Rep. Carol A. Sente

Filed: 3/18/2015

 

 


 

 


 
09900HB3429ham002LRB099 04381 JLS 32838 a

1
AMENDMENT TO HOUSE BILL 3429

2    AMENDMENT NO. ______. Amend House Bill 3429 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The Illinois Securities Law of 1953 is amended
5by changing Sections 4, 8, 11, 11a, 12, 13, and 18.1 and by
6adding Sections 2.34, 2.35, 2.36, and 8d as follows:
 
7    (815 ILCS 5/2.34 new)
8    Sec. 2.34. Accredited investor. "Accredited investor" has
9the meaning given to that term in 17 CFR 230.501(a), as amended
10and in effect from time to time.
 
11    (815 ILCS 5/2.35 new)
12    Sec. 2.35. Qualified escrowee. "Qualified escrowee" means
13a person, firm, partnership, association, corporation, or
14other legal entity who: (a) falls under the definition of
15"title insurance company" under, and pursuant to the terms and

 

 

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1requirements of, the Title Insurance Act; (b) is certified as
2an independent escrowee under, and pursuant to the terms and
3requirements of, the Title Insurance Act; or (c) is a bank,
4regulated trust company, savings bank, savings and loan
5association, or credit union which is authorized to do business
6in the State and which maintains at least one physical business
7location within the State.
 
8    (815 ILCS 5/2.36 new)
9    Sec. 2.36. Registered Internet portal. "Registered
10Internet portal" means an Internet portal maintained by a
11corporation or other legal entity that is being used to offer
12or sell securities and that meets the requirements of Section
138d of this Act.
 
14    (815 ILCS 5/4)  (from Ch. 121 1/2, par. 137.4)
15    Sec. 4. Exempt transactions. The provisions of Sections 2a,
165, 6 and 7 of this Act shall not apply to any of the following
17transactions, except where otherwise specified in this Section
184:
19    A. Any offer or sale, whether through a dealer or
20otherwise, of securities by a person who is not an issuer,
21underwriter, dealer or controlling person in respect of such
22securities, and who, being the bona fide owner of such
23securities, disposes thereof for his or her own account;
24provided, that such offer or sale is not made directly or

 

 

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1indirectly for the benefit of the issuer or of an underwriter
2or controlling person.
3    B. Any offer, sale, issuance or exchange of securities of
4the issuer to or with security holders of the issuer except to
5or with persons who are security holders solely by reason of
6holding transferable warrants, transferable options, or
7similar transferable rights of the issuer, if no commission or
8other remuneration is paid or given directly or indirectly for
9or on account of the procuring or soliciting of such sale or
10exchange (other than a fee paid to underwriters based on their
11undertaking to purchase any securities not purchased by
12security holders in connection with such sale or exchange).
13    C. Any offer, sale or issuance of securities to any
14corporation, bank, savings bank, savings institution, savings
15and loan association, trust company, insurance company,
16building and loan association, or dealer; to a pension fund,
17pension trust, or employees' profit sharing trust, other
18financial institution or institutional investor, any
19government or political subdivision or instrumentality
20thereof, whether the purchaser is acting for itself or in some
21fiduciary capacity; to any partnership or other association
22engaged as a substantial part of its business or operations in
23purchasing or holding securities; to any trust in respect of
24which a bank or trust company is trustee or co-trustee; to any
25entity in which at least 90% of the equity is owned by persons
26described under subsection C, H, or S of this Section 4; to any

 

 

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1employee benefit plan within the meaning of Title I of the
2Federal ERISA Act if (i) the investment decision is made by a
3plan fiduciary as defined in Section 3(21) of the Federal ERISA
4Act and such plan fiduciary is either a bank, savings and loan
5association, insurance company, registered investment adviser
6or an investment adviser registered under the Federal 1940
7Investment Advisers Act, or (ii) the plan has total assets in
8excess of $5,000,000, or (iii) in the case of a self-directed
9plan, investment decisions are made solely by persons that are
10described under subsection C, D, H or S of this Section 4; to
11any plan established and maintained by, and for the benefit of
12the employees of, any state or political subdivision or agency
13or instrumentality thereof if such plan has total assets in
14excess of $5,000,000; or to any organization described in
15Section 501(c)(3) of the Internal Revenue Code of 1986, any
16Massachusetts or similar business trust, or any partnership, if
17such organization, trust, or partnership has total assets in
18excess of $5,000,000.
19    D. The Secretary of State is granted authority to create by
20rule or regulation a limited offering transactional exemption
21that furthers the objectives of compatibility with federal
22exemptions and uniformity among the states. The Secretary of
23State shall prescribe by rule or regulation the amount of the
24fee for filing any report required under this subsection, but
25the fee shall not be less than the minimum amount nor more than
26the maximum amount established under Section 11a of this Act

 

 

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1and shall not be returnable in any event.
2    E. Any offer or sale of securities by an executor,
3administrator, guardian, receiver or trustee in insolvency or
4bankruptcy, or at any judicial sale, or at a public sale by
5auction held at an advertised time and place, or the offer or
6sale of securities in good faith and not for the purpose of
7avoiding the provisions of this Act by a pledgee of securities
8pledged for a bona fide debt.
9    F. Any offer or sale by a registered dealer, either as
10principal or agent, of any securities (except face amount
11certificate contracts and investment fund shares) at a price
12reasonably related to the current market price of such
13securities, provided:
14        (1) (a) the securities are issued and outstanding;
15            (b) the issuer is required to file reports pursuant
16        to Section 13 or Section 15(d) of the Federal 1934 Act
17        and has been subject to such requirements during the 90
18        day period immediately preceding the date of the offer
19        or sale, or is an issuer of a security covered by
20        Section 12(g)(2)(B) or (G) of the Federal 1934 Act;
21            (c) the dealer has a reasonable basis for believing
22        that the issuer is current in filing the reports
23        required to be filed at regular intervals pursuant to
24        the provisions of Section 13 or Section 15(d), as the
25        case may be, of the Federal 1934 Act, or in the case of
26        insurance companies exempted from Section 12(g) of the

 

 

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1        Federal 1934 Act by subparagraph 12(g)(2)(G) thereof,
2        the annual statement referred to in Section
3        12(g)(2)(G)(i) of the Federal 1934 Act; and
4            (d) the dealer has in its records, and makes
5        reasonably available upon request to any person
6        expressing an interest in a proposed transaction in the
7        securities, the issuer's most recent annual report
8        filed pursuant to Section 13 or 15(d), as the case may
9        be, of the Federal 1934 Act or the annual statement in
10        the case of an insurance company exempted from Section
11        12(g) of the Federal 1934 Act by subparagraph
12        12(g)(2)(G) thereof, together with any other reports
13        required to be filed at regular intervals under the
14        Federal 1934 Act by the issuer after such annual report
15        or annual statement; provided that the making
16        available of such reports pursuant to this
17        subparagraph, unless otherwise represented, shall not
18        constitute a representation by the dealer that the
19        information is true and correct, but shall constitute a
20        representation by the dealer that the information is
21        reasonably current; or
22        (2) (a) prior to any offer or sale, an application for
23        the authorization thereof and a report as set forth
24        under sub-paragraph (d) of this paragraph (2) has been
25        filed by any registered dealer with and approved by the
26        Secretary of State pursuant to such rules and

 

 

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1        regulations as the Secretary of State may prescribe;
2            (b) the Secretary of State shall have the power by
3        order to refuse to approve any application or report
4        filed pursuant to this paragraph (2) if
5                (i) the application or report does not comply
6            with the provisions of this paragraph (2), or
7                (ii) the offer or sale of such securities would
8            work or tend to work a fraud or deceit, or
9                (iii) the issuer or the applicant has violated
10            any of the provisions of this Act;
11            (c) each application and report filed pursuant to
12        this paragraph (2) shall be accompanied by a filing fee
13        and an examination fee in the amount established
14        pursuant to Section 11a of this Act, which shall not be
15        returnable in any event;
16            (d) there shall be submitted to the Secretary of
17        State no later than 120 days following the end of the
18        issuer's fiscal year, each year during the period of
19        the authorization, one copy of a report which shall
20        contain a balance sheet and income statement prepared
21        as of the issuer's most recent fiscal year end
22        certified by an independent certified public
23        accountant, together with such current information
24        concerning the securities and the issuer thereof as the
25        Secretary of State may prescribe by rule or regulation
26        or order;

 

 

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1            (e) prior to any offer or sale of securities under
2        the provisions of this paragraph (2), each registered
3        dealer participating in the offer or sale of such
4        securities shall provide upon request of prospective
5        purchasers of such securities a copy of the most recent
6        report required under the provisions of sub-paragraph
7        (d) of this paragraph (2);
8            (f) approval of an application filed pursuant to
9        this paragraph (2) of subsection F shall expire 5 years
10        after the date of the granting of the approval, unless
11        said approval is sooner terminated by (1) suspension or
12        revocation by the Secretary of State in the same manner
13        as is provided for in subsections E, F and G of Section
14        11 of this Act, or (2) the applicant filing with the
15        Secretary of State an affidavit to the effect that (i)
16        the subject securities have become exempt under
17        Section 3 of this Act or (ii) the applicant no longer
18        is capable of acting as the applicant and stating the
19        reasons therefor or (iii) the applicant no longer
20        desires to act as the applicant. In the event of the
21        filing of an affidavit under either preceding
22        sub-division (ii) or (iii) the Secretary of State may
23        authorize a substitution of applicant upon the new
24        applicant executing the application as originally
25        filed. However, the aforementioned substituted
26        execution shall have no effect upon the previously

 

 

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1        determined date of expiration of approval of the
2        application. Notwithstanding the provisions of this
3        subparagraph (f), approvals granted under this
4        paragraph (2) of subsection F prior to the effective
5        date of this Act shall be governed by the provisions of
6        this Act in effect on such date of approval; and
7            (g) no person shall be considered to have violated
8        Section 5 of this Act by reason of any offer or sale
9        effected in reliance upon an approval granted under
10        this paragraph (2) after a termination thereof under
11        the foregoing subparagraph (f) if official notice of
12        such termination has not been circulated generally to
13        dealers by the Secretary of State and if such person
14        sustains the burden of proof that he or she did not
15        know, and in the exercise of reasonable care, could not
16        have known, of the termination; or
17        (3) the securities, or securities of the same class,
18    are the subject of an existing registration under Section 5
19    of this Act.
20    The exemption provided in this subsection F shall apply
21only if the offer or sale is made in good faith and not for the
22purpose of avoiding any of the provisions of this Act, and only
23if the offer or sale is not made for the direct or indirect
24benefit of the issuer of the securities, or the controlling
25person in respect of such issuer.
26    G. (1) Any offer, sale or issuance of a security, whether

 

 

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1    to residents or to non-residents of this State, where:
2            (a) all sales of such security to residents of this
3        State (including the most recent such sale) within the
4        immediately preceding 12-month period have been made
5        to not more than 35 persons or have involved an
6        aggregate sales price of not more than $1,000,000;
7            (b) such security is not offered or sold by means
8        of any general advertising or general solicitation in
9        this State; and
10            (c) no commission, discount, or other remuneration
11        exceeding 20% of the sale price of such security, if
12        sold to a resident of this State, is paid or given
13        directly or indirectly for or on account of such sales.
14        (2) In computing the number of resident purchasers or
15    the aggregate sales price under paragraph (1) (a) above,
16    there shall be excluded any purchaser or dollar amount of
17    sales price, as the case may be, with respect to any
18    security which at the time of its sale was exempt under
19    Section 3 or was registered under Section 5, 6 or 7 or was
20    sold in a transaction exempt under other subsections of
21    this Section 4.
22        (3) A prospectus or preliminary prospectus with
23    respect to a security for which a registration statement is
24    pending or effective under the Federal 1933 Act shall not
25    be deemed to constitute general advertising or general
26    solicitation in this State as such terms are used in

 

 

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1    paragraph (1) (b) above, provided that such prospectus or
2    preliminary prospectus has not been sent or otherwise
3    delivered to more than 150 residents of this State.
4        (4) The Secretary of State shall by rule or regulation
5    require the filing of a report or reports of sales made in
6    reliance upon the exemption provided by this subsection G
7    and prescribe the form of such report and the time within
8    which such report shall be filed. Such report shall set
9    forth the name and address of the issuer and of the
10    controlling person, if the sale was for the direct or
11    indirect benefit of such person, and any other information
12    deemed necessary by the Secretary of State to enforce
13    compliance with this subsection G. The Secretary of State
14    shall prescribe by rule or regulation the amount of the fee
15    for filing any such report, established pursuant to Section
16    11a of this Act, which shall not be returnable in any
17    event. The Secretary of State may impose, in such cases as
18    he or she may deem appropriate, a penalty for failure to
19    file any such report in a timely manner, but no such
20    penalty shall exceed an amount equal to five times the
21    filing fee. The contents of any such report or portion
22    thereof may be deemed confidential by the Secretary of
23    State by rule or order and if so deemed shall not be
24    disclosed to the public except by order of court or in
25    court proceedings. The failure to file any such report
26    shall not affect the availability of such exemption, but

 

 

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1    such failure to file any such report shall constitute a
2    violation of subsection D of Section 12 of this Act,
3    subject to the penalties enumerated in Section 14 of this
4    Act. The civil remedies provided for in subsection A of
5    Section 13 of this Act and the civil remedies of rescission
6    and appointment of a receiver, conservator, ancillary
7    receiver or ancillary conservator provided for in
8    subsection F of Section 13 of this Act shall not be
9    available against any person by reason of the failure to
10    file any such report or on account of the contents of any
11    such report.
12    H. Any offer, sale or issuance of a security to an
13accredited investor provided that such security is not offered
14or sold by means of any general advertising or general
15solicitation, except as otherwise permitted in this Act. (1)
16any natural person who has, or is reasonably believed by the
17person relying upon this subsection H to have, a net worth or
18joint net worth with that person's spouse, at the time of the
19offer, sale or issuance, in excess of $1,000,000 excluding the
20value of a principal residence, or (2) any natural person who
21had, or is reasonably believed by the person relying upon this
22subsection H to have had, an income or joint income with that
23person's spouse, in excess of $200,000 in each of the two most
24recent years and who reasonably expects, or is reasonably
25expected to have, an income in excess of $200,000 in the
26current year, or (3) any person that is not a natural person

 

 

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1and in which at least 90% of the equity interest is owned by
2persons who meet either of the tests set forth in clauses (1)
3or (2) of this subsection H; provided that such security is not
4offered or sold by means of any general advertising or general
5solicitation in this State.
6    I. Any offer, sale or issuance of securities to or for the
7benefit of security holders of any person incident to a vote by
8such security holders pursuant to such person's organizational
9document or any applicable statute of the jurisdiction of such
10person's organization, on a merger, consolidation,
11reclassification of securities, or sale or transfer of assets
12in consideration of or exchange for securities of the same or
13another person.
14    J. Any offer, sale or issuance of securities in exchange
15for one or more outstanding securities, claims or property
16interests, or partly in such exchange and partly for cash,
17where such offer, sale or issuance is incident to a
18reorganization, recapitalization, readjustment, composition or
19settlement of a claim, as approved by a court of competent
20jurisdiction of the United States, or any state.
21    K. Any offer, sale or issuance of securities for patronage,
22or as patronage refunds, or in connection with marketing
23agreements by cooperative associations organized exclusively
24for agricultural, producer, marketing, purchasing, or consumer
25purposes; and the sale of subscriptions for or shares of stock
26of cooperative associations organized exclusively for

 

 

