Public Act 93-0580
SB1865 Enrolled LRB093 03738 JLS 11715 b
AN ACT concerning securities regulation.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Securities Law of 1953 is amended
by changing Sections 8, 11, 11b, 12, and 14 as follows:
(815 ILCS 5/8) (from Ch. 121 1/2, par. 137.8)
Sec. 8. Registration of dealers, limited Canadian
dealers, salespersons, investment advisers, and investment
adviser representatives.
A. Except as otherwise provided in this subsection A,
every dealer, limited Canadian dealer, salesperson,
investment adviser, and investment adviser representative
shall be registered as such with the Secretary of State. No
dealer or salesperson need be registered as such when
offering or selling securities in transactions exempted by
subsection A, B, C, D, E, G, H, I, J, K, M, O, P, Q, R or S
of Section 4 of this Act, provided that such dealer or
salesperson is not regularly engaged in the business of
offering or selling securities in reliance upon the exemption
set forth in subsection G or M of Section 4 of this Act. No
dealer, issuer or controlling person shall employ a
salesperson unless such salesperson is registered as such
with the Secretary of State or is employed for the purpose of
offering or selling securities solely in transactions
exempted by subsection A, B, C, D, E, G, H, I, J, K, L, M, O,
P, Q, R or S of Section 4 of this Act; provided that such
salesperson need not be registered when effecting
transactions in this State limited to those transactions
described in Section 15(h)(2) of the Federal 1934 Act or
engaging in the offer or sale of securities in respect of
which he or she has beneficial ownership and is a controlling
person. The Secretary of State may, by rule, regulation or
order and subject to such terms, conditions, and fees as may
be prescribed in such rule, regulation or order, exempt from
the registration requirements of this Section 8 any
investment adviser, if the Secretary of State shall find that
such registration is not necessary in the public interest by
reason of the small number of clients or otherwise limited
character of operation of such investment adviser.
B. An application for registration as a dealer or
limited Canadian dealer, executed, verified, or authenticated
by or on behalf of the applicant, shall be filed with the
Secretary of State, in such form as the Secretary of State
may by rule, regulation or order prescribe, setting forth or
accompanied by:
(1) The name and address of the applicant, the
location of its principal business office and all branch
offices, if any, and the date of its organization;
(2) A statement of any other Federal or state
licenses or registrations which have been granted the
applicant and whether any such licenses or registrations
have ever been refused, cancelled, suspended, revoked or
withdrawn;
(3) The assets and all liabilities, including
contingent liabilities of the applicant, as of a date not
more than 60 days prior to the filing of the application;
(4) (a) A brief description of any civil or
criminal proceeding of which fraud is an essential
element pending against the applicant and whether the
applicant has ever been convicted of a felony, or of any
misdemeanor of which fraud is an essential element;
(b) A list setting forth the name, residence and
business address and a 10 year occupational statement of
each principal of the applicant and a statement
describing briefly any civil or criminal proceedings of
which fraud is an essential element pending against any
such principal and the facts concerning any conviction of
any such principal of a felony, or of any misdemeanor of
which fraud is an essential element;
(5) If the applicant is a corporation: a list of
its officers and directors setting forth the residence
and business address of each; a 10-year occupational
statement of each such officer or director; and a
statement describing briefly any civil or criminal
proceedings of which fraud is an essential element
pending against each such officer or director and the
facts concerning any conviction of any officer or
director of a felony, or of any misdemeanor of which
fraud is an essential element;
(6) If the applicant is a sole proprietorship, a
partnership, limited liability company, an unincorporated
association or any similar form of business organization:
the name, residence and business address of the
proprietor or of each partner, member, officer, director,
trustee or manager; the limitations, if any, of the
liability of each such individual; a 10-year occupational
statement of each such individual; a statement describing
briefly any civil or criminal proceedings of which fraud
is an essential element pending against each such
individual and the facts concerning any conviction of any
such individual of a felony, or of any misdemeanor of
which fraud is an essential element;
(7) Such additional information as the Secretary of
State may by rule or regulation prescribe as necessary to
determine the applicant's financial responsibility,
business repute and qualification to act as a dealer.
(8) (a) No applicant shall be registered or
re-registered as a dealer or limited Canadian dealer
under this Section unless and until each principal of the
dealer has passed an examination conducted by the
Secretary of State or a self-regulatory organization of
securities dealers or similar person, which examination
has been designated by the Secretary of State by rule,
regulation or order to be satisfactory for purposes of
determining whether the applicant has sufficient
knowledge of the securities business and laws relating
thereto to act as a registered dealer. Any dealer who was
registered on September 30, 1963, and has continued to be
so registered; and any principal of any registered
dealer, who was acting in such capacity on and
continuously since September 30, 1963; and any individual
who has previously passed a securities dealer examination
administered by the Secretary of State or any examination
designated by the Secretary of State to be satisfactory
for purposes of determining whether the applicant has
sufficient knowledge of the securities business and laws
relating thereto to act as a registered dealer by rule,
regulation or order, shall not be required to pass an
examination in order to continue to act in such capacity.
