Illinois General Assembly

Previous General Assemblies

Full Text of HB6292  99th General Assembly

HB6292sam001 99TH GENERAL ASSEMBLY

Sen. Daniel Biss

Filed: 5/3/2016

 

 


 

 


 
09900HB6292sam001LRB099 19829 EFG 47770 a

1
AMENDMENT TO HOUSE BILL 6292

2    AMENDMENT NO. ______. Amend House Bill 6292 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The Illinois Pension Code is amended by adding
5Sections 1-113.17, 1-113.17a, and 1-113.17b as follows:
 
6    (40 ILCS 5/1-113.17 new)
7    Sec. 1-113.17. Investment transparency; definitions. As
8used in this Section and Sections 1-113.17a and 1-113.17b:
9    (a) "Affiliate" means any person directly or indirectly
10controlling or controlled by, or under direct or indirect
11common control with, another person.
12    (a-5) "Alternative investment fund" means a private equity
13fund, hedge fund, absolute return fund, total return fund, or
14any investment pool that is privately organized, actively
15managed by investment professionals, and pays performance or
16incentive fees to investment managers.

 

 

09900HB6292sam001- 2 -LRB099 19829 EFG 47770 a

1    (b) "Board" or "public retirement system board" means the
2board of trustees of a public retirement system and includes
3the Illinois State Board of Investment established under
4Article 22A of this Code.
5    (c) "External manager" means either of the following:
6        (1) A person who manages an alternative investment fund
7    and who offers or sells, or has offered or sold, an
8    ownership interest in the alternative investment fund to a
9    board.
10        (2) A general partner, managing member entity, fund
11    manager, fund adviser, or other similar person or entity
12    with decision-making authority over an alternative
13    investment fund.
14    (d) "External manager group" means (1) the external
15manager, (2) its affiliates, (3) any other parties described in
16the external manager's marketing materials for the relevant
17alternative investment fund as providing services to or on
18behalf of portfolio holdings, and (4) any other parties
19described in the external manager's affiliated adviser's SEC
20Form ADV filing as receiving portfolio holding fees or
21portfolio holding other compensation. "External manager group"
22does not include the affiliated alternative investment fund in
23which the public retirement system is an investor, nor does it
24include an alternative investment fund used to effectuate
25investments of the affiliated fund in which the public
26retirement system is an investor.

 

 

09900HB6292sam001- 3 -LRB099 19829 EFG 47770 a

1    (e) "Marketing materials" means (1) a prospectus, (2) a
2private placement memorandum, (3) a prospective investor
3presentation, (4) a due diligence questionnaire, but only if
4the questions are authored by an external manager, or (5) any
5other written material provided by an external manager for the
6purpose of soliciting a commitment to an alternative investment
7fund.
8    (f) "New agreement" means an agreement that is proposed or
9executed after January 1, 2017, and includes any modification
10to or amendment of such an agreement that modifies or alters
11any of the provisions required to be disclosed under Section
121-113.17a or 1-113.17b. "New agreement" also means any
13subsequent agreement that implements, memorializes, or
14provides detail about such an agreement.
15    (g) "Person" means an individual, corporation,
16partnership, limited partnership, limited liability company,
17or association, either domestic or foreign.
18    (h) "Portfolio holding" means any business, partnership,
19real property, or other business entity or asset in which an
20alternative investment fund has, at any time, held either an
21interest in the securities thereof or a real property interest
22in, or has acted as a lender to, the entity or asset.
23    (i) "Portfolio holding fee" means the total payment
24obligation of a portfolio holding, regardless of whether it is
25actually paid or accrued, and regardless of whether the payment
26obligation is satisfied in cash, securities, or other

 

 

09900HB6292sam001- 4 -LRB099 19829 EFG 47770 a

1consideration, and regardless of whether it is incurred as
2compensation for services provided or as reimbursement for
3expenses incurred.
4    (j) "Private equity fund" means a pooled investment entity
5that is, or holds itself out as being, engaged primarily, or
6proposes to engage primarily, in investment strategies
7involving equity or debt financings that are provided for
8purchasing or expanding private or public companies, or for
9related purposes such as financing for capital, research and
10development, introduction of a product or process into the
11marketplace, or similar needs requiring risk capital. This
12includes, but is not limited to, financing classified as
13venture capital, mezzanine, buyout, or growth funds.
14    (k) "Public retirement system" means a pension fund or
15retirement system subject to this Code and includes the
16Illinois State Board of Investment established under Article
1722A of this Code.
 