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1agricultural, producer, marketing, purchasing, or consumer
2purposes, if no commission or other remuneration is paid or
3given directly or indirectly for or on account of such
4subscription, sale or resale, and if any person does not own
5beneficially more than 5% of the aggregate amount of issued and
6outstanding capital stock of such cooperative association.
7    L. Offers for sale or solicitations of offers to buy (but
8not the acceptance thereof), of securities which are the
9subject of a pending registration statement filed under the
10Federal 1933 Act and which are the subject of a pending
11application for registration under this Act.
12    M. Any offer or sale of preorganization subscriptions for
13any securities prior to the incorporation, organization or
14formation of any issuer under the laws of the United States, or
15any state, or the issuance by such issuer, after its
16incorporation, organization or formation, of securities
17pursuant to such preorganization subscriptions, provided the
18number of subscribers does not exceed 25 and either (1) no
19commission or other remuneration is paid or given directly or
20indirectly for or on account of such sale or sales or issuance,
21or (2) if any commission or other remuneration is paid or given
22directly or indirectly for or on account of such sale or sales
23or issuance, the securities are not offered or sold by any
24means of general advertising or general solicitation in this
25State.
26    N. The execution of orders for purchase of securities by a

 

 

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1registered salesperson and dealer, provided such persons act as
2agent for the purchaser, have made no solicitation of the order
3to purchase the securities, have no direct interest in the sale
4or distribution of the securities ordered, receive no
5commission, profit, or other compensation other than the
6commissions involved in the purchase and sale of the securities
7and deliver to the purchaser written confirmation of the order
8which clearly identifies the commissions paid to the registered
9dealer.
10    O. Any offer, sale or issuance of securities, other than
11fractional undivided interests in an oil, gas or other mineral
12lease, right or royalty, for the direct or indirect benefit of
13the issuer thereof, or of a controlling person, whether through
14a dealer (acting either as principal or agent) or otherwise, if
15the securities sold, immediately following the sale or sales,
16together with securities already owned by the purchaser, would
17constitute 50% or more of the equity interest of any one
18issuer, provided that the number of purchasers is not more than
195 and provided further that no commission, discount or other
20remuneration exceeding 15% of the aggregate sale price of the
21securities is paid or given directly or indirectly for or on
22account of the sale or sales.
23    P. Any offer, sale or issuance of securities (except face
24amount certificate contracts and investment fund shares)
25issued by and representing an interest in an issuer which is a
26business corporation incorporated under the laws of this State,

 

 

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1the purposes of which are to provide capital and supervision
2solely for the redevelopment of blighted urban areas located in
3a municipality in this State and whose assets are located
4entirely within that municipality, provided: (1) no
5commission, discount or other remuneration is paid or given
6directly or indirectly for or on account of the sale or sales
7of such securities; (2) the aggregate amount of any securities
8of the issuer owned of record or beneficially by any one person
9will not exceed the lesser of $5,000 or 4% of the equity
10capitalization of the issuer; (3) the officers and directors of
11the corporation have been bona fide residents of the
12municipality not less than 3 years immediately preceding the
13effectiveness of the offering sheet for the securities under
14this subsection P; and (4) the issuer files with the Secretary
15of State an offering sheet descriptive of the securities
16setting forth:
17        (a) the name and address of the issuer;
18        (b) the title and total amount of securities to be
19    offered;
20        (c) the price at which the securities are to be
21    offered; and
22        (d) such additional information as the Secretary of
23    State may prescribe by rule and regulation.
24    The Secretary of State shall within a reasonable time
25examine the offering sheet so filed and, unless the Secretary
26of State shall make a determination that the offering sheet so

 

 

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1filed does not conform to the requirements of this subsection
2P, shall declare the offering sheet to be effective, which
3offering sheet shall continue effective for a period of 12
4months from the date it becomes effective. The fee for
5examining the offering sheet shall be as established pursuant
6to Section 11a of this Act, and shall not be returnable in any
7event. The Secretary of State shall by rule or regulation
8require the filing of a report or reports of sales made to
9residents of this State in reliance upon the exemption provided
10by this subsection P and prescribe the form of such report and
11the time within which such report shall be filed. The Secretary
12of State shall prescribe by rule or regulation the amount of
13the fee for filing any such report, but such fee shall not be
14less than the minimum amount nor more than the maximum amount
15established pursuant to Section 11a of this Act, and shall not
16be returnable in any event. The Secretary of State may impose,
17in such cases as he or she may deem appropriate, a penalty for
18failure to file any such report in a timely manner, but no such
19penalty shall exceed an amount equal to five times the filing
20fee. The contents of any such report shall be deemed
21confidential and shall not be disclosed to the public except by
22order of court or in court proceedings. The failure to file any
23such report shall not affect the availability of such
24exemption, but such failure to file any such report shall
25constitute a violation of subsection D of Section 12 of this
26Act, subject to the penalties enumerated in Section 14 of this

 

 

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1Act. The civil remedies provided for in subsection A of Section
213 of this Act and the civil remedies of rescission and
3appointment of a receiver, conservator, ancillary receiver or
4ancillary conservator provided for in subsection F of Section
513 of this Act shall not be available against any person by
6reason of the failure to file any such report or on account of
7the contents of any such report.
8    Q. Any isolated transaction, whether effected by a dealer
9or not.
10    R. Any offer, sale or issuance of a security to any person
11who purchases at least $150,000 of the securities being
12offered, where the purchaser's total purchase price does not,
13or it is reasonably believed by the person relying upon this
14subsection R that said purchase price does not, exceed 20
15percent of the purchaser's net worth at the time of sale, or if
16a natural person a joint net worth with that person's spouse,
17for one or any combination of the following: (i) cash, (ii)
18securities for which market quotations are readily available,
19(iii) an unconditional obligation to pay cash or securities for
20which quotations are readily available, which obligation is to
21be discharged within five years of the sale of the securities
22to the purchaser, or (iv) the cancellation of any indebtedness
23owed by the issuer to the purchaser; provided that such
24security is not offered or sold by means of any general
25advertising or general solicitation in this State.
26    S. Any offer, sale or issuance of a security to any person

 

 

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1who is, or who is reasonably believed by the person relying
2upon this subsection S to be, a director, executive officer, or
3general partner of the issuer of the securities being offered
4or sold, or any director, executive officer, or general partner
5of a general partner of that issuer. For purposes of this
6subsection S, "executive officer" shall mean the president, any
7vice president in charge of a principal business unit, division
8or function (such as sales, administration or finance), any
9other officer who performs a policy making function, or any
10other person who performs similar policy making functions for
11the issuer. Executive officers of subsidiaries may be deemed
12executive officers of the issuer if they perform such policy
13making functions for the issuer.
14    A document being filed pursuant to this Section 4 shall be
15deemed filed, and any fee paid pursuant to this Section 4 shall
16be deemed paid, upon the date of actual receipt thereof by the
17Secretary of State.
18    T. An offer or sale of a security by an issuer that is
19organized and, as of the time of the offer and the time of
20sale, in good standing under the laws of the State of Illinois,
21made solely to persons or entities that are, as of the time of
22the offer and time of sale, residents of the State of Illinois,
23provided:
24        (1) The offering meets all of the requirements of the
25    federal exemption for intrastate offerings provided in
26    Section 3(a)(11) of the Securities Act of 1933 (15 U.S.C.

 

 

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1    77c(a)(11)) and Rule 147 adopted under the Securities Act
2    of 1933 (17 CFR 230.147).
3        (2) The aggregate purchase price of all securities sold
4    by an issuer in reliance on the exemption under this
5    subsection, within any 12-month period, does not exceed:
6    (i) $1,000,000; or (ii) $4,000,000 if the issuer has
7    undergone and made available (directly, or through a
8    registered Internet portal), to each prospective purchaser
9    and the Secretary of State, copies of its most recent
10    financial statements which have been audited by an
11    independent auditor and certified by a senior officer of
12    the issuer as fairly, completely, and accurately
13    presenting the financial condition of the issuer, in all
14    material respects, as of the dates indicated therein.
15    Amounts received in connection with any offer or sale to
16    any accredited investor or any of the following shall not
17    count toward the calculation of the foregoing monetary
18    limitations:
19            (a) any entity (including, without limitation, any
20        trust) in which all of the equity interests are owned
21        by (or with respect to any trust, the primary
22        beneficiaries are) persons who are accredited
23        investors or who meet one or more of the criteria in
24        subparagraphs (b) through (d) of this paragraph (2);
25            (b) with respect to participating in an offering of
26        a particular issuer, a natural person serving as an

 

 

09900HB3429ham002- 21 -LRB099 04381 JLS 32838 a

1        officer, director, partner, or trustee of, or
2        otherwise occupying similar status or performing
3        similar functions with respect to, such issuer;
4            (c) with respect to participating in an offering of
5        a particular issuer, a natural person or entity who
6        owns 10% or more of the then aggregate outstanding
7        voting capital securities of such issuer; or
8            (d) such other person or entity as the Secretary of
9        State may hereafter exempt by rule.
10        The Secretary of State may hereafter cumulatively
11    increase the dollar limitations provided in this
12    paragraph.
13        (3) The aggregate amount sold by an issuer to any
14    purchaser (other than an accredited investor or a person or
15    entity which meets one or more of the criteria in
16    subparagraphs (a) through (d) of paragraph (2) of this
17    subsection T) in an offering of securities made in reliance
18    on the exemption provided in this subsection T, within any
19    consecutive 12-month period, does not exceed $5,000.
20        (4) The Secretary of State shall establish by rule the
21    duties of the issuer including disclosure and filing
22    requirements, treatment of escrow funds and agreements,
23    production of financial statements, and other requirements
24    as deemed necessary.
25        (5) The issuer has made available, to each prospective
26    purchaser and the Secretary of State, copies of its most

 

 

09900HB3429ham002- 22 -LRB099 04381 JLS 32838 a

1    recent financial statements personally certified by one or
2    more senior officers of the issuer as fairly, completely,
3    and accurately presenting the financial condition of the
4    issuer, in all material respects, as of the dates indicated
5    therein.
6        (6) No commission or other remuneration is paid or
7    given directly or indirectly to any person or entity
8    (including, without limitation, any registered Internet
9    portal) for soliciting any person in this State, except to
10    registered dealers and registered salespersons licensed in
11    this State.
12        (7) Not less than 15 days before the earlier of the
13    first sale of securities made in reliance on the exemption
14    provided in this subsection T, or the use of any general
15    solicitation with respect thereto (other than a general
16    announcement made by (or on behalf of), an issuer shall
17    file forms, materials, and fees as required by the
18    Secretary of State by rule.
19        The Secretary of State shall prescribe by rule the
20    amount of the fee for filing the notice required in
21    subparagraph (a), established pursuant to Section 11a of
22    this Act. The Secretary of State may impose, in such cases
23    as he or she may deem appropriate, a penalty for failure to
24    file any such notice in a timely manner, but no such
25    penalty shall exceed an amount equal to 5 times the filing
26    fee. The contents of any such notice or portion thereof may

 

 

09900HB3429ham002- 23 -LRB099 04381 JLS 32838 a

1    be deemed confidential by the Secretary of State by rule or
2    order and if so deemed shall not be disclosed to the public
3    except by order of court or in court proceedings. The
4    failure to file any such notice does not affect the
5    availability of such exemption, but such failure to file
6    any such report constitutes a violation of subsection D of
7    Section 12 of this Act and is subject to the penalties and
8    remedies available in this Act and under the law.
9        (8) All payments for purchase of securities offered
10    pursuant to the exemption provided under this subsection T
11    are made directly to, and held by, the qualified escrowee
12    identified in the escrow agreement required pursuant to
13    subparagraph (c) of paragraph (4).
14        (9) The issuer includes each of the following in one or
15    more of the offering materials delivered to a prospective
16    purchaser, or to which a prospective purchaser has been
17    granted electronic access, in connection with the
18    offering:
19            (a) a description of the issuer, its type of
20        entity, the address, and telephone number of its
21        principal office;
22            (b) a reasonably detailed description of the
23        intended use of the offering proceeds, including any
24        amounts to be paid, as compensation or otherwise, to
25        any owner, executive officer, director, managing
26        member, or other person occupying a similar status or

 

 

09900HB3429ham002- 24 -LRB099 04381 JLS 32838 a

1        performing similar functions on behalf of the issuer;
2            (c) the identity of all persons owning more than
3        10% of the voting capital securities of the issuer;
4            (d) the identity of the executive officers,
5        directors, managing members, and other persons
6        occupying a similar status or performing similar
7        functions in the name of and on behalf of the issuer,
8        including their titles and a reasonably detailed
9        description of their prior experience;
10            (e) the identity of any person or entity who has
11        been or will be retained by the issuer to assist the
12        issuer in conducting the offering and sale of the
13        securities (including all registered Internet portals
14        but excluding persons acting solely as accountants or
15        attorneys and employees whose primary job
16        responsibilities involve the operating business of the
17        issuer rather than assisting the issuer in raising
18        capital) and a description of the consideration being
19        paid to each such person or entity for such assistance;
20            (f) any additional information material to the
21        offering, including a description of significant
22        factors that make the offering speculative or risky for
23        the purchaser;
24            (g) the information required pursuant to
25        subparagraphs (a) and (b) of paragraph (4) of this
26        subsection T;

 

 

09900HB3429ham002- 25 -LRB099 04381 JLS 32838 a

1            (h) such other information as the Secretary of
2        State may hereafter require by rule.
3        (10) The issuer (directly or through a registered
4    Internet portal) requires each purchaser to certify, in
5    writing or electronically, that the purchaser:
6            (a) is a resident of the State of Illinois;
7            (b) understands that he or she is investing in a
8        high-risk, highly speculative, business venture, that
9        he or she may lose all of his or her investment, and
10        that he or she can afford such a loss of his or her
11        investment;
12            (c) understands that the securities being offered
13        are highly illiquid, that there is no ready market for
14        the sale of such securities, that it may be difficult
15        or impossible for purchaser to sell or otherwise
16        dispose of such securities, and (where applicable)
17        that purchaser may be required to hold the securities
18        for an indefinite period of time; and
19            (d) understands that purchaser may be subject to
20        the payment of certain taxes with respect to the
21        securities being purchased whether or not purchaser
22        has sold, or otherwise disposed of, such securities or
23        whether purchaser has received any distributions or
24        other amounts from the issuer.
25        (11) The issuer (directly or through a registered
26    Internet portal) obtains from each purchaser of a security

 

 

09900HB3429ham002- 26 -LRB099 04381 JLS 32838 a

1    offered under this subsection T evidence that the purchaser
2    is a resident of this State and, if applicable, is an
3    accredited investor. Without limiting the generality of
4    the foregoing, and not to the exclusion of other reasonable
5    methods which may be used by the issuer in connection with
6    the foregoing, an issuer may rely.
7        (12) The issuer (and to the extent a registered
8    Internet portal is used, such registered Internet portal)
9    maintains records of all offers and sales of securities
10    made pursuant to the exemption granted by this subsection T
11    and provides ready access to such records to the Secretary
12    of State, upon notice from the Secretary of State.
13        (13) The issuer is not, either before or as a result of
14    the offering:
15            (a) an investment company, as defined in Section 3
16        of the Investment Company Act of 1940 (15 U.S.C.
17        80a-3), as amended and in effect (unless the issuer
18        qualifies for exclusion from such definition pursuant
19        to one or more of the exceptions provided in Section
20        3(c) of the Investment Company Act of 1940, any other
21        provision of the Investment Company Act of 1940, or any
22        administrative rule or regulation promulgated with
23        respect to the Investment Company Act of 1940 or in
24        connection therewith); or
25            (b) subject to the reporting requirements of
26        Section 13 or 15(d) of the Securities Exchange Act of

 

 

09900HB3429ham002- 27 -LRB099 04381 JLS 32838 a

1        1934 (15 U.S.C. 78m or 15 U.S.C. 78o(d).
2        (14) Neither the issuer, nor any person affiliated with
3    the issuer (either before or as a result of the offering),
4    nor the offering itself, nor the registered Internet portal
5    (to the extent used) is subject to disqualification
6    established by the Secretary of State by rule or contained
7    in the Securities Act of 1933 (15 U.S.C. 77c(a)(11)) and
8    Rule 147 adopted under the Securities Act of 1933 (17 CFR
9    230.147), unless both of the following are met:
10            (a) on a showing of good cause and without
11        prejudice to any other action by the Secretary of
12        State, the Secretary of State determines that it is not
13        necessary under the circumstances that an exemption is
14        denied; and
15            (b) the issuer establishes that it made a factual
16        inquiry into whether any disqualification existed
17        under this paragraph (14), but did not know, and in the
18        exercise of reasonable care could not have known, that
19        a disqualification existed under this paragraph (14);
20        the nature and scope of the requisite inquiry will vary
21        based on the circumstances of the issuer and the other
22        offering participants.
23(Source: P.A. 90-70, eff. 7-8-97; 91-809, eff. 1-1-01.)
 
24    (815 ILCS 5/8)  (from Ch. 121 1/2, par. 137.8)
25    Sec. 8. Registration of dealers, limited Canadian dealers,

 

 

09900HB3429ham002- 28 -LRB099 04381 JLS 32838 a

1internet portals, salespersons, investment advisers, and
2investment adviser representatives.
 
3    A. Except as otherwise provided in this subsection A, every
4dealer, limited Canadian dealer, salesperson, investment
5adviser, and investment adviser representative shall be
6registered as such with the Secretary of State. No dealer or
7salesperson need be registered as such when offering or selling
8securities in transactions exempted by subsection A, B, C, D,
9E, G, H, I, J, K, M, O, P, Q, R or S of Section 4 of this Act,
10provided that such dealer or salesperson is not regularly
11engaged in the business of offering or selling securities in
12reliance upon the exemption set forth in subsection G or M of
13Section 4 of this Act. No dealer, issuer or controlling person
14shall employ a salesperson unless such salesperson is
15registered as such with the Secretary of State or is employed
16for the purpose of offering or selling securities solely in
17transactions exempted by subsection A, B, C, D, E, G, H, I, J,
18K, L, M, O, P, Q, R or S of Section 4 of this Act; provided that
19such salesperson need not be registered when effecting
20transactions in this State limited to those transactions
21described in Section 15(h)(2) of the Federal 1934 Act or
22engaging in the offer or sale of securities in respect of which
23he or she has beneficial ownership and is a controlling person.
24The Secretary of State may, by rule, regulation or order and
25subject to such terms, conditions, and fees as may be

 

 

09900HB3429ham002- 29 -LRB099 04381 JLS 32838 a

1prescribed in such rule, regulation or order, exempt from the
2registration requirements of this Section 8 any investment
3adviser, if the Secretary of State shall find that such
4registration is not necessary in the public interest by reason
5of the small number of clients or otherwise limited character
6of operation of such investment adviser.
 
7    B. An application for registration as a dealer or limited
8Canadian dealer, executed, verified, or authenticated by or on
9behalf of the applicant, shall be filed with the Secretary of
10State, in such form as the Secretary of State may by rule,
11regulation or order prescribe, setting forth or accompanied by:
12        (1) The name and address of the applicant, the location
13    of its principal business office and all branch offices, if
14    any, and the date of its organization;
15        (2) A statement of any other Federal or state licenses
16    or registrations which have been granted the applicant and
17    whether any such licenses or registrations have ever been
18    refused, cancelled, suspended, revoked or withdrawn;
19        (3) The assets and all liabilities, including
20    contingent liabilities of the applicant, as of a date not
21    more than 60 days prior to the filing of the application;
22        (4) (a) A brief description of any civil or criminal
23    proceeding of which fraud is an essential element pending
24    against the applicant and whether the applicant has ever
25    been convicted of a felony, or of any misdemeanor of which

 

 

09900HB3429ham002- 30 -LRB099 04381 JLS 32838 a

1    fraud is an essential element;
2        (b) A list setting forth the name, residence and
3    business address and a 10 year occupational statement of
4    each principal of the applicant and a statement describing
5    briefly any civil or criminal proceedings of which fraud is
6    an essential element pending against any such principal and
7    the facts concerning any conviction of any such principal
8    of a felony, or of any misdemeanor of which fraud is an
9    essential element;
10        (5) If the applicant is a corporation: a list of its
11    officers and directors setting forth the residence and
12    business address of each; a 10-year occupational statement
13    of each such officer or director; and a statement
14    describing briefly any civil or criminal proceedings of
15    which fraud is an essential element pending against each
16    such officer or director and the facts concerning any
17    conviction of any officer or director of a felony, or of
18    any misdemeanor of which fraud is an essential element;
19        (6) If the applicant is a sole proprietorship, a
20    partnership, limited liability company, an unincorporated
21    association or any similar form of business organization:
22    the name, residence and business address of the proprietor
23    or of each partner, member, officer, director, trustee or
24    manager; the limitations, if any, of the liability of each
25    such individual; a 10-year occupational statement of each
26    such individual; a statement describing briefly any civil

 

 

09900HB3429ham002- 31 -LRB099 04381 JLS 32838 a

1    or criminal proceedings of which fraud is an essential
2    element pending against each such individual and the facts
3    concerning any conviction of any such individual of a
4    felony, or of any misdemeanor of which fraud is an
5    essential element;
6        (7) Such additional information as the Secretary of
7    State may by rule or regulation prescribe as necessary to
8    determine the applicant's financial responsibility,
9    business repute and qualification to act as a dealer.
10        (8) (a) No applicant shall be registered or
11    re-registered as a dealer or limited Canadian dealer under
12    this Section unless and until each principal of the dealer
13    has passed an examination conducted by the Secretary of
14    State or a self-regulatory organization of securities
15    dealers or similar person, which examination has been
16    designated by the Secretary of State by rule, regulation or
17    order to be satisfactory for purposes of determining
18    whether the applicant has sufficient knowledge of the
19    securities business and laws relating thereto to act as a
20    registered dealer. Any dealer who was registered on
21    September 30, 1963, and has continued to be so registered;
22    and any principal of any registered dealer, who was acting
23    in such capacity on and continuously since September 30,
24    1963; and any individual who has previously passed a
25    securities dealer examination administered by the
26    Secretary of State or any examination designated by the

 

 

09900HB3429ham002- 32 -LRB099 04381 JLS 32838 a

1    Secretary of State to be satisfactory for purposes of
2    determining whether the applicant has sufficient knowledge
3    of the securities business and laws relating thereto to act
4    as a registered dealer by rule, regulation or order, shall
5    not be required to pass an examination in order to continue
6    to act in such capacity. The Secretary of State may by
7    order waive the examination requirement for any principal
8    of an applicant for registration under this subsection B
9    who has had such experience or education relating to the
10    securities business as may be determined by the Secretary
11    of State to be the equivalent of such examination. Any
12    request for such a waiver shall be filed with the Secretary
13    of State in such form as may be prescribed by rule or
14    regulation.
15        (b) Unless an applicant is a member of the body
16    corporate known as the Securities Investor Protection
17    Corporation established pursuant to the Act of Congress of
18    the United States known as the Securities Investor
19    Protection Act of 1970, as amended, a member of an
20    association of dealers registered as a national securities
21    association pursuant to Section 15A of the Federal 1934
22    Act, or a member of a self-regulatory organization or stock
23    exchange in Canada which the Secretary of State has
24    designated by rule or order, an applicant shall not be
25    registered or re-registered unless and until there is filed
26    with the Secretary of State evidence that such applicant

 

 

09900HB3429ham002- 33 -LRB099 04381 JLS 32838 a

1    has in effect insurance or other equivalent protection for
2    each client's cash or securities held by such applicant,
3    and an undertaking that such applicant will continually
4    maintain such insurance or other protection during the
5    period of registration or re-registration. Such insurance
6    or other protection shall be in a form and amount
7    reasonably prescribed by the Secretary of State by rule or
8    regulation.
9        (9) The application for the registration of a dealer or
10    limited Canadian dealer shall be accompanied by a filing
11    fee and a fee for each branch office in this State, in each
12    case in the amount established pursuant to Section 11a of
13    this Act, which fees shall not be returnable in any event.
14        (10) The Secretary of State shall notify the dealer or
15    limited Canadian dealer by written notice (which may be by
16    electronic or facsimile transmission) of the effectiveness
17    of the registration as a dealer in this State.
18        (11) Any change which renders no longer accurate any
19    information contained in any application for registration
20    or re-registration of a dealer or limited Canadian dealer
21    shall be reported to the Secretary of State within 10
22    business days after the occurrence of such change; but in
23    respect to assets and liabilities only materially adverse
24    changes need be reported.
 
25    C. Any registered dealer, limited Canadian dealer, issuer,

 

 

09900HB3429ham002- 34 -LRB099 04381 JLS 32838 a

1or controlling person desiring to register a salesperson shall
2file an application with the Secretary of State, in such form
3as the Secretary of State may by rule or regulation prescribe,
4which the salesperson is required by this Section to provide to
5the dealer, issuer, or controlling person, executed, verified,
6or authenticated by the salesperson setting forth or
7accompanied by:
8        (1) the name, residence and business address of the
9    salesperson;
10        (2) whether any federal or State license or
11    registration as dealer, limited Canadian dealer, or
12    salesperson has ever been refused the salesperson or
13    cancelled, suspended, revoked, withdrawn, barred, limited,
14    or otherwise adversely affected in a similar manner or
15    whether the salesperson has ever been censured or expelled;
16        (3) the nature of employment with, and names and
17    addresses of, employers of the salesperson for the 10 years
18    immediately preceding the date of application;
19        (4) a brief description of any civil or criminal
20    proceedings of which fraud is an essential element pending
21    against the salesperson, and whether the salesperson has
22    ever been convicted of a felony, or of any misdemeanor of
23    which fraud is an essential element;
24        (5) such additional information as the Secretary of
25    State may by rule, regulation or order prescribe as
26    necessary to determine the salesperson's business repute

 

 

09900HB3429ham002- 35 -LRB099 04381 JLS 32838 a

1    and qualification to act as a salesperson; and
2        (6) no individual shall be registered or re-registered
3    as a salesperson under this Section unless and until such
4    individual has passed an examination conducted by the
5    Secretary of State or a self-regulatory organization of
6    securities dealers or similar person, which examination
7    has been designated by the Secretary of State by rule,
8    regulation or order to be satisfactory for purposes of
9    determining whether the applicant has sufficient knowledge
10    of the securities business and laws relating thereto to act
11    as a registered salesperson.
12        Any salesperson who was registered prior to September
13    30, 1963, and has continued to be so registered, and any
14    individual who has passed a securities salesperson
15    examination administered by the Secretary of State or an
16    examination designated by the Secretary of State by rule,
17    regulation or order to be satisfactory for purposes of
18    determining whether the applicant has sufficient knowledge
19    of the securities business and laws relating thereto to act
20    as a registered salesperson, shall not be required to pass
21    an examination in order to continue to act as a
22    salesperson. The Secretary of State may by order waive the
23    examination requirement for any applicant for registration
24    under this subsection C who has had such experience or
25    education relating to the securities business as may be
26    determined by the Secretary of State to be the equivalent

 

 

09900HB3429ham002- 36 -LRB099 04381 JLS 32838 a

1    of such examination. Any request for such a waiver shall be
2    filed with the Secretary of State in such form as may be
3    prescribed by rule, regulation or order.
4        (7) The application for registration of a salesperson
5    shall be accompanied by a filing fee and a Securities Audit
6    and Enforcement Fund fee, each in the amount established
7    pursuant to Section 11a of this Act, which shall not be
8    returnable in any event.
9        (8) Any change which renders no longer accurate any
10    information contained in any application for registration
11    or re-registration as a salesperson shall be reported to
12    the Secretary of State within 10 business days after the
13    occurrence of such change. If the activities are terminated
14    which rendered an individual a salesperson for the dealer,
15    issuer or controlling person, the dealer, issuer or
16    controlling person, as the case may be, shall notify the
17    Secretary of State, in writing, within 30 days of the
18    salesperson's cessation of activities, using the
19    appropriate termination notice form.
20        (9) A registered salesperson may transfer his or her
21    registration under this Section 8 for the unexpired term
22    thereof from one registered dealer or limited Canadian
23    dealer to another by the giving of notice of the transfer
24    by the new registered dealer or limited Canadian dealer to
25    the Secretary of State in such form and subject to such
26    conditions as the Secretary of State shall by rule or

 

 

09900HB3429ham002- 37 -LRB099 04381 JLS 32838 a

1    regulation prescribe. The new registered dealer or limited
2    Canadian dealer shall promptly file an application for
3    registration of such salesperson as provided in this
4    subsection C, accompanied by the filing fee prescribed by
5    paragraph (7) of this subsection C.
 
6    C-5. Except with respect to federal covered investment
7advisers whose only clients are investment companies as defined
8in the Federal 1940 Act, other investment advisers, federal
9covered investment advisers, or any similar person which the
10Secretary of State may prescribe by rule or order, a federal
11covered investment adviser shall file with the Secretary of
12State, prior to acting as a federal covered investment adviser
13in this State, such documents as have been filed with the
14Securities and Exchange Commission as the Secretary of State by
15rule or order may prescribe. The notification of a federal
16covered investment adviser shall be accompanied by a
17notification filing fee established pursuant to Section 11a of
18this Act, which shall not be returnable in any event. Every
19person acting as a federal covered investment adviser in this
20State shall file a notification filing and pay an annual
21notification filing fee established pursuant to Section 11a of
22this Act, which is not returnable in any event. The failure to
23file any such notification shall constitute a violation of
24subsection D of Section 12 of this Act, subject to the
25penalties enumerated in Section 14 of this Act. Until October

 

 

09900HB3429ham002- 38 -LRB099 04381 JLS 32838 a

110, 1999 or other date as may be legally permissible, a federal
2covered investment adviser who fails to file the notification
3or refuses to pay the fees as required by this subsection shall
4register as an investment adviser with the Secretary of State
5under Section 8 of this Act. The civil remedies provided for in
6subsection A of Section 13 of this Act and the civil remedies
7of rescission and appointment of receiver, conservator,
8ancillary receiver, or ancillary conservator provided for in
9subsection F of Section 13 of this Act shall not be available
10against any person by reason of the failure to file any such
11notification or to pay the notification fee or on account of
12the contents of any such notification.
 