The Secretary of State may by order waive the examination
requirement for any principal of an applicant for
registration under this subsection B who has had such
experience or education relating to the securities
business as may be determined by the Secretary of State
to be the equivalent of such examination. Any request
for such a waiver shall be filed with the Secretary of
State in such form as may be prescribed by rule or
regulation.
(b) Unless an applicant is a member of the body
corporate known as the Securities Investor Protection
Corporation established pursuant to the Act of Congress
of the United States known as the Securities Investor
Protection Act of 1970, as amended, a member of an
association of dealers registered as a national
securities association pursuant to Section 15A of the
Federal 1934 Act, or a member of a self-regulatory
organization or stock exchange in Canada which the
Secretary of State has designated by rule or order, an
applicant shall not be registered or re-registered unless
and until there is filed with the Secretary of State
evidence that such applicant has in effect insurance or
other equivalent protection for each client's cash or
securities held by such applicant, and an undertaking
that such applicant will continually maintain such
insurance or other protection during the period of
registration or re-registration. Such insurance or other
protection shall be in a form and amount reasonably
prescribed by the Secretary of State by rule or
regulation.
(9) The application for the registration of a
dealer or limited Canadian dealer shall be accompanied
by a filing fee and a fee for each branch office in this
State, in each case in the amount established pursuant to
Section 11a of this Act, which fees shall not be
returnable in any event.
(10) The Secretary of State shall notify the dealer
or limited Canadian dealer by written notice (which may
be by electronic or facsimile transmission) of the
effectiveness of the registration as a dealer in this
State.
(11) Any change which renders no longer accurate
any information contained in any application for
registration or re-registration of a dealer or limited
Canadian dealer shall be reported to the Secretary of
State within 10 business days after the occurrence of
such change; but in respect to assets and liabilities
only materially adverse changes need be reported.
C. Any registered dealer, limited Canadian dealer,
issuer, or controlling person desiring to register a
salesperson shall file an application with the Secretary of
State, in such form as the Secretary of State may by rule or
regulation prescribe, which the salesperson is required by
this Section to provide to the dealer, issuer, or controlling
person, executed, verified, or authenticated by the
salesperson setting forth or accompanied by:
(1) the name, residence and business address of the
salesperson;
(2) whether any federal or State license or
registration as dealer, limited Canadian dealer, or
salesperson has ever been refused the salesperson or
cancelled, suspended, revoked, withdrawn, barred,
limited, or otherwise adversely affected in a similar
manner or whether the salesperson has ever been censured
or expelled;
(3) the nature of employment with, and names and
addresses of, employers of the salesperson for the 10
years immediately preceding the date of application;
(4) a brief description of any civil or criminal
proceedings of which fraud is an essential element
pending against the salesperson, and whether the
salesperson has ever been convicted of a felony, or of
any misdemeanor of which fraud is an essential element;
(5) such additional information as the Secretary of
State may by rule, regulation or order prescribe as
necessary to determine the salesperson's business repute
and qualification to act as a salesperson; and
(6) no individual shall be registered or
re-registered as a salesperson under this Section unless
and until such individual has passed an examination
conducted by the Secretary of State or a self-regulatory
organization of securities dealers or similar person,
which examination has been designated by the Secretary of
State by rule, regulation or order to be satisfactory for
purposes of determining whether the applicant has
sufficient knowledge of the securities business and laws
relating thereto to act as a registered salesperson.
Any salesperson who was registered prior to
September 30, 1963, and has continued to be so
registered, and any individual who has passed a
securities salesperson examination administered by the
Secretary of State or an examination designated by the
Secretary of State by rule, regulation or order to be
satisfactory for purposes of determining whether the
applicant has sufficient knowledge of the securities
business and laws relating thereto to act as a registered
salesperson, shall not be required to pass an examination
in order to continue to act as a salesperson. The
Secretary of State may by order waive the examination
requirement for any applicant for registration under this
subsection C who has had such experience or education
relating to the securities business as may be determined
by the Secretary of State to be the equivalent of such
examination. Any request for such a waiver shall be
filed with the Secretary of State in such form as may be
prescribed by rule, regulation or order.
(7) The application for registration of a
salesperson shall be accompanied by a filing fee and a
Securities Audit and Enforcement Fund fