment service | 13 | | contracts let to minority-owned businesses, women-owned | 14 | | businesses, and businesses owned by a person with a disability, | 15 | | as those terms are defined in the Business Enterprise for | 16 | | Minorities, Women, and Persons with Disabilities Act. The | 17 | | retirement system, pension fund, or investment board shall | 18 | | annually review the goals established under this subsection. | 19 | | If in any case an emerging investment manager meets the | 20 | | criteria established by a board for a specific search and meets | 21 | | the criteria established by a consultant for that search, then | 22 | | that emerging investment manager shall receive an invitation by | 23 | | the board of trustees, or an investment committee of the board | 24 | | of trustees, to present his or her firm for final consideration | 25 | | of a contract. In the case where multiple emerging investment | 26 | | managers meet the criteria of this Section, the staff may |
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| 1 | | choose the most qualified firm or firms to present to the | 2 | | board.
| 3 | | The use of an emerging investment manager does not | 4 | | constitute a transfer
of investment authority for the purposes | 5 | | of subsection (2) of this Section.
| 6 | | (5) Each retirement system, pension fund, or investment | 7 | | board subject to this Code, except those whose investments are | 8 | | restricted by Section 1-113.2 of this Code, shall establish a | 9 | | policy that sets forth goals for increasing the racial, ethnic, | 10 | | and gender diversity of its fiduciaries, including its | 11 | | consultants and senior staff. Each retirement system, pension | 12 | | fund, or
investment board shall make its best efforts to ensure | 13 | | that
the racial and ethnic makeup of its senior administrative
| 14 | | staff represents the racial and ethnic makeup of its
| 15 | | membership. Each system, fund, and investment board shall | 16 | | annually review the goals established under this subsection. | 17 | | (6) On or before January 1, 2010, a retirement system, | 18 | | pension fund, or investment board subject to this Code, except | 19 | | those whose investments are restricted by Section 1-113.2 of | 20 | | this Code, shall adopt a policy that sets forth goals for | 21 | | utilization of businesses owned by minorities, women, and | 22 | | persons with disabilities for all contracts and services. The | 23 | | goals established shall be based on the percentage of total | 24 | | dollar amount of all contracts let to minority-owned | 25 | | businesses, women-owned businesses, and businesses owned by a | 26 | | person with a disability, as those terms are defined in the |
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| 1 | | Business Enterprise for Minorities, Women, and Persons with | 2 | | Disabilities Act. The retirement system, pension fund, or | 3 | | investment board shall annually review the goals established | 4 | | under this subsection. | 5 | | (7) On or before January 1, 2010, a retirement system, | 6 | | pension fund, or investment board subject to this Code, except | 7 | | those whose investments are restricted by Section 1-113.2 of | 8 | | this Code, shall adopt a policy that sets forth goals for | 9 | | increasing the utilization of minority broker-dealers. For the | 10 | | purposes of this Code, "minority broker-dealer" means a | 11 | | qualified broker-dealer who meets the definition of | 12 | | "minority-owned business", "women-owned business", or | 13 | | "business owned by a person with a disability", as those terms | 14 | | are defined in the Business Enterprise for Minorities, Women, | 15 | | and Persons with Disabilities Act. The retirement system, | 16 | | pension fund, or investment board shall annually review the | 17 | | goals established under this Section. | 18 | | (8) Each retirement system, pension fund, and investment | 19 | | board subject to this Code, except those whose investments are | 20 | | restricted by Section 1-113.2 of this Code, shall submit a | 21 | | report to the Governor and the General Assembly by January 1 of | 22 | | each year that includes the following: (i) the policy adopted | 23 | | under subsection (4) of this Section, including the names and | 24 | | addresses of the emerging investment managers used, percentage | 25 | | of the assets under the investment control of emerging | 26 | | investment managers for the 3 separate goals, and the actions |