13    D. An application for registration as an investment
14adviser, executed, verified, or authenticated by or on behalf
15of the applicant, shall be filed with the Secretary of State,
16in such form as the Secretary of State may by rule or
17regulation prescribe, setting forth or accompanied by:
18        (1) The name and form of organization under which the
19    investment adviser engages or intends to engage in
20    business; the state or country and date of its
21    organization; the location of the adviser's principal
22    business office and branch offices, if any; the names and
23    addresses of the adviser's principal, partners, officers,
24    directors, and persons performing similar functions or, if
25    the investment adviser is an individual, of the individual;

 

 

09900HB3429ham002- 39 -LRB099 04381 JLS 32838 a

1    and the number of the adviser's employees who perform
2    investment advisory functions;
3        (2) The education, the business affiliations for the
4    past 10 years, and the present business affiliations of the
5    investment adviser and of the adviser's principal,
6    partners, officers, directors, and persons performing
7    similar functions and of any person controlling the
8    investment adviser;
9        (3) The nature of the business of the investment
10    adviser, including the manner of giving advice and
11    rendering analyses or reports;
12        (4) The nature and scope of the authority of the
13    investment adviser with respect to clients' funds and
14    accounts;
15        (5) The basis or bases upon which the investment
16    adviser is compensated;
17        (6) Whether the investment adviser or any principal,
18    partner, officer, director, person performing similar
19    functions or person controlling the investment adviser (i)
20    within 10 years of the filing of the application has been
21    convicted of a felony, or of any misdemeanor of which fraud
22    is an essential element, or (ii) is permanently or
23    temporarily enjoined by order or judgment from acting as an
24    investment adviser, underwriter, dealer, principal or
25    salesperson, or from engaging in or continuing any conduct
26    or practice in connection with any such activity or in

 

 

09900HB3429ham002- 40 -LRB099 04381 JLS 32838 a

1    connection with the purchase or sale of any security, and
2    in each case the facts relating to the conviction, order or
3    judgment;
4        (7) (a) A statement as to whether the investment
5    adviser is engaged or is to engage primarily in the
6    business of rendering investment supervisory services; and
7        (b) A statement that the investment adviser will
8    furnish his, her, or its clients with such information as
9    the Secretary of State deems necessary in the form
10    prescribed by the Secretary of State by rule or regulation;
11        (8) Such additional information as the Secretary of
12    State may, by rule, regulation or order prescribe as
13    necessary to determine the applicant's financial
14    responsibility, business repute and qualification to act
15    as an investment adviser.
16        (9) No applicant shall be registered or re-registered
17    as an investment adviser under this Section unless and
18    until each principal of the applicant who is actively
19    engaged in the conduct and management of the applicant's
20    advisory business in this State has passed an examination
21    or completed an educational program conducted by the
22    Secretary of State or an association of investment advisers
23    or similar person, which examination or educational
24    program has been designated by the Secretary of State by
25    rule, regulation or order to be satisfactory for purposes
26    of determining whether the applicant has sufficient

 

 

09900HB3429ham002- 41 -LRB099 04381 JLS 32838 a

1    knowledge of the securities business and laws relating
2    thereto to conduct the business of a registered investment
3    adviser.
4        Any person who was a registered investment adviser
5    prior to September 30, 1963, and has continued to be so
6    registered, and any individual who has passed an investment
7    adviser examination administered by the Secretary of
8    State, or passed an examination or completed an educational
9    program designated by the Secretary of State by rule,
10    regulation or order to be satisfactory for purposes of
11    determining whether the applicant has sufficient knowledge
12    of the securities business and laws relating thereto to
13    conduct the business of a registered investment adviser,
14    shall not be required to pass an examination or complete an
15    educational program in order to continue to act as an
16    investment adviser. The Secretary of State may by order
17    waive the examination or educational program requirement
18    for any applicant for registration under this subsection D
19    if the principal of the applicant who is actively engaged
20    in the conduct and management of the applicant's advisory
21    business in this State has had such experience or education
22    relating to the securities business as may be determined by
23    the Secretary of State to be the equivalent of the
24    examination or educational program. Any request for a
25    waiver shall be filed with the Secretary of State in such
26    form as may be prescribed by rule or regulation.

 

 

09900HB3429ham002- 42 -LRB099 04381 JLS 32838 a

1        (10) No applicant shall be registered or re-registered
2    as an investment adviser under this Section 8 unless the
3    application for registration or re-registration is
4    accompanied by an application for registration or
5    re-registration for each person acting as an investment
6    adviser representative on behalf of the adviser and a
7    Securities Audit and Enforcement Fund fee that shall not be
8    returnable in any event is paid with respect to each
9    investment adviser representative.
10        (11) The application for registration of an investment
11    adviser shall be accompanied by a filing fee and a fee for
12    each branch office in this State, in each case in the
13    amount established pursuant to Section 11a of this Act,
14    which fees shall not be returnable in any event.
15        (12) The Secretary of State shall notify the investment
16    adviser by written notice (which may be by electronic or
17    facsimile transmission) of the effectiveness of the
18    registration as an investment adviser in this State.
19        (13) Any change which renders no longer accurate any
20    information contained in any application for registration
21    or re-registration of an investment adviser shall be
22    reported to the Secretary of State within 10 business days
23    after the occurrence of the change. In respect to assets
24    and liabilities of an investment adviser that retains
25    custody of clients' cash or securities or accepts
26    pre-payment of fees in excess of $500 per client and 6 or

 

 

09900HB3429ham002- 43 -LRB099 04381 JLS 32838 a

1    more months in advance only materially adverse changes need
2    be reported by written notice (which may be by electronic
3    or facsimile transmission) no later than the close of
4    business on the second business day following the discovery
5    thereof.
6        (14) Each application for registration as an
7    investment adviser shall become effective automatically on
8    the 45th day following the filing of the application,
9    required documents or information, and payment of the
10    required fee unless (i) the Secretary of State has
11    registered the investment adviser prior to that date or
12    (ii) an action with respect to the applicant is pending
13    under Section 11 of this Act.
 
14    D-5. A registered investment adviser or federal covered
15investment adviser desiring to register an investment adviser
16representative shall file an application with the Secretary of
17State, in the form as the Secretary of State may by rule or
18order prescribe, which the investment adviser representative
19is required by this Section to provide to the investment
20adviser, executed, verified, or authenticated by the
21investment adviser representative and setting forth or
22accompanied by:
23        (1) The name, residence, and business address of the
24    investment adviser representative;
25        (2) A statement whether any federal or state license or

 

 

09900HB3429ham002- 44 -LRB099 04381 JLS 32838 a

1    registration as a dealer, salesperson, investment adviser,
2    or investment adviser representative has ever been
3    refused, canceled, suspended, revoked or withdrawn;
4        (3) The nature of employment with, and names and
5    addresses of, employers of the investment adviser
6    representative for the 10 years immediately preceding the
7    date of application;
8        (4) A brief description of any civil or criminal
9    proceedings, of which fraud is an essential element,
10    pending against the investment adviser representative and
11    whether the investment adviser representative has ever
12    been convicted of a felony or of any misdemeanor of which
13    fraud is an essential element;
14        (5) Such additional information as the Secretary of
15    State may by rule or order prescribe as necessary to
16    determine the investment adviser representative's business
17    repute or qualification to act as an investment adviser
18    representative;
19        (6) Documentation that the individual has passed an
20    examination conducted by the Secretary of State, an
21    organization of investment advisers, or similar person,
22    which examination has been designated by the Secretary of
23    State by rule or order to be satisfactory for purposes of
24    determining whether the applicant has sufficient knowledge
25    of the investment advisory or securities business and laws
26    relating to that business to act as a registered investment

 

 

09900HB3429ham002- 45 -LRB099 04381 JLS 32838 a

1    adviser representative; and
2        (7) A Securities Audit and Enforcement Fund fee
3    established under Section 11a of this Act, which shall not
4    be returnable in any event.
5    The Secretary of State may by order waive the examination
6requirement for an applicant for registration under this
7subsection D-5 who has had the experience or education relating
8to the investment advisory or securities business as may be
9determined by the Secretary of State to be the equivalent of
10the examination. A request for a waiver shall be filed with the
11Secretary of State in the form as may be prescribed by rule or
12order.
13    A change that renders no longer accurate any information
14contained in any application for registration or
15re-registration as an investment adviser representative must
16be reported to the Secretary of State within 10 business days
17after the occurrence of the change. If the activities that
18rendered an individual an investment adviser representative
19for the investment adviser are terminated, the investment
20adviser shall notify the Secretary of State in writing (which
21may be by electronic or facsimile transmission), within 30 days
22of the investment adviser representative's termination, using
23the appropriate termination notice form as the Secretary of
24State may prescribe by rule or order.
25    A registered investment adviser representative may
26transfer his or her registration under this Section 8 for the

 

 

09900HB3429ham002- 46 -LRB099 04381 JLS 32838 a

1unexpired term of the registration from one registered
2investment adviser to another by the giving of notice of the
3transfer by the new investment adviser to the Secretary of
4State in the form and subject to the conditions as the
5Secretary of State shall prescribe. The new registered
6investment adviser shall promptly file an application for
7registration of the investment adviser representative as
8provided in this subsection, accompanied by the Securities
9Audit and Enforcement Fund fee prescribed by paragraph (7) of
10this subsection D-5.
 
11    E. (1) Subject to the provisions of subsection F of Section
1211 of this Act, the registration of a dealer, limited Canadian
13dealer, salesperson, investment adviser, or investment adviser
14representative may be denied, suspended or revoked if the
15Secretary of State finds that the dealer, limited Canadian
16dealer, internet portal, salesperson, investment adviser, or
17investment adviser representative or any principal officer,
18director, partner, member, trustee, manager or any person who
19performs a similar function of the dealer, limited Canadian
20dealer, internet portal, or investment adviser:
21        (a) has been convicted of any felony during the 10 year
22    period preceding the date of filing of any application for
23    registration or at any time thereafter, or of any
24    misdemeanor of which fraud is an essential element;
25        (b) has engaged in any unethical practice in connection

 

 

09900HB3429ham002- 47 -LRB099 04381 JLS 32838 a

1    with any security, or in any fraudulent business practice;
2        (c) has failed to account for any money or property, or
3    has failed to deliver any security, to any person entitled
4    thereto when due or within a reasonable time thereafter;
5        (d) in the case of a dealer, limited Canadian dealer,
6    or investment adviser, is insolvent;
7        (e) in the case of a dealer, limited Canadian dealer,
8    salesperson, or registered principal of a dealer or limited
9    Canadian dealer (i) has failed reasonably to supervise the
10    securities activities of any of its salespersons or other
11    employees and the failure has permitted or facilitated a
12    violation of Section 12 of this Act or (ii) is offering or
13    selling or has offered or sold securities in this State
14    through a salesperson other than a registered salesperson,
15    or, in the case of a salesperson, is selling or has sold
16    securities in this State for a dealer, limited Canadian
17    dealer, issuer or controlling person with knowledge that
18    the dealer, limited Canadian dealer, issuer or controlling
19    person has not complied with the provisions of this Act or
20    (iii) has failed reasonably to supervise the
21    implementation of compliance measures following notice by
22    the Secretary of State of noncompliance with the Act or
23    with the regulations promulgated thereunder or both or (iv)
24    has failed to maintain and enforce written procedures to
25    supervise the types of business in which it engages and to
26    supervise the activities of its salespersons that are

 

 

09900HB3429ham002- 48 -LRB099 04381 JLS 32838 a

1    reasonably designed to achieve compliance with applicable
2    securities laws and regulations;
3        (f) in the case of an investment adviser, has failed
4    reasonably to supervise the advisory activities of any of
5    its investment adviser representatives or employees and
6    the failure has permitted or facilitated a violation of
7    Section 12 of this Act;
8        (g) has violated any of the provisions of this Act;
9        (h) has made any material misrepresentation to the
10    Secretary of State in connection with any information
11    deemed necessary by the Secretary of State to determine a
12    dealer's, limited Canadian dealer's, or investment
13    adviser's financial responsibility or a dealer's, limited
14    Canadian dealer's, investment adviser's, salesperson's, or
15    investment adviser representative's business repute or
16    qualifications, or has refused to furnish any such
17    information requested by the Secretary of State;
18        (i) has had a license or registration under any Federal
19    or State law regulating securities, commodity futures
20    contracts, or stock futures contracts refused, cancelled,
21    suspended, withdrawn, revoked, or otherwise adversely
22    affected in a similar manner;
23        (j) has had membership in or association with any
24    self-regulatory organization registered under the Federal
25    1934 Act or the Federal 1974 Act suspended, revoked,
26    refused, expelled, cancelled, barred, limited in any

 

 

09900HB3429ham002- 49 -LRB099 04381 JLS 32838 a

1    capacity, or otherwise adversely affected in a similar
2    manner arising from any fraudulent or deceptive act or a
3    practice in violation of any rule, regulation or standard
4    duly promulgated by the self-regulatory organization;
5        (k) has had any order entered against it after notice
6    and opportunity for hearing by a securities agency of any
7    state, any foreign government or agency thereof, the
8    Securities and Exchange Commission, or the Federal
9    Commodities Futures Trading Commission arising from any
10    fraudulent or deceptive act or a practice in violation of
11    any statute, rule or regulation administered or
12    promulgated by the agency or commission;
13        (l) in the case of a dealer or limited Canadian dealer,
14    fails to maintain a minimum net capital in an amount which
15    the Secretary of State may by rule or regulation require;
16        (m) has conducted a continuing course of dealing of
17    such nature as to demonstrate an inability to properly
18    conduct the business of the dealer, limited Canadian
19    dealer, salesperson, investment adviser, or investment
20    adviser representative;
21        (n) has had, after notice and opportunity for hearing,
22    any injunction or order entered against it or license or
23    registration refused, cancelled, suspended, revoked,
24    withdrawn, limited, or otherwise adversely affected in a
25    similar manner by any state or federal body, agency or
26    commission regulating banking, insurance, finance or small

 

 

09900HB3429ham002- 50 -LRB099 04381 JLS 32838 a

1    loan companies, real estate or mortgage brokers or
2    companies, if the action resulted from any act found by the
3    body, agency or commission to be a fraudulent or deceptive
4    act or practice in violation of any statute, rule or
5    regulation administered or promulgated by the body, agency
6    or commission;
7        (o) has failed to file a return, or to pay the tax,
8    penalty or interest shown in a filed return, or to pay any
9    final assessment of tax, penalty or interest, as required
10    by any tax Act administered by the Illinois Department of
11    Revenue, until such time as the requirements of that tax
12    Act are satisfied;
13        (p) in the case of a natural person who is a dealer,
14    limited Canadian dealer, salesperson, investment adviser,
15    or investment adviser representative, has defaulted on an
16    educational loan guaranteed by the Illinois Student
17    Assistance Commission, until the natural person has
18    established a satisfactory repayment record as determined
19    by the Illinois Student Assistance Commission;
20        (q) has failed to maintain the books and records
21    required under this Act or rules or regulations promulgated
22    under this Act or under any requirements established by the
23    Securities and Exchange Commission or a self-regulatory
24    organization;
25        (r) has refused to allow or otherwise impeded designees
26    of the Secretary of State from conducting an audit,

 

 

09900HB3429ham002- 51 -LRB099 04381 JLS 32838 a

1    examination, inspection, or investigation provided for
2    under Section 8 or 11 of this Act;
3        (s) has failed to maintain any minimum net capital or
4    bond requirement set forth in this Act or any rule or
5    regulation promulgated under this Act;
6        (t) has refused the Secretary of State or his or her
7    designee access to any office or location within an office
8    to conduct an investigation, audit, examination, or
9    inspection;
10        (u) has advised or caused a public pension fund or
11    retirement system established under the Illinois Pension
12    Code to make an investment or engage in a transaction not
13    authorized by that Code;
14        (v) if a corporation, limited liability company, or
15    limited liability partnership has been suspended,
16    canceled, revoked, or has failed to register as a foreign
17    corporation, limited liability company, or limited
18    liability partnership with the Secretary of State;
19        (w) is permanently or temporarily enjoined by any court
20    of competent jurisdiction, including any state, federal,
21    or foreign government, from engaging in or continuing any
22    conduct or practice involving any aspect of the securities
23    or commodities business or in any other business where the
24    conduct or practice enjoined involved investments,
25    franchises, insurance, banking, or finance;
26    (2) If the Secretary of State finds that any registrant or

 

 

09900HB3429ham002- 52 -LRB099 04381 JLS 32838 a

1applicant for registration is no longer in existence or has
2ceased to do business as a dealer, limited Canadian dealer,
3internet portal, salesperson, investment adviser, or
4investment adviser representative, or is subject to an
5adjudication as a person under legal disability or to the
6control of a guardian, or cannot be located after reasonable
7search, or has failed after written notice to pay to the
8Secretary of State any additional fee prescribed by this
9Section or specified by rule or regulation, or if a natural
10person, has defaulted on an educational loan guaranteed by the
11Illinois Student Assistance Commission, the Secretary of State
12may by order cancel the registration or application.
13    (3) Withdrawal of an application for registration or
14withdrawal from registration as a dealer, limited Canadian
15dealer, salesperson, investment adviser, or investment adviser
16representative becomes effective 30 days after receipt of an
17application to withdraw or within such shorter period of time
18as the Secretary of State may determine, unless any proceeding
19is pending under Section 11 of this Act when the application is
20filed or a proceeding is instituted within 30 days after the
21application is filed. If a proceeding is pending or instituted,
22withdrawal becomes effective at such time and upon such
23conditions as the Secretary of State by order determines. If no
24proceeding is pending or instituted and withdrawal
25automatically becomes effective, the Secretary of State may
26nevertheless institute a revocation or suspension proceeding

 

 

09900HB3429ham002- 53 -LRB099 04381 JLS 32838 a

1within 2 years after withdrawal became effective and enter a
2revocation or suspension order as of the last date on which
3registration was effective.
 