18    (40 ILCS 5/1-113.17a new)
19    Sec. 1-113.17a. Investment transparency; disclosure of
20alternative investment fund agreements.
21    (a) The definitions in Section 1-113.17 of this Code apply
22to this Section.
23    (b) Within 90 days after entering into an agreement to
24invest in an alternative investment fund, a public retirement
25system must disclose, in the manner provided under this

 

 

09900HB6292sam001- 5 -LRB099 19829 EFG 47770 a

1Section, the existence of the agreement and all of the
2following parts and provisions of the agreement:
3        (1) All management fee waiver provisions, including,
4    but not limited to, provisions that permit the external
5    manager or general partner to waive fees, or that specify
6    the mechanics of the fee waiver or its repayment, or that
7    specify the magnitude of the fee waiver, or that are
8    necessary to understand how the fee waiver works, and all
9    defined terms related to or affecting the fee waiver.
10        (2) All indemnification provisions, including, but not
11    limited to, provisions that require the alternative
12    investment fund or its investors to indemnify the external
13    manager or general partner, or any of its affiliates, for
14    settlements or judgments paid, and including all
15    provisions necessary to understand how the indemnification
16    works and all defined terms related to or affecting
17    indemnification.
18        (3) All clawback provisions, including, but not
19    limited to, provisions that allow the external manager or
20    general partner to pay back an amount less than the full
21    cost of the overpayment received by the manager, and
22    including all provisions necessary to understand how the
23    clawback works and all defined terms related to or
24    affecting clawbacks.
25        (4) The cover page and signature block of the
26    agreement.

 

 

09900HB6292sam001- 6 -LRB099 19829 EFG 47770 a

1    However, in the case of a new agreement that consists of a
2modification of or amendment to a previous new agreement for
3which the disclosures required under this subsection have
4already been made, it is sufficient for the public retirement
5system (i) to identify the previous disclosures and disclose
6only the parts and provisions of the modification of or
7amendment to the agreement that modify, alter, or affect any of
8the provisions previously disclosed under this subsection or
9(ii) to make and disclose a finding that the modification or
10amendment does not modify, alter, or affect any of the
11provisions previously disclosed under this subsection,
12whichever is applicable.
13    (c) The public retirement system shall make the disclosures
14required under subsection (b) by doing all of the following:
15        (1) filing a copy of the required material with the
16    Public Pension Division of the Illinois Department of
17    Insurance;
18        (2) filing a copy of the required material with the
19    Illinois Secretary of State; and
20        (3) posting and maintaining the required material on
21    the public retirement system's website.
22    (d) A new agreement shall not be deemed to be violated or
23made invalid by the public retirement system's good faith
24effort to make the disclosures required under subsection (b) of
25this Section, nor due to harmless or inadvertent failure by the
26public retirement system to correctly include or identify a

 

 

09900HB6292sam001- 7 -LRB099 19829 EFG 47770 a

1component of a required disclosure.
2    (e) The following are public records and are subject to
3disclosure under the Freedom of Information Act:
4        (1) All of the material required to be disclosed under
5    subsection (b) of this Section.
6        (2) Any amounts paid in indemnification and any amounts
7    deducted from payments owed by the general partner or
8    external manager under an agreement establishing or
9    providing for participation in an alternative investment
10    fund by a public retirement system, and any documents
11    submitted to a public retirement system justifying the
12    demand for payment relating to the indemnification.
13        (3) The cover page and a legible copy of the executed
14    signature block of any new agreement to establish or
15    participate in an alternative investment fund by a public
16    retirement system.
 
17    (40 ILCS 5/1-113.17b new)
18    Sec. 1-113.17b. Investment transparency; disclosure of
19certain investment fees.
20    (a) The definitions in Section 1-113.17 of this Code apply
21to this Section. For the purposes of this Section, "carried
22interest" means a share of the profits of an alternative
23investment fund that is paid, accrued, or due to the general
24partner or the external manager or their affiliates.
25    (b) This Section applies to any new agreement that a public

 

 

09900HB6292sam001- 8 -LRB099 19829 EFG 47770 a

1retirement system enters into in order to establish or
2participate in an alternative investment fund. A public
3retirement system shall not enter into such new agreement
4without a written undertaking by the alternative investment
5fund external managers and general partners that they will
6comply with this Section and the requirements of the public
7retirement system pursuant to subsection (c).
8    (c) Every public retirement system shall require its
9alternative investment fund external managers and general
10partners to make the following disclosures annually, in a
11manner and form prescribed by the system, in regard to each
12alternative investment fund:
13        (1) The fees and expenses that the public retirement
14    system pays directly to the alternative investment fund, or
15    to the alternative investment fund external manager or
16    general partner.
17        (2) The public retirement system's share of all fees
18    and expenses not included in paragraph (1), including
19    carried interest, that are paid or allocated from the
20    alternative investment fund to the external manager or
21    general partners, or that are deducted from payments owed
22    from the external manager or general partners to the
23    alternative investment fund.
24        (3) The amount of all management fee waivers made by
25    the alternative investment fund external managers or
26    general partners.

 

 

09900HB6292sam001- 9 -LRB099 19829 EFG 47770 a

1        (4) The total amount of portfolio holding fees incurred
2    by each portfolio holding of the alternative investment
3    fund as payment to any person who is a member of the
4    external manager group.
5    (d) A public retirement system shall make the information
6received under subsection (c) available by:
7        (1) filing a copy of the received material with the
8    Public Pension Division of the Illinois Department of
9    Insurance; and
10        (2) posting and maintaining the received information
11    on the public retirement system's website, together with
12    sufficient identifying and explanatory material to
13    facilitate access and understanding by the public.
 
14    Section 99. Effective date. This Act takes effect upon
15becoming law.".