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| 1 | | it has undertaken to increase the use of emerging investment | 2 | | managers, including encouraging other investment managers to | 3 | | use emerging investment managers as subcontractors when the | 4 | | opportunity arises; (ii) the policy adopted under subsection | 5 | | (5) of this Section; (iii) the policy adopted under subsection | 6 | | (6) of this Section; (iv) the policy adopted under subsection | 7 | | (7) of this Section, including specific actions undertaken to | 8 | | increase the use of minority broker-dealers; and (v) the policy | 9 | | adopted under subsection (9) of this Section. | 10 | | (9) On or before February 1, 2015, a retirement system, | 11 | | pension fund, or investment board subject to this Code, except | 12 | | those whose investments are restricted by Section 1-113.2 of | 13 | | this Code, shall adopt a policy that sets forth goals for | 14 | | increasing the utilization of minority investment managers. | 15 | | For the purposes of this Code, "minority investment manager" | 16 | | means a qualified investment manager that manages an investment | 17 | | portfolio and meets the definition of "minority-owned | 18 | | business", "women-owned business", or "business owned by a | 19 | | person with a disability", as those terms are defined in the | 20 | | Business Enterprise for Minorities, Women, and Persons with | 21 | | Disabilities Act. | 22 | | It is hereby declared to be the public policy of the State | 23 | | of Illinois to
encourage the trustees of public employee | 24 | | retirement systems, pension funds, and investment boards
to use | 25 | | minority investment managers in managing their systems' | 26 | | assets, encompassing all asset classes, and to increase the |
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| 1 | | racial, ethnic, and gender diversity of their fiduciaries, to | 2 | | the
greatest extent feasible within the bounds of financial and | 3 | | fiduciary
prudence, and to take affirmative steps to remove any | 4 | | barriers to the full
participation in investment opportunities
| 5 | | afforded by those retirement systems, pension funds, and | 6 | | investment boards. | 7 | | The retirement system, pension fund, or investment board | 8 | | shall establish 3 separate goals for: (i) minority investment | 9 | | managers that are minority-owned businesses; (ii) minority | 10 | | investment managers that are women-owned businesses; and (iii) | 11 | | minority investment managers that are businesses owned by a | 12 | | person with a disability. The retirement system, pension fund, | 13 | | or investment board shall annually review the goals established | 14 | | under this Section. | 15 | | If in any case a minority investment manager meets the | 16 | | criteria established by a board for a specific search and meets | 17 | | the criteria established by a consultant for that search, then | 18 | | that minority investment manager shall receive an invitation by | 19 | | the board of trustees, or an investment committee of the board | 20 | | of trustees, to present his or her firm for final consideration | 21 | | of a contract. In the case where multiple minority investment | 22 | | managers meet the criteria of this Section, the staff may | 23 | | choose the most qualified firm or firms to present to the | 24 | | board. | 25 | | The use of a minority investment manager does not | 26 | | constitute a transfer
of investment authority for the purposes |
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| 1 | | of subsection (2) of this Section. | 2 | | (10) Beginning January 1, 2016, it shall be the | 3 | | aspirational goal for a retirement system, pension fund, or | 4 | | investment board subject to this Code to use emerging | 5 | | investment managers for not less than 20% of the total funds | 6 | | under management. Furthermore, it shall be the aspirational | 7 | | goal that not less than 20% of investment advisors be | 8 | | minorities, women, and persons with disabilities as those terms | 9 | | are defined in the Business Enterprise for Minorities, Women, | 10 | | and Persons with Disabilities Act. It shall be the aspirational | 11 | | goal to utilize businesses owned by minorities, women, and | 12 | | persons with disabilities for not less than 20% of contracts | 13 | | awarded for "information technology services", "accounting | 14 | | services", "insurance brokers", "architectural and engineering | 15 | | services", and "legal services" as those terms are defined in | 16 | | the Act. | 17 | | (Source: P.A. 99-462, eff. 8-25-15; 100-391, eff. 8-25-17; | 18 | | 100-902, eff. 8-17-18.)