4    F. The Secretary of State shall make available upon request
5the date that each dealer, investment adviser, salesperson, or
6investment adviser representative was granted registration,
7together with the name and address of the dealer, limited
8Canadian dealer, or issuer on whose behalf the salesperson is
9registered, and all orders of the Secretary of State denying or
10abandoning an application, or suspending or revoking
11registration, or censuring the persons. The Secretary of State
12may designate by rule, regulation or order the statements,
13information or reports submitted to or filed with him or her
14pursuant to this Section 8 which the Secretary of State
15determines are of a sensitive nature and therefore should be
16exempt from public disclosure. Any such statement, information
17or report shall be deemed confidential and shall not be
18disclosed to the public except upon the consent of the person
19filing or submitting the statement, information or report or by
20order of court or in court proceedings.
 
21    G. The registration or re-registration of a dealer or
22limited Canadian dealer and of all salespersons registered upon
23application of the dealer or limited Canadian dealer shall
24expire on the next succeeding anniversary date of the

 

 

09900HB3429ham002- 54 -LRB099 04381 JLS 32838 a

1registration or re-registration of the dealer; and the
2registration or re-registration of an investment adviser and of
3all investment adviser representatives registered upon
4application of the investment adviser shall expire on the next
5succeeding anniversary date of the registration of the
6investment adviser; provided, that the Secretary of State may
7by rule or regulation prescribe an alternate date which any
8dealer registered under the Federal 1934 Act or a member of any
9self-regulatory association approved pursuant thereto, a
10member of a self-regulatory organization or stock exchange in
11Canada, or any investment adviser may elect as the expiration
12date of its dealer or limited Canadian dealer and salesperson
13registrations, or the expiration date of its investment adviser
14registration, as the case may be. A registration of a
15salesperson registered upon application of an issuer or
16controlling person shall expire on the next succeeding
17anniversary date of the registration, or upon termination or
18expiration of the registration of the securities, if any,
19designated in the application for his or her registration or
20the alternative date as the Secretary may prescribe by rule or
21regulation. Subject to paragraph (9) of subsection C of this
22Section 8, a salesperson's registration also shall terminate
23upon cessation of his or her employment, or termination of his
24or her appointment or authorization, in each case by the person
25who applied for the salesperson's registration, provided that
26the Secretary of State may by rule or regulation prescribe an

 

 

09900HB3429ham002- 55 -LRB099 04381 JLS 32838 a

1alternate date for the expiration of the registration.
 
2    H. Applications for re-registration of dealers, limited
3Canadian dealers, internet portals, salespersons, investment
4advisers, and investment adviser representatives shall be
5filed with the Secretary of State prior to the expiration of
6the then current registration and shall contain such
7information as may be required by the Secretary of State upon
8initial application with such omission therefrom or addition
9thereto as the Secretary of State may authorize or prescribe.
10Each application for re-registration of a dealer, limited
11Canadian dealer, internet portal, or investment adviser shall
12be accompanied by a filing fee, each application for
13re-registration as a salesperson shall be accompanied by a
14filing fee and a Securities Audit and Enforcement Fund fee
15established pursuant to Section 11a of this Act, and each
16application for re-registration as an investment adviser
17representative shall be accompanied by a Securities Audit and
18Enforcement Fund fee established under Section 11a of this Act,
19which shall not be returnable in any event. Notwithstanding the
20foregoing, applications for re-registration of dealers,
21limited Canadian dealers, internet portals, and investment
22advisers may be filed within 30 days following the expiration
23of the registration provided that the applicant pays the annual
24registration fee together with an additional amount equal to
25the annual registration fee and files any other information or

 

 

09900HB3429ham002- 56 -LRB099 04381 JLS 32838 a

1documents that the Secretary of State may prescribe by rule or
2regulation or order. Any application filed within 30 days
3following the expiration of the registration shall be
4automatically effective as of the time of the earlier
5expiration provided that the proper fee has been paid to the
6Secretary of State.
7    Each registered dealer, limited Canadian dealer, internet
8portal, or investment adviser shall continue to be registered
9if the registrant changes his, her, or its form of organization
10provided that the dealer or investment adviser files an
11amendment to his, her, or its application not later than 30
12days following the occurrence of the change and pays the
13Secretary of State a fee in the amount established under
14Section 11a of this Act.
 
15    I. (1) Every registered dealer, limited Canadian dealer,
16internet portal, and investment adviser shall make and keep for
17such periods, such accounts, correspondence, memoranda,
18papers, books and records as the Secretary of State may by rule
19or regulation prescribe. All records so required shall be
20preserved for 3 years unless the Secretary of State by rule,
21regulation or order prescribes otherwise for particular types
22of records.
23    (2) Every registered dealer, limited Canadian dealer,
24internet portal, and investment adviser shall file such
25financial reports as the Secretary of State may by rule or

 

 

09900HB3429ham002- 57 -LRB099 04381 JLS 32838 a

1regulation prescribe.
2    (3) All the books and records referred to in paragraph (1)
3of this subsection I are subject at any time or from time to
4time to such reasonable periodic, special or other audits,
5examinations, or inspections by representatives of the
6Secretary of State, within or without this State, as the
7Secretary of State deems necessary or appropriate in the public
8interest or for the protection of investors.
9    (4) At the time of an audit, examination, or inspection,
10the Secretary of State, by his or her designees, may conduct an
11interview of any person employed or appointed by or affiliated
12with a registered dealer, limited Canadian dealer, internet
13portal, or investment advisor, provided that the dealer,
14limited Canadian dealer, internet portal, or investment
15advisor shall be given reasonable notice of the time and place
16for the interview. At the option of the dealer, limited
17Canadian dealer, internet portal, or investment advisor, a
18representative of the dealer or investment advisor with
19supervisory responsibility over the individual being
20interviewed may be present at the interview.
 
21    J. The Secretary of State may require by rule or regulation
22the payment of an additional fee for the filing of information
23or documents required to be filed by this Section which have
24not been filed in a timely manner. The Secretary of State may
25also require by rule or regulation the payment of an

 

 

09900HB3429ham002- 58 -LRB099 04381 JLS 32838 a

1examination fee for administering any examination which it may
2conduct pursuant to subsection B, C, D, or D-5 of this Section
38.
 
4    K. The Secretary of State may declare any application for
5registration or limited registration under this Section 8
6abandoned by order if the applicant fails to pay any fee or
7file any information or document required under this Section 8
8or by rule or regulation for more than 30 days after the
9required payment or filing date. The applicant may petition the
10Secretary of State for a hearing within 15 days after the
11applicant's receipt of the order of abandonment, provided that
12the petition sets forth the grounds upon which the applicant
13seeks a hearing.
 
14    L. Any document being filed pursuant to this Section 8
15shall be deemed filed, and any fee being paid pursuant to this
16Section 8 shall be deemed paid, upon the date of actual receipt
17thereof by the Secretary of State or his or her designee.
 
18    M. The Secretary of State shall provide to the Illinois
19Student Assistance Commission annually or at mutually agreed
20periodic intervals the names and social security numbers of
21natural persons registered under subsections B, C, D, and D-5
22of this Section. The Illinois Student Assistance Commission
23shall determine if any student loan defaulter is registered as

 

 

09900HB3429ham002- 59 -LRB099 04381 JLS 32838 a

1a dealer, limited Canadian dealer, internet portal
2salesperson, or investment adviser under this Act and report
3its determination to the Secretary of State or his or her
4designee.
5(Source: P.A. 92-308, eff. 1-1-02; 93-580, eff. 8-21-03.)
 
6    (815 ILCS 5/8d new)
7    Sec. 8d. Offerings made through registered Internet
8portals.
9    (a) An issuer shall make an offering or sale of securities
10pursuant to subsection T of Section 4 of this Act through the
11use of one or more registered Internet portals.
12    (b) The Internet portal:
13        (1) shall be a registered broker-dealer under the
14    Securities Exchange Act of 1934 (15 U.S.C. 78o);
15        (2) shall be a funding portal registered under the
16    Securities Act of 1933 (15 U.S.C. 77d-1) and the Securities
17    and Exchange Commission has adopted rules under authority
18    of Section 3(h) of the Securities Exchange Act of 1934 (15
19    U.S.C. 78c) and Section 304 of the Jumpstart Our Business
20    Startups Act (P.L. 112-106) governing funding portals;
21        (3) shall be a dealer registered under this Act as of
22    the date of any offer or sale of securities made through
23    the Internet portal; or
24        (4) shall, to the extent it meets the qualifications
25    for exemption from registration pursuant to subsection (d)

 

 

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1    of this Section:
2            (A) file, not later than 30 days before the date of
3        the first offer or sale of securities made within this
4        State, an application for registration (or renewal of
5        registration, as applicable) as a registered Internet
6        portal with the Secretary of State, in writing or in
7        electronic form as prescribed by the Secretary of
8        State, which the Secretary of State shall make
9        available as an electronic document on the Secretary of
10        State's Internet website, containing such information
11        and required deliveries as specified therein; and
12            (B) pay the application filing fee established
13        under Section 11a of this Act; the Secretary of State
14        shall, within a reasonable time, examine the filed
15        application and other materials filed and, approve or
16        deny the application.
17    (c) If any change occurs in the information submitted by,
18or on behalf of, an Internet portal to the Secretary of State,
19the Internet portal shall notify the Secretary of State within
2010 days after such change occurs and shall provide the
21Secretary of State with such additional information (if any)
22requested by the Secretary of State in connection therewith.
23    (d) Notwithstanding anything contained in this Act to the
24contrary, neither an Internet portal nor its owning or
25operating entity is required to register as a dealer or an
26investment advisor under this Act if each of the following

 

 

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1applies with respect to the Internet portal and its owning or
2operating entity:
3        (1) It does not solicit purchases, sales, or offers to
4    buy the securities offered or displayed on the Internet
5    portal.
6        (2) It does not collect or hold funds in connection
7    with any purchase, sale, or offer to buy any securities
8    offered or displayed on the Internet portal.
9        (3) It does not compensate employees, agents, or other
10    persons for the solicitation or based on the sale of
11    securities displayed or referenced on the Internet portal.
12        (4) It is not compensated based on the amount of
13    securities sold.
14        (5) The fee it charges an issuer for an offering of
15    securities on the Internet portal is a fixed amount for
16    each offering, a variable amount based on the length of
17    time that the securities are offered on the Internet
18    portal, a variable amount based on the total proposed
19    offering amount, or any combination of such fixed and
20    variable amounts.
21        (6) It does not offer investment advice or
22    recommendations; however, an Internet portal is not deemed
23    to be offering investment advice or recommendations simply
24    by virtue of:
25            (A) selecting transactions in which the Internet
26        portal shall serve as an intermediary;

 

 

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1            (B) establishing reasonable selection criteria for
2        an issuer to meet in order to establish an offer or
3        sale of securities through the Internet portal;
4            (C) establishing reasonable selection criteria for
5        a potential purchaser to meet in order to participate
6        in an offer or sale of securities made through the
7        Internet portal; or
8            (D) terminating an issuer transaction at any time
9        before the first sale of the securities of such issuer
10        if the Internet portal determines such action is
11        appropriate, after reasonable due diligence, to
12        protect potential purchasers, and the Internet portal
13        is able to direct the qualified escrowee to return all
14        funds then provided by potential purchasers, if any.
15        (7) It does not engage in such other activities as the
16    Secretary of State, by rule, determines are prohibited.
17    (e) Upon completion of an offering made pursuant to
18subsection T of Section 4, each registered Internet portal
19involved with the transactions (and the issuer, to the extent
20applicable) shall store any and all electronic materials
21related to the completed offering (including copies of all
22offering documents, all offering materials, and all purchaser
23information) on a secure, non-public, server or in such other
24manner as the Secretary of State may hereafter deem acceptable
25by rule.
 

 

 

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1    (815 ILCS 5/11)  (from Ch. 121 1/2, par. 137.11)
2    Sec. 11. Duties and powers of the Secretary of State.
3    A. (1) The administration of this Act is vested in the
4Secretary of State, who may from time to time make, amend and
5rescind such rules and regulations as may be necessary to carry
6out this Act, including rules and regulations governing
7procedures of registration, statements, applications and
8reports for various classes of securities, persons and matters
9within his or her jurisdiction and defining any terms, whether
10or not used in this Act, insofar as the definitions are not
11inconsistent with this Act. The rules and regulations adopted
12by the Secretary of State under this Act shall be effective in
13the manner provided for in the Illinois Administrative
14Procedure Act.
15    (2) Among other things, the Secretary of State shall have
16authority, for the purposes of this Act, to prescribe the form
17or forms in which required information shall be set forth,
18accounting practices, the items or details to be shown in
19balance sheets and earning statements, and the methods to be
20followed in the preparation of accounts, in the appraisal or
21valuation of assets and liabilities, in the determination of
22depreciation and depletion, in the differentiation of
23recurring and non-recurring income, in the differentiation of
24investment and operating income, and in the preparation of
25consolidated balance sheets or income accounts of any person,
26directly or indirectly, controlling or controlled by the

 

 

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1issuer, or any person under direct or indirect common control
2with the issuer.
3    (3) No provision of this Act imposing any liability shall
4apply to any act done or omitted in good faith in conformity
5with any rule or regulation of the Secretary of State under
6this Act, notwithstanding that the rule or regulation may,
7after the act or omission, be amended or rescinded or be
8determined by judicial or other authority to be invalid for any
9reason.
10    (4) The Securities Department of the Office of the
11Secretary of State shall be deemed a criminal justice agency
12for purposes of all federal and state laws and regulations and,
13in that capacity, shall be entitled to access to any
14information available to criminal justice agencies and has the
15power to appoint special agents to conduct all investigations,
16searches, seizures, arrests, and other duties imposed under the
17provisions of any law administered by the Department. The
18special agents have and may exercise all the powers of peace
19officers solely for the purpose of enforcing provisions of this
20Act.
21    The Director must authorize to each special agent employed
22under this Section a distinct badge that, on its face, (i)
23clearly states that the badge is authorized by the Department
24and (ii) contains a unique and identifying number.
25    Special agents shall comply with all training requirements
26established for law enforcement officers by provisions of the

 

 

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1Illinois Police Training Act.
2    (5) The Secretary of State, by rule, may conditionally or
3unconditionally exempt any person, security, or transaction,
4or any class or classes of persons, securities, or transactions
5from any provision of Section 5, 6, 7, 8, 8a, or 9 of this Act
6or of any rule promulgated under these Sections, to the extent
7that such exemption is necessary or appropriate in the public
8interest, and is consistent with the protection of investors.
9    B. The Secretary of State may, anything in this Act to the
10contrary notwithstanding, require financial statements and
11reports of the issuer, dealer, internet portal, salesperson,
12investment adviser, or investment adviser representative as
13often as circumstances may warrant. In addition, the Secretary
14of State may secure information or books and records from or
15through others and may make or cause to be made investigations
16respecting the business, affairs, and property of the issuer of
17securities, any person involved in the sale or offer for sale,
18purchase or offer to purchase of any mineral investment
19contract, mineral deferred delivery contract, or security and
20of dealers, internet portals, salespersons, investment
21advisers, and investment adviser representatives that are
22registered or are the subject of an application for
23registration under this Act. The costs of an investigation
24shall be borne by the registrant or the applicant, provided
25that the registrant or applicant shall not be obligated to pay
26the costs without his, her or its consent in advance.