| 19 | | (40 ILCS 5/1-113.14)
| 20 | | Sec. 1-113.14. Investment services for retirement systems, | 21 | | pension funds, and investment boards, except those funds | 22 | | established under Articles 3 and 4. | 23 | | (a) For the purposes of this Section, "investment services" | 24 | | means services provided by an investment adviser or a | 25 | | consultant other than qualified fund-of-fund management |
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| 1 | | services , as defined in Section 1-113.15 , and qualified manager | 2 | | of emerging investment managers services, as defined in Section | 3 | | 1-113.15a . | 4 | | (b) The selection and appointment of an investment adviser | 5 | | or consultant for investment services by the board of a | 6 | | retirement system, pension fund, or investment board subject to | 7 | | this Code, except those whose investments are restricted by | 8 | | Section 1-113.2, shall be made and awarded in accordance with | 9 | | this Section. All contracts for investment services shall be | 10 | | awarded by the board using a competitive process that is | 11 | | substantially similar to the process required for the | 12 | | procurement of professional and artistic services under | 13 | | Article 35 of the Illinois Procurement Code. Each board of | 14 | | trustees shall adopt a policy in accordance with this | 15 | | subsection (b) within 60 days after the effective date of this | 16 | | amendatory Act of the 96th General Assembly. The policy shall | 17 | | be posted on its web site and filed with the Illinois | 18 | | Procurement Policy Board. Exceptions to this Section are | 19 | | allowed for (i) sole source procurements, (ii) emergency | 20 | | procurements, (iii) at the discretion of the pension fund, | 21 | | retirement system, or board of investment, contracts that are | 22 | | nonrenewable and one year or less in duration, so long as the | 23 | | contract has a value of less than $20,000, and (iv) in the | 24 | | discretion of the pension fund, retirement system, or | 25 | | investment board, contracts for follow-on funds with the same | 26 | | fund sponsor through closed-end funds , (v) contracts for |
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| 1 | | investment services with an emerging investment manager, and | 2 | | (vi) contracts for investment services with an emerging | 3 | | investment manager provided through a qualified manager of | 4 | | emerging investment managers services, as defined in Section | 5 | | 1-113.15a .
All exceptions granted under this Section must be | 6 | | published on the system's, fund's, or board's web site, shall | 7 | | name the person authorizing the procurement, and shall include | 8 | | a brief explanation of the reason for the exception. | 9 | | A person, other than a trustee or an employee of a | 10 | | retirement system, pension fund, or investment board, may not | 11 | | act as a consultant or investment adviser under this Section | 12 | | unless that person is registered as an investment adviser under | 13 | | the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1, | 14 | | et seq.) or a bank, as defined in the federal Investment | 15 | | Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.). | 16 | | (c) Investment services provided by an investment adviser | 17 | | or a consultant appointed under this Section shall be rendered | 18 | | pursuant to a written contract between the investment adviser | 19 | | or consultant and the board. | 20 | | The contract shall include all of the following: | 21 | | (1) Acknowledgement in writing by the investment | 22 | | adviser or consultant that he or she is a fiduciary with | 23 | | respect to the pension fund or retirement system. | 24 | | (2) The description of the board's investment policy | 25 | | and notice that the policy is subject to change. | 26 | | (3) (i) Full disclosure of direct and indirect fees, |
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| 1 | | commissions, penalties, and other compensation, including | 2 | | reimbursement for expenses, that may be paid by or on | 3 | | behalf of the consultant in connection with the provision | 4 | | of services to the pension fund or retirement system and | 5 | | (ii) a requirement that the consultant update the | 6 | | disclosure promptly after a modification of those payments | 7 | | or an additional payment. | 8 | | (4) A requirement that the investment adviser or | 9 | | consultant, in conjunction with the board's staff, submit | 10 | | periodic written reports, on at least a quarterly basis, | 11 | | for the board's review at its regularly scheduled meetings. | 12 | | All returns on investment shall be reported as net returns | 13 | | after payment of all fees, commissions, and any other | 14 | | compensation. | 15 | | (5) Disclosure of the names and addresses of (i) the | 16 | | consultant or investment adviser; (ii) any entity that is a | 17 | | parent of, or owns a controlling interest in, the | 18 | | consultant or investment adviser; (iii) any entity that is | 19 | | a subsidiary of, or in which a controlling interest is | 20 | | owned by, the consultant or investment adviser; (iv) any | 21 | | persons who have an ownership or distributive income share | 22 | | in the consultant or investment adviser that is in excess | 23 | | of 7.5%; or (v) serves as an executive officer of the | 24 | | consultant or investment adviser. | 25 | | (6) A disclosure of the names and addresses of all | 26 | | subcontractors, if applicable, and the expected amount of |