 

 

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1    C. Whenever it shall appear to the Secretary of State,
2either upon complaint or otherwise, that this Act, or any rule
3or regulation prescribed under authority thereof, has been or
4is about to be violated, he or she may, in his or her
5discretion, do one or more of the following:
6        (1) require or permit the person to file with the
7    Secretary of State a statement in writing under oath, or
8    otherwise, as to all the facts and circumstances concerning
9    the subject matter which the Secretary of State believes to
10    be in the public interest to investigate, audit, examine,
11    or inspect;
12        (2) conduct an investigation, audit, examination, or
13    inspection as necessary or advisable for the protection of
14    the interests of the public; and
15        (3) appoint investigators to conduct all
16    investigations, searches, seizures, arrests, and other
17    duties imposed under the provisions of any law administered
18    by the Department. The Director must authorize to each
19    investigator employed under this Section a distinct badge
20    that, on its face, (i) clearly states that the badge is
21    authorized by the Department and (ii) contains a unique and
22    identifying number.
23    D. (1) For the purpose of all investigations, audits,
24examinations, or inspections which in the opinion of the
25Secretary of State are necessary and proper for the enforcement
26of this Act, the Secretary of State or a person designated by

 

 

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1him or her is empowered to administer oaths and affirmations,
2subpoena witnesses, take evidence, and require, by subpoena or
3other lawful means provided by this Act or the rules adopted by
4the Secretary of State, the production of any books and
5records, papers, or other documents which the Secretary of
6State or a person designated by him or her deems relevant or
7material to the inquiry.
8    (2) The Secretary of State or a person designated by him or
9her is further empowered to administer oaths and affirmations,
10subpoena witnesses, take evidence, and require the production
11of any books and records, papers, or other documents in this
12State at the request of a securities agency of another state,
13if the activities constituting the alleged violation for which
14the information is sought would be in violation of Section 12
15of this Act if the activities had occurred in this State.
16    (3) The Circuit Court of any County of this State, upon
17application of the Secretary of State or a person designated by
18him or her may order the attendance of witnesses, the
19production of books and records, papers, accounts and documents
20and the giving of testimony before the Secretary of State or a
21person designated by him or her; and any failure to obey the
22order may be punished by the Circuit Court as a contempt
23thereof.
24    (4) The fees of subpoenaed witnesses under this Act for
25attendance and travel shall be the same as fees of witnesses
26before the Circuit Courts of this State, to be paid when the

 

 

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1witness is excused from further attendance, provided, the
2witness is subpoenaed at the instance of the Secretary of
3State; and payment of the fees shall be made and audited in the
4same manner as other expenses of the Secretary of State.
5    (5) Whenever a subpoena is issued at the request of a
6complainant or respondent as the case may be, the Secretary of
7State may require that the cost of service and the fee of the
8witness shall be borne by the party at whose instance the
9witness is summoned.
10    (6) The Secretary of State shall have power at his or her
11discretion, to require a deposit to cover the cost of the
12service and witness fees and the payment of the legal witness
13fee and mileage to the witness served with subpoena.
14    (7) A subpoena issued under this Act shall be served in the
15same manner as a subpoena issued out of a circuit court.
16    (8) The Secretary of State may in any investigation,
17audits, examinations, or inspections cause the taking of
18depositions of persons residing within or without this State in
19the manner provided in civil actions under the laws of this
20State.
21    E. Anything in this Act to the contrary notwithstanding:
22        (1) If the Secretary of State shall find that the offer
23    or sale or proposed offer or sale or method of offer or
24    sale of any securities by any person, whether exempt or
25    not, in this State, is fraudulent, or would work or tend to
26    work a fraud or deceit, or is being offered or sold in

 

 

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1    violation of Section 12, or there has been a failure or
2    refusal to submit any notification filing or fee required
3    under this Act, the Secretary of State may by written order
4    prohibit or suspend the offer or sale of securities by that
5    person or deny or revoke the registration of the securities
6    or the exemption from registration for the securities.
7        (2) If the Secretary of State shall find that any
8    person has violated subsection C, D, E, F, G, H, I, J, or K
9    of Section 12 of this Act, the Secretary of State may by
10    written order temporarily or permanently prohibit or
11    suspend the person from offering or selling any securities,
12    any mineral investment contract, or any mineral deferred
13    delivery contract in this State, provided that any person
14    who is the subject of an order of permanent prohibition may
15    petition the Secretary of State for a hearing to present
16    evidence of rehabilitation or change in circumstances
17    justifying the amendment or termination of the order of
18    permanent prohibition.
19        (3) If the Secretary of State shall find that any
20    person is engaging or has engaged in the business of
21    selling or offering for sale securities as a dealer,
22    internet portal, or salesperson or is acting or has acted
23    as an investment adviser, investment adviser
24    representative, or federal covered investment adviser,
25    without prior thereto and at the time thereof having
26    complied with the registration or notice filing

 

 

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1    requirements of this Act, the Secretary of State may by
2    written order prohibit or suspend the person from engaging
3    in the business of selling or offering for sale securities,
4    or acting as an investment adviser, investment adviser
5    representative, or federal covered investment adviser, in
6    this State.
7        (4) In addition to any other sanction or remedy
8    contained in this subsection E, the Secretary of State,
9    after finding that any provision of this Act has been
10    violated, may impose a fine as provided by rule, regulation
11    or order not to exceed $10,000 for each violation of this
12    Act, may issue an order of public censure against the
13    violator, and may charge as costs of investigation all
14    reasonable expenses, including attorney's fees and witness
15    fees.
16    F. (1) The Secretary of State shall not deny, suspend or
17revoke the registration of securities, suspend or revoke the
18registration of a dealer, internet portal, salesperson,
19investment adviser, or investment adviser representative,
20prohibit or suspend the offer or sale of any securities,
21prohibit or suspend any person from offering or selling any
22securities in this State, prohibit or suspend a dealer or
23salesperson from engaging in the business of selling or
24offering for sale securities, prohibit or suspend a person from
25acting as an investment adviser or federal covered investment
26adviser, or investment adviser representative, impose any fine

 

 

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1for violation of this Act, issue an order of public censure, or
2enter into an agreed settlement except after an opportunity for
3hearing upon not less than 10 days notice given by personal
4service or registered mail or certified mail, return receipt
5requested, to the person or persons concerned. Such notice
6shall state the date and time and place of the hearing and
7shall contain a brief statement of the proposed action of the
8Secretary of State and the grounds for the proposed action. A
9failure to appear at the hearing or otherwise respond to the
10allegations set forth in the notice of hearing shall constitute
11an admission of any facts alleged therein and shall constitute
12sufficient basis to enter an order.
13    (2) Anything herein contained to the contrary
14notwithstanding, the Secretary of State may temporarily
15prohibit or suspend, for a maximum period of 90 days, by an
16order effective immediately, the offer or sale or registration
17of securities, the registration of a dealer, internet portal,
18salesperson, investment adviser, or investment adviser
19representative, or the offer or sale of securities by any
20person, or the business of rendering investment advice, without
21the notice and prior hearing in this subsection prescribed, if
22the Secretary of State shall in his or her opinion, based on
23credible evidence, deem it necessary to prevent an imminent
24violation of this Act or to prevent losses to investors which
25the Secretary of State reasonably believes will occur as a
26result of a prior violation of this Act. Immediately after

 

 

09900HB3429ham002- 72 -LRB099 04381 JLS 32838 a

1taking action without such notice and hearing, the Secretary of
2State shall deliver a copy of the temporary order to the
3respondent named therein by personal service or registered mail
4or certified mail, return receipt requested. The temporary
5order shall set forth the grounds for the action and shall
6advise that the respondent may request a hearing, that the
7request for a hearing will not stop the effectiveness of the
8temporary order and that respondent's failure to request a
9hearing within 30 days after the date of the entry of the
10temporary order shall constitute an admission of any facts
11alleged therein and shall constitute sufficient basis to make
12the temporary order final. Any provision of this paragraph (2)
13to the contrary notwithstanding, the Secretary of State may not
14pursuant to the provisions of this paragraph (2) suspend the
15registration of a dealer, limited Canadian dealer,
16salesperson, investment adviser, or investment adviser
17representative based upon sub-paragraph (n) of paragraph (l) of
18subsection E of Section 8 of this Act or revoke the
19registration of securities or revoke the registration of any
20dealer, salesperson, investment adviser representative, or
21investment adviser.
22    (3) The Secretary of State may issue a temporary order
23suspending or delaying the effectiveness of any registration of
24securities under subsection A or B of Section 5, 6 or 7 of this
25Act subsequent to and upon the basis of the issuance of any
26stop, suspension or similar order by the Securities and

 

 

09900HB3429ham002- 73 -LRB099 04381 JLS 32838 a

1Exchange Commission with respect to the securities which are
2the subject of the registration under subsection A or B of
3Section 5, 6 or 7 of this Act, and the order shall become
4effective as of the date and time of effectiveness of the
5Securities and Exchange Commission order and shall be vacated
6automatically at such time as the order of the Securities and
7Exchange Commission is no longer in effect.
8    (4) When the Secretary of State finds that an application
9for registration as a dealer, internet portal, salesperson,
10investment adviser, or investment adviser representative
11should be denied, the Secretary of State may enter an order
12denying the registration. Immediately after taking such
13action, the Secretary of State shall deliver a copy of the
14order to the respondent named therein by personal service or
15registered mail or certified mail, return receipt requested.
16The order shall state the grounds for the action and that the
17matter will be set for hearing upon written request filed with
18the Secretary of State within 30 days after the receipt of the
19request by the respondent. The respondent's failure to request
20a hearing within 30 days after receipt of the order shall
21constitute an admission of any facts alleged therein and shall
22make the order final. If a hearing is held, the Secretary of
23State shall affirm, vacate, or modify the order.
24    (5) The findings and decision of the Secretary of State
25upon the conclusion of each final hearing held pursuant to this
26subsection shall be set forth in a written order signed on

 

 

09900HB3429ham002- 74 -LRB099 04381 JLS 32838 a

1behalf of the Secretary of State by his or her designee and
2shall be filed as a public record. All hearings shall be held
3before a person designated by the Secretary of State, and
4appropriate records thereof shall be kept.
5    (6) Notwithstanding the foregoing, the Secretary of State,
6after notice and opportunity for hearing, may at his or her
7discretion enter into an agreed settlement, stipulation or
8consent order with a respondent in accordance with the
9provisions of the Illinois Administrative Procedure Act. The
10provisions of the agreed settlement, stipulation or consent
11order shall have the full force and effect of an order issued
12by the Secretary of State.
13    (7) Anything in this Act to the contrary notwithstanding,
14whenever the Secretary of State finds that a person is
15currently expelled from, refused membership in or association
16with, or limited in any material capacity by a self-regulatory
17organization registered under the Federal 1934 Act or the
18Federal 1974 Act because of a fraudulent or deceptive act or a
19practice in violation of a rule, regulation, or standard duly
20promulgated by the self-regulatory organization, the Secretary
21of State may, at his or her discretion, enter a Summary Order
22of Prohibition, which shall prohibit the offer or sale of any
23securities, mineral investment contract, or mineral deferred
24delivery contract by the person in this State. The order shall
25take effect immediately upon its entry. Immediately after
26taking the action the Secretary of State shall deliver a copy

 

 

09900HB3429ham002- 75 -LRB099 04381 JLS 32838 a

1of the order to the named Respondent by personal service or
2registered mail or certified mail, return receipt requested. A
3person who is the subject of an Order of Prohibition may
4petition the Secretary of State for a hearing to present
5evidence of rehabilitation or change in circumstances
6justifying the amendment or termination of the Order of
7Prohibition.
8    G. No administrative action shall be brought by the
9Secretary of State for relief under this Act or upon or because
10of any of the matters for which relief is granted by this Act
11after the earlier to occur of (i) 3 years from the date upon
12which the Secretary of State had notice of facts which in the
13exercise of reasonable diligence would lead to actual knowledge
14of the alleged violation of the Act, or (ii) 5 years from the
15date on which the alleged violation occurred.
16    H. The action of the Secretary of State in denying,
17suspending, or revoking the registration of a dealer, internet
18portal, limited Canadian dealer, salesperson, investment
19adviser, or investment adviser representative, in prohibiting
20any person from engaging in the business of offering or selling
21securities as a dealer, limited Canadian dealer, or
22salesperson, in prohibiting or suspending the offer or sale of
23securities by any person, in prohibiting a person from acting
24as an investment adviser, federal covered investment adviser,
25or investment adviser representative, in denying, suspending,
26or revoking the registration of securities, in prohibiting or

 

 

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1suspending the offer or sale or proposed offer or sale of
2securities, in imposing any fine for violation of this Act, or
3in issuing any order shall be subject to judicial review in the
4Circuit Courts of Cook or Sangamon Counties in this State. The
5Administrative Review Law shall apply to and govern every
6action for the judicial review of final actions or decisions of
7the Secretary of State under this Act.
8    I. Notwithstanding any other provisions of this Act to the
9contrary, whenever it shall appear to the Secretary of State
10that any person is engaged or about to engage in any acts or
11practices which constitute or will constitute a violation of
12this Act or of any rule or regulation prescribed under
13authority of this Act, the Secretary of State may at his or her
14discretion, through the Attorney General take any of the
15following actions:
16        (1) File a complaint and apply for a temporary
17    restraining order without notice, and upon a proper showing
18    the court may enter a temporary restraining order without
19    bond, to enforce this Act.
20        (2) File a complaint and apply for a preliminary or
21    permanent injunction, and, after notice and a hearing and
22    upon a proper showing, the court may grant a preliminary or
23    permanent injunction and may order the defendant to make an
24    offer of rescission with respect to any sales or purchases
25    of securities, mineral investment contracts, or mineral
26    deferred delivery contracts determined by the court to be

 

 