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| 1 | | money each will receive under the contract, including an | 2 | | acknowledgment that the contractor must promptly make | 3 | | notification, in writing, if at any time during the term of | 4 | | the contract a contractor adds or changes any | 5 | | subcontractors. For purposes of this subparagraph (6), | 6 | | "subcontractor" does not include non-investment related | 7 | | professionals or professionals offering services that are | 8 | | not directly related to the investment of assets, such as | 9 | | legal counsel, actuary, proxy-voting services, services | 10 | | used to track compliance with legal standards, and | 11 | | investment fund of funds , and qualified managers of | 12 | | emerging investment managers services where the board has | 13 | | no direct contractual relationship with the investment | 14 | | advisers or partnerships. | 15 | | (7) A description of service to be performed. | 16 | | (8) A description of the need for the service. | 17 | | (9) A description of the plan for post-performance | 18 | | review. | 19 | | (10) A description of the qualifications necessary. | 20 | | (11) The duration of the contract. | 21 | | (12) The method for charging and measuring cost. | 22 | | (d) Notwithstanding any other provision of law, a | 23 | | retirement system, pension fund, or investment board subject to | 24 | | this Code, except those whose investments are restricted by | 25 | | Section 1-113.2 of this Code, shall not enter into a contract | 26 | | with a consultant that exceeds 5 years in duration. No contract |
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| 1 | | to provide consulting services may be renewed or extended. At | 2 | | the end of the term of a contract, however, the consultant is | 3 | | eligible to compete for a new contract as provided in this | 4 | | Section. No retirement system, pension fund, or investment | 5 | | board shall attempt to avoid or contravene the restrictions of | 6 | | this subsection (d) by any means. | 7 | | (e) Within 60 days after the effective date of this | 8 | | amendatory Act of the 96th General Assembly, each investment | 9 | | adviser or consultant currently providing services or subject | 10 | | to an existing contract for the provision of services must | 11 | | disclose to the board of trustees all direct and indirect fees, | 12 | | commissions, penalties, and other compensation paid by or on | 13 | | behalf of the investment adviser or consultant in connection | 14 | | with the provision of those services and shall update that | 15 | | disclosure promptly after a modification of those payments or | 16 | | an additional payment. The person shall update the disclosure | 17 | | promptly after a modification of those payments or an | 18 | | additional payment. The disclosures required by this | 19 | | subsection (e) shall be in writing and shall include the date | 20 | | and amount of each payment and the name and address of each | 21 | | recipient of a payment. | 22 | | (f) The retirement system, pension fund, or board of | 23 | | investment shall develop uniform documents that shall be used | 24 | | for the solicitation, review, and acceptance of all investment | 25 | | services. The form shall include the terms contained in | 26 | | subsection (c) of this Section. All such uniform documents |
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| 1 | | shall be posted on the retirement system's, pension fund's, or | 2 | | investment board's web site. | 3 | | (g) A description of every contract for investment services | 4 | | shall be posted in a conspicuous manner on the web site of the | 5 | | retirement system, pension fund, or investment board. The | 6 | | description must include the name of the person or entity | 7 | | awarded a contract, the total amount applicable to the | 8 | | contract, the total fees paid or to be paid, and a disclosure | 9 | | approved by the board describing the factors that contributed | 10 | | to the selection of an investment adviser or consultant.
| 11 | | (Source: P.A. 98-433, eff. 8-16-13.) | 12 | | (40 ILCS 5/1-113.15a new) | 13 | | Sec. 1-113.15a. Qualified manager of emerging investment | 14 | | managers services. | 15 | | (a) As used in this Section, "qualified manager of emerging | 16 | | investment managers services" means the services of an | 17 | | investment adviser acting in its capacity as an investment | 18 | | manager of a multimanager portfolio made up of emerging | 19 | | investment managers, as that term is defined in subsection (4) | 20 | | of Section 1-109.1. | 21 | | (b) Based upon a written recommendation from an investment | 22 | | adviser providing qualified manager of emerging investment | 23 | | managers services for the selection or appointment of an | 24 | | emerging investment manager that has been providing investment | 25 | | services in the multimanager portfolio for at least 24 months, |
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| 1 | | the board of a retirement system, pension fund, or investment | 2 | | board may select or appoint such emerging investment manager | 3 | | based upon such recommendation. | 4 | | (c) A qualified manager of emerging investment managers | 5 | | services shall comply with the requirements regarding written | 6 | | contracts set forth in subsection (c) of Section 1-113.14.
| 7 | | Section 99. Effective date. This Act takes effect upon | 8 | | becoming law.".
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