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1    unlawful under this Act.
2        (3) Seek the seizure of assets when probable cause
3    exists that the assets were obtained by a defendant through
4    conduct in violation of Section 12, paragraph F, G, I, J,
5    K, or L of this Act, and thereby subject to a judicial
6    forfeiture hearing as required under this Act.
7            (a) In the event that such probable cause exists
8        that the subject of an investigation who is alleged to
9        have committed one of the relevant violations of this
10        Act has in his possession assets obtained as a result
11        of the conduct giving rise to the violation, the
12        Secretary of State may seek a seizure warrant in any
13        circuit court in Illinois.
14            (b) In seeking a seizure warrant, the Secretary of
15        State, or his or her designee, shall submit to the
16        court a sworn affidavit detailing the probable cause
17        evidence for the seizure, the location of the assets to
18        be seized, the relevant violation under Section 12 of
19        this Act, and a statement detailing any known owners or
20        interest holders in the assets.
21            (c) Seizure of the assets shall be made by any
22        peace officer upon process of the seizure warrant
23        issued by the court. Following the seizure of assets
24        under this Act and pursuant to a seizure warrant,
25        notice of seizure, including a description of the
26        seized assets, shall immediately be returned to the

 

 

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1        issuing court. Seized assets shall be maintained
2        pending a judicial forfeiture hearing in accordance
3        with the instructions of the court.
4            (d) In the event that management of seized assets
5        becomes necessary to prevent the devaluation,
6        dissipation, or otherwise to preserve the property,
7        the court shall have jurisdiction to appoint a
8        receiver, conservator, ancillary receiver, or
9        ancillary conservator for that purpose, as provided in
10        item (2) of this subsection.
11        (4) Seek the forfeiture of assets obtained through
12    conduct in violation of Section 12, paragraph F, G, H, I,
13    J, K, or L when authorized by law. A forfeiture must be
14    ordered by a circuit court or an action brought by the
15    Secretary of State as provided for in this Act, under a
16    verified complaint for forfeiture.
17            (a) In the event assets have been seized pursuant
18        to this Act, forfeiture proceedings shall be
19        instituted by the Attorney General within 45 days of
20        seizure.
21            (b) Service of the complaint filed under the
22        provisions of this Act shall be made in the manner as
23        provided in civil actions in this State.
24            (c) Only an owner of or interest holder in the
25        property may file an answer asserting a claim against
26        the property. For purposes of this Section, the owner

 

 

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1        or interest holder shall be referred to as claimant.
2            (d) The answer must be signed by the owner or
3        interest holder under penalty of perjury and must set
4        forth:
5                (i) the caption of the proceedings as set forth
6            on the notice of pending forfeiture and the name of
7            the claimant;
8                (ii) the address at which the claimant will
9            accept mail;
10                (iii) the nature and extent of the claimant's
11            interest in the property;
12                (iv) the date, identity of the transferor, and
13            circumstances of the claimant's acquisition of the
14            interest in the property;
15                (v) the name and address of all other persons
16            known to have an interest in the property;
17                (vi) the specific provisions of this Act
18            relied on in asserting that the property is not
19            subject to forfeiture;
20                (vii) all essential facts supporting each
21            assertion; and
22                (viii) the precise relief sought.
23            (e) The answer must be filed with the court within
24        45 days after service of the complaint.
25            (f) A property interest is exempt from forfeiture
26        under this Act if its owner or interest holder

 

 

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1        establishes by a preponderance of evidence that the
2        owner or interest holder:
3                (i) is not legally accountable for the conduct
4            giving rise to the forfeiture, did not acquiesce in
5            it, and did not know and could not reasonably have
6            known of the conduct or that the conduct was likely
7            to occur;
8                (ii) with respect to conveyances, did not hold
9            the property jointly or in common with a person
10            whose conduct gave rise to the forfeiture;
11                (iii) does not hold the property for the
12            benefit of or as a nominee for any person whose
13            conduct gave rise to its forfeiture and the owner
14            or interest holder acquires it as a bona fide
15            purchaser for value without knowingly taking part
16            in the conduct giving rise to the forfeiture; or
17                (iv) acquired the interest after the
18            commencement of the conduct giving rise to its
19            forfeiture and the owner or interest holder
20            acquired the interest as a mortgagee, secured
21            creditor, lienholder, or bona fide purchaser for
22            value without knowledge of the conduct that gave
23            rise to the forfeiture.
24            (g) The hearing must be held within 60 days after
25        the answer is filed unless continued for good cause.
26            (h) During the probable cause portion of the

 

 

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1        judicial in rem proceeding wherein the Secretary of
2        State presents its case-in-chief, the court must
3        receive and consider, among other things, any relevant
4        hearsay evidence and information. The laws of evidence
5        relating to civil actions shall apply to all other
6        portions of the judicial in rem proceeding.
7            (i) The Secretary of State shall show the existence
8        of probable cause for forfeiture of the property. If
9        the Secretary of State shows probable cause, the
10        claimant has the burden of showing by a preponderance
11        of the evidence that the claimant's interest in the
12        property is not subject to forfeiture.
13            (j) If the Secretary of State does not show the
14        existence of probable cause or a claimant has an
15        interest that is exempt under subdivision I (4)(d) of
16        this Section, the court shall order the interest in the
17        property returned or conveyed to the claimant and shall
18        order all other property forfeited to the Secretary of
19        State pursuant to all provisions of this Act. If the
20        Secretary of State does show the existence of probable
21        cause and the claimant does not establish by a
22        preponderance of the evidence that the claimant has an
23        interest that is exempt under subsection D herein, the
24        court shall order all the property forfeited to the
25        Secretary of State pursuant to the provisions of the
26        Section.

 

 

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1            (k) A defendant convicted in any criminal
2        proceeding is precluded from later denying the
3        essential allegations of the criminal offense of which
4        the defendant was convicted in any proceeding for
5        violations of the Act giving rise to forfeiture of
6        property herein regardless of the pendency of an appeal
7        from that conviction. However, evidence of the
8        pendency of an appeal is admissible.
9            (l) An acquittal or dismissal in a criminal
10        proceeding for violations of the Act giving rise to the
11        forfeiture of property herein shall not preclude civil
12        proceedings under this provision; however, for good
13        cause shown, on a motion by the Secretary of State, the
14        court may stay civil forfeiture proceedings during the
15        criminal trial for a related criminal indictment or
16        information alleging violation of the provisions of
17        Section 12 of the Illinois Securities Law of 1953.
18        Property subject to forfeiture under this Section
19        shall not be subject to return or release by a court
20        exercising jurisdiction over a criminal case involving
21        the seizure of the property unless the return or
22        release is consented to by the Secretary of State.
23            (m) All property declared forfeited under this Act
24        vests in the State on the commission of the conduct
25        giving rise to forfeiture together with the proceeds of
26        the property after that time. Any such property or

 

 

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1        proceeds subsequently transferred to any person remain
2        subject to forfeiture and thereafter shall be ordered
3        forfeited unless the transferee claims and establishes
4        in a hearing under the provisions of this Act that the
5        transferee's interest is exempt under the Act. Any
6        assets forfeited to the State shall be disposed of in
7        following manner:
8                (i) all forfeited property and assets shall be
9            liquidated by the Secretary of State in accordance
10            with all laws and rules governing the disposition
11            of such property;
12                (ii) the Secretary of State shall provide the
13            court at the time the property and assets are
14            declared forfeited a verified statement of
15            investors subject to the conduct giving rise to the
16            forfeiture;
17                (iii) after payment of any costs of sale,
18            receivership, storage, or expenses for
19            preservation of the property seized, other costs
20            to the State, and payment to claimants for any
21            amount deemed exempt from forfeiture, the proceeds
22            from liquidation shall be distributed pro rata to
23            investors subject to the conduct giving rise to the
24            forfeiture; and
25                (iv) any proceeds remaining after all verified
26            investors have been made whole shall be

 

 

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1            distributed 25% to the Securities Investors
2            Education Fund, 25% to the Securities Audit and
3            Enforcement Fund, 25% to the Attorney General or
4            any State's Attorney bringing criminal charges for
5            the conduct giving rise to the forfeiture, and 25%
6            to other law enforcement agencies participating in
7            the investigation of the criminal charges for the
8            conduct giving rise to the forfeiture. In the event
9            that no other law enforcement agencies are
10            involved in the investigation of the conduct
11            giving rise to the forfeiture, then the portion to
12            other law enforcement agencies shall be
13            distributed to the Securities Investors Education
14            Fund.
15            (n) The Secretary of State shall notify by
16        certified mail, return receipt requested, all known
17        investors in the matter giving rise to the forfeiture
18        of the forfeiture proceeding and sale of assets
19        forfeited arising from the violations of this Act, and
20        shall further publish notice in a paper of general
21        circulation in the district in which the violations
22        were prosecuted. The notice to investors shall
23        identify the name, address, and other identifying
24        information about any defendant prosecuted for
25        violations of this Act that resulted in forfeiture and
26        sale of property, the offense for which the defendant

 

 

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1        was convicted, and that the court has ordered
2        forfeiture and sale of property for claims of investors
3        who incurred losses or damages as a result of the
4        violations. Investors may then file a claim in a form
5        prescribed by the Secretary of State in order to share
6        in disbursement of the proceeds from sale of the
7        forfeited property. Investor claims must be filed with
8        the Secretary of State within 30 days after receipt of
9        the certified mail return receipt, or within 30 days
10        after the last date of publication of the general
11        notice in a paper of general circulation in the
12        district in which the violations were prosecuted,
13        whichever occurs last.
14            (o) A civil action under this subsection must be
15        commenced within 5 years after the last conduct giving
16        rise to the forfeiture became known or should have
17        become known or 5 years after the forfeitable property
18        is discovered, whichever is later, excluding time
19        during which either the property or claimant is out of
20        this State or in confinement or during which criminal
21        proceedings relating to the same conduct are in
22        progress.
23            (p) If property is seized for evidence and for
24        forfeiture, the time periods for instituting judicial
25        forfeiture proceedings shall not begin until the
26        property is no longer necessary for evidence.

 

 

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1            (q) Notwithstanding other provisions of this Act,
2        the Secretary of State and a claimant of forfeitable
3        property may enter into an agreed-upon settlement
4        concerning the forfeitable property in such an amount
5        and upon such terms as are set out in writing in a
6        settlement agreement.
7            (r) Nothing in this Act shall apply to property
8        that constitutes reasonable bona fide attorney's fees
9        paid to an attorney for services rendered or to be
10        rendered in the forfeiture proceeding or criminal
11        proceeding relating directly thereto when the property
12        was paid before its seizure and before the issuance of
13        any seizure warrant or court order prohibiting
14        transfer of the property and when the attorney, at the
15        time he or she received the property, did not know that
16        it was property subject to forfeiture under this Act.
17    The court shall further have jurisdiction and authority, in
18addition to the penalties and other remedies in this Act
19provided, to enter an order for the appointment of the court or
20a person as a receiver, conservator, ancillary receiver or
21ancillary conservator for the defendant or the defendant's
22assets located in this State, or to require restitution,
23damages or disgorgement of profits on behalf of the person or
24persons injured by the act or practice constituting the subject
25matter of the action, and may assess costs against the
26defendant for the use of the State; provided, however, that the

 

 

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1civil remedies of rescission and appointment of a receiver,
2conservator, ancillary receiver or ancillary conservator shall
3not be available against any person by reason of the failure to
4file with the Secretary of State, or on account of the contents
5of, any report of sale provided for in subsection G or P of
6Section 4, paragraph (2) of subsection D of Sections 5 and 6,
7or paragraph (2) of subsection F of Section 7 of this Act.
8Appeals may be taken as in other civil cases.
9    J. In no case shall the Secretary of State, or any of his
10or her employees or agents, in the administration of this Act,
11incur any official or personal liability by instituting an
12injunction or other proceeding or by denying, suspending or
13revoking the registration of a dealer or salesperson, or by
14denying, suspending or revoking the registration of securities
15or prohibiting the offer or sale of securities, or by
16suspending or prohibiting any person from acting as a dealer,
17limited Canadian dealer, salesperson, investment adviser, or
18investment adviser representative or from offering or selling
19securities.
20    K. No provision of this Act shall be construed to require
21or to authorize the Secretary of State to require any
22investment adviser or federal covered investment adviser
23engaged in rendering investment supervisory services to
24disclose the identity, investments, or affairs of any client of
25the investment adviser or federal covered investment adviser,
26except insofar as the disclosure may be necessary or

 

 

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1appropriate in a particular proceeding or investigation having
2as its object the enforcement of this Act.
3    L. Whenever, after an examination, investigation or
4hearing, the Secretary of State deems it of public interest or
5advantage, he or she may certify a record to the State's
6Attorney of the county in which the act complained of, examined
7or investigated occurred. The State's Attorney of that county
8within 90 days after receipt of the record shall file a written
9statement at the Office of the Secretary of State, which
10statement shall set forth the action taken upon the record, or
11if no action has been taken upon the record that fact, together
12with the reasons therefor, shall be stated.
13    M. The Secretary of State may initiate, take, pursue, or
14prosecute any action authorized or permitted under Section 6d
15of the Federal 1974 Act.
16    N. (1) Notwithstanding any provision of this Act to the
17contrary, to encourage uniform interpretation, administration,
18and enforcement of the provisions of this Act, the Secretary of
19State may cooperate with the securities agencies or
20administrators of one or more states, Canadian provinces or
21territories, or another country, the Securities and Exchange
22Commission, the Commodity Futures Trading Commission, the
23Securities Investor Protection Corporation, any
24self-regulatory organization, and any governmental law
25enforcement or regulatory agency.
26    (2) The cooperation authorized by paragraph (1) of this

 

 

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1subsection includes, but is not limited to, the following:
2        (a) establishing or participating in a central
3    depository or depositories for registration under this Act
4    and for documents or records required under this Act;
5        (b) making a joint audit, inspection, examination, or
6    investigation;
7        (c) holding a joint administrative hearing;
8        (d) filing and prosecuting a joint civil or criminal
9    proceeding;
10        (e) sharing and exchanging personnel;
11        (f) sharing and exchanging information and documents;
12    or
13        (g) issuing any joint statement or policy.
14(Source: P.A. 92-308, eff. 1-1-02; 93-580, eff. 8-21-03.)
 
15    (815 ILCS 5/11a)  (from Ch. 121 1/2, par. 137.11a)
16    Sec. 11a. Fees.
17    (1) The Secretary of State shall by rule or regulation
18impose and shall collect reasonable fees necessary for the
19administration of this Act including, but not limited to, fees
20for the following purposes:
21        (a) filing an application pursuant to paragraph (2) of
22    subsection F of Section 4 of this Act;
23        (b) examining an application and report pursuant to
24    paragraph (2) of subsection F of Section 4 of this Act;
25        (c) filing a report pursuant to subsection G of Section

 

 

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1    4 of this Act, determined in accordance with paragraph (4)
2    of subsection G of Section 4 of this Act;
3        (d) examining an offering sheet pursuant to subsection
4    P of Section 4 of this Act;
5        (e) filing a report pursuant to subsection P of Section
6    4, determined in accordance with subsection P of Section 4
7    of this Act;
8        (f) examining an application to register securities
9    under subsection B of Section 5 of this Act;
10        (g) examining an amended or supplemental prospectus
11    filed pursuant to the undertaking required by
12    sub-paragraph (i) of paragraph (2) of subsection B of
13    Section 5 of this Act;
14        (h) registering or renewing registration of securities
15    under Section 5, determined in accordance with subsection C
16    of Section 5 of this Act;
17        (i) registering securities in excess of the amount
18    initially registered, determined in accordance with
19    paragraph (2) of subsection C of Section 5 of this Act;
20        (j) failure to file timely an application for renewal
21    under subsection E of Section 5 of this Act;
22        (k) failure to file timely any document or information
23    required under Section 5 of this Act;
24        (l) examining an application to register face amount
25    certificate contracts under subsection B of Section 6 of
26    this Act;

 

 

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1        (m) examining an amended or supplemental prospectus
2    filed pursuant to the undertaking required by
3    sub-paragraph (f) of paragraph (2) of subsection B of
4    Section 6 of this Act;
5        (n) registering or renewing registration of face
6    amount certificate contracts under Section 6 of this Act;
7        (o) amending a registration of face amount certificate
8    contracts pursuant to subsection E of Section 6 of this Act
9    to add any additional series, type or class of contract;
10        (p) failure to file timely an application for renewal
11    under subsection F of Section 6 of this Act;
12        (q) adding to or withdrawing from deposits with respect
13    to face amount certificate contracts pursuant to
14    subsection H of Section 6, a transaction charge payable at
15    the times and in the manner specified in subsection H of
16    Section 6 (which transaction charge shall be in addition to
17    the annual fee called for by subsection H of Section 6 of
18    this Act);
19        (r) failure to file timely any document or information
20    required under Section 6 of this Act;
21        (s) examining an application to register investment
22    fund shares under subsection B of Section 7 of this Act;
23        (t) examining an amended or supplemental prospectus
24    filed pursuant to the undertaking required by
25    sub-paragraph (f) of paragraph (2) of subsection B of
26    Section 7 of this Act;

 

 

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1        (u) registering or renewing registration of investment
2    fund shares under Section 7 of this Act;
3        (v) amending a registration of investment fund shares
4    pursuant to subsection D of Section 7 of this Act to
5    register an additional class or classes of investment fund
6    shares;
7        (w) failure to file timely an application for renewal
8    under paragraph (l) of subsection G of Section 7 of this
9    Act;
10        (x) examining an application for renewal of
11    registration of investment fund shares under paragraph (2)
12    of subsection G of Section 7 of this Act;
13        (y) failure to file timely any document or information
14    required under Section 7 of this Act;
15        (z) filing an application for registration or
16    re-registration of a dealer or limited Canadian dealer
17    under Section 8 of this Act for each office in this State;
18        (aa) in connection with an application for the
19    registration or re-registration of a salesperson under
20    Section 8 of or this Act, for the following purposes:
21            (i) filing an application;
22            (ii) a Securities Audit and Enforcement Fund fee;
23        and
24            (iii) a notification filing of federal covered
25        investment advisers;
26        (bb) in connection with an application for the

 

 

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1    registration or re-registration of an investment adviser
2    under Section 8 of this Act;
3        (cc) failure to file timely any document or information
4    required under Section 8 of this Act;
5        (dd) filing a consent to service of process under
6    Section 10 of this Act;
7        (ee) issuing a certificate pursuant to subsection B of
8    Section 15 of this Act;
9        (ff) issuing a certified copy pursuant to subsection C
10    of Section 15 of this Act;
11        (gg) issuing a non-binding statement pursuant to
12    Section 15a of this Act;
13        (hh) filings by Notification under Section 2a;
14        (ii) notification filing of federal Regulation D,
15    Section 506 offering under the Federal 1933 Act;
16        (jj) notification filing of securities and closed-end
17    investment company securities;
18        (kk) notification filing of face amount certificate
19    contracts;
20        (ll) notification filing of open-end investment
21    company securities;
22        (mm) filing a report pursuant to subsection D of
23    Section 4 of this Act;
24        (nn) in connection with the filing of an application
25    for registration or re-registration of an investment
26    adviser representative under subsection D of Section 8 of

 

 

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1    this Act; .
2        (oo) filing a notice pursuant to paragraph (6) of
3    subsection T of Section 4 of this Act; and
4        (pp) applying for registration, or renewing
5    registration, as a registered Internet portal pursuant to
6    Section 8d of this Act.
7    (2) The Secretary of State may, by rule or regulation,
8raise or lower any fee imposed by, and which he or she is
9authorized by law to collect under, this Act.
10(Source: P.A. 90-70, eff. 7-8-97; 91-357, eff. 7-29-99; revised
1112-11-14.)
 
12    (815 ILCS 5/12)  (from Ch. 121 1/2, par. 137.12)
13    Sec. 12. Violation. It shall be a violation of the
14provisions of this Act for any person:
15    A. To offer or sell any security except in accordance with
16the provisions of this Act.
17    B. To deliver to a purchaser any security required to be
18registered under Section 5, Section 6 or Section 7 hereof
19unless accompanied or preceded by a prospectus that meets the
20requirements of the pertinent subsection of Section 5 or of
21Section 6 or of Section 7.
22    C. To act as a dealer, internet portal, salesperson,
23investment adviser, or investment adviser representative,
24unless registered as such, where such registration is required,
25under the provisions of this Act.

 

 

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1    D. To fail to file with the Secretary of State any
2application, report or document required to be filed under the
3provisions of this Act or any rule or regulation made by the
4Secretary of State pursuant to this Act or to fail to comply
5with the terms of any order of the Secretary of State issued
6pursuant to Section 11 hereof.
7    E. To make, or cause to be made, (1) in any application,
8report or document filed under this Act or any rule or
9regulation made by the Secretary of State pursuant to this Act,
10any statement which was false or misleading with respect to any
11material fact or (2) any statement to the effect that a
12security (other than a security issued by the State of
13Illinois) has been in any way endorsed or approved by the
14Secretary of State or the State of Illinois.
15    F. To engage in any transaction, practice or course of
16business in connection with the sale or purchase of securities
17which works or tends to work a fraud or deceit upon the
18purchaser or seller thereof.
19    G. To obtain money or property through the sale of
20securities by means of any untrue statement of a material fact
21or any omission to state a material fact necessary in order to
22make the statements made, in the light of the circumstances
23under which they were made, not misleading.
24    H. To sign or circulate any statement, prospectus, or other
25paper or document required by any provision of this Act or
26pertaining to any security knowing or having reasonable grounds

 

 

09900HB3429ham002- 96 -LRB099 04381 JLS 32838 a

1to know any material representation therein contained to be
2false or untrue.
3    I. To employ any device, scheme or artifice to defraud in
4connection with the sale or purchase of any security, directly
5or indirectly.
6    J. When acting as an investment adviser, investment adviser
7representative, or federal covered investment adviser, by any
8means or instrumentality, directly or indirectly:
9        (1) To employ any device, scheme or artifice to defraud
10    any client or prospective client;
11        (2) To engage in any transaction, practice, or course
12    of business which operates as a fraud or deceit upon any
13    client or prospective client; or
14        (3) To engage in any act, practice, or course of
15    business which is fraudulent, deceptive or manipulative.
16    The Secretary of State shall for the purposes of this
17    paragraph (3), by rules and regulations, define and
18    prescribe means reasonably designed to prevent such acts,
19    practices, and courses of business as are fraudulent,
20    deceptive, or manipulative.
21    K. When offering or selling any mineral investment contract
22or mineral deferred delivery contract:
23        (1) To employ any device, scheme, or artifice to
24    defraud any customer, prospective customer, or offeree;
25        (2) To engage in any transaction, practice, or course
26    of business that operates as a fraud or deceit upon any

 

 

09900HB3429ham002- 97 -LRB099 04381 JLS 32838 a

1    customer, prospective customer, or offeree; or
2        (3) To engage in any act, practice, or course of
3    business that is fraudulent, deceptive, or manipulative.
4    The Secretary of State shall for the purposes of this
5    paragraph (3), by rules and regulations, define and
6    prescribe means reasonably designed to prevent acts,
7    practices, and courses of business as are fraudulent,
8    deceptive, or manipulative.
9    L. To knowingly influence, coerce, manipulate, or mislead
10any person engaged in the preparation or audit of financial
11statements or appraisals to be used in the offer or sale of
12securities for the purpose of rendering such financial
13statements or appraisals materially misleading.
14(Source: P.A. 93-580, eff. 8-21-03.)
 
15    (815 ILCS 5/13)  (from Ch. 121 1/2, par. 137.13)
16    Sec. 13. Private and other civil remedies; securities.
17    A. Every sale of a security made in violation of the
18provisions of this Act shall be voidable at the election of the
19purchaser exercised as provided in subsection B of this
20Section; and the issuer, controlling person, underwriter,
21dealer or other person by or on behalf of whom said sale was
22made, and each underwriter, dealer, internet portal, or
23salesperson who shall have participated or aided in any way in
24making the sale, and in case the issuer, controlling person,
25underwriter, or dealer, or internet portal is a corporation or

 

 

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1unincorporated association or organization, each of its
2officers and directors (or persons performing similar
3functions) who shall have participated or aided in making the
4sale, shall be jointly and severally liable to the purchaser as
5follows:
6        (1) for the full amount paid, together with interest
7    from the date of payment for the securities sold at the
8    rate of the interest or dividend stipulated in the
9    securities sold (or if no rate is stipulated, then at the
10    rate of 10% per annum) less any income or other amounts
11    received by the purchaser on the securities, upon offer to
12    tender to the seller or tender into court of the securities
13    sold or, where the securities were not received, of any
14    contract made in respect of the sale; or
15        (2) if the purchaser no longer owns the securities, for
16    the amounts set forth in clause (1) of this subsection A
17    less any amounts received by the purchaser for or on
18    account of the disposition of the securities.
19    If the purchaser shall prevail in any action brought to
20enforce any of the remedies provided in this subsection, the
21court shall assess costs together with the reasonable fees and
22expenses of the purchaser's attorney against the defendant. Any
23provision of this subsection A to the contrary notwithstanding,
24the civil remedies provided in this subsection A shall not be
25available against any person by reason of the failure to file
26with the Secretary of State, or on account of the content of,

 

 

09900HB3429ham002- 99 -LRB099 04381 JLS 32838 a

1any report of sale provided for in subsection G or P of Section
24, paragraph (2) of subsection D of Sections 5 and 6, or
3paragraph (2) of subsection F of Section 7 of this Act.
4    B. Notice of any election provided for in subsection A of
5this Section shall be given by the purchaser within 6 months
6after the purchaser shall have knowledge that the sale of the
7securities to him or her is voidable, to each person from whom
8recovery will be sought, by registered mail or certified mail,
9return receipt requested, addressed to the person to be
10notified at his or her last known address with proper postage
11affixed, or by personal service.
12    C. No purchaser shall have any right or remedy under this
13Section who shall fail, within 15 days from the date of receipt
14thereof, to accept an offer to repurchase the securities
15purchased by him or her for a price equal to the full amount
16paid therefor plus interest thereon and less any income thereon
17as set forth in subsection A of this Section. Every offer of
18repurchase provided for in this subsection shall be in writing,
19shall be delivered to the purchaser or sent by registered mail
20or certified mail, return receipt requested, addressed to the
21purchaser at his or her last known address, and shall offer to
22repurchase the securities sold for a price equal to the full
23amount paid therefor plus interest thereon and less any income
24thereon as set forth in subsection A of this Section. Such
25offer shall continue in force for 15 days from the date on
26which it was received by the purchaser, shall advise the

 

 

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1purchaser of his or her rights and the period of time limited
2for acceptance thereof, and shall contain such further
3information, if any, as the Secretary of State may prescribe.
4Any agreement not to accept or refusing or waiving any such
5offer made during or prior to said 15 days shall be void.
6    D. No action shall be brought for relief under this Section
7or upon or because of any of the matters for which relief is
8granted by this Section after 3 years from the date of sale;
9provided, that if the party bringing the action neither knew
10nor in the exercise of reasonable diligence should have known
11of any alleged violation of subsection E, F, G, H, I or J of
12Section 12 of this Act which is the basis for the action, the 3
13year period provided herein shall begin to run upon the earlier
14of:
15        (1) the date upon which the party bringing the action
16    has actual knowledge of the alleged violation of this Act;
17    or
18        (2) the date upon which the party bringing the action
19    has notice of facts which in the exercise of reasonable
20    diligence would lead to actual knowledge of the alleged
21    violation of this Act.
22    E. The term purchaser as used in this Section shall include
23the personal representative or representatives of the
24purchaser.
25    F. Anything in this Act to the contrary notwithstanding and
26in addition to all other remedies, the Secretary of State

 

 

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1through the Office of the Attorney General may bring an action
2in any circuit court of the State of Illinois in the name and
3on behalf of the State of Illinois against any person or
4persons participating in or about to participate in a violation
5of this Act to enjoin those persons who are continuing or doing
6any act in violation of this Act or to enforce compliance with
7this Act. Upon a proper showing the court may grant a permanent
8or preliminary injunction or temporary restraining order
9without bond, and may order the defendant to make an offer of
10rescission of any sales or purchases of securities determined
11by the court to be unlawful under this Act. The court shall
12further have jurisdiction and authority, in addition to the
13other penalties and remedies in this Act provided, to act or
14appoint another person as a receiver, conservator, ancillary
15receiver or ancillary conservator for the defendant or the
16defendant's assets located in this State and may assess costs
17against the defendant for the use of the State.
18    G. (1) Whenever any person has engaged or is about to
19engage in any act or practice constituting a violation of this
20Act, any party in interest may bring an action in the circuit
21court of the county in which the party in interest resides, or
22where the person has his, her or its principal office or
23registered office or where any part of the transaction has or
24will take place, to enjoin that person from continuing or doing
25any act in violation of or to enforce compliance with this Act.
26Upon a proper showing, the court shall grant a permanent or

 

 

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1preliminary injunction or temporary restraining order or
2rescission of any sales or purchases of securities determined
3to be unlawful under this Act, and may assess costs of the
4proceedings against the defendant.
5    (2) A copy of the complaint shall be served upon the
6Secretary of State within one business day of filing in the
7form and manner prescribed by the Secretary of State by rule or
8regulation; provided, that the failure to comply with this
9provision shall not invalidate the action which is the subject
10of the complaint.
11    H. Any provision of this Section 13 to the contrary
12notwithstanding, neither the civil remedies provided in
13subsection A of this Section 13 nor the remedies of rescission
14and appointment of a receiver, conservator, ancillary receiver
15or ancillary conservator provided in subsection I of Section 11
16of this Act and in subsections F and G of this Section 13 of
17this Act nor the remedies of restitution, damages or
18disgorgement of profits provided in subsection I of Section 11
19of this Act shall be available against any person by reason of
20the failure to file with the Secretary of State, or on account
21of the contents of, any notice filing under Section 2a of this
22Act or subsection C-5 of Section 8 of this Act or any report of
23sale provided for in subsection G or P of Section 4, paragraph
24(2) of subsection D of Sections 5 and 6, or paragraph (2) of
25subsection F of Section 7 of this Act.
26(Source: P.A. 98-174, eff. 8-5-13.)
 

 

 

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1    (815 ILCS 5/18.1)
2    Sec. 18.1. Additional fees. In addition to any other fee
3that the Secretary of State may impose and collect pursuant to
4the authority contained in Sections 4, 8, and 11a of this Act,
5beginning on July 1, 2003 the Secretary of State shall also
6collect the following additional fees:
 
7Securities offered or sold under the Uniform
8Limited Offering Exemption Pursuant to
9Section 4.D of the Act............................$100
10Securities offered or sold under the Uniform
11Limited Offering Exemption pursuant to subsection
12T of Section 4 of this Act. $100
13Registration and renewal of a dealer..............$300
14Registration and renewal of a registered Internet
15portal. $300
16Registration and renewal of an investment adviser.$200
17Federal covered investment adviser notification
18filing and annual notification filing.............$200
19Registration and renewal of a salesperson.........$75
20Registration and renewal of an investment adviser
21representative and a federal covered
22investment adviser representative.................$75
23    Investment fund shares notification filing and annual
24notification filing: $800 plus $80 for each series, class, or

 

 

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1portfolio.
2    All fees collected by the Secretary of State pursuant to
3this amendatory Act of the 93rd General Assembly shall be
4deposited into the General Revenue Fund in the State treasury.
5(Source: P.A. 93-32, eff. 7-1-03.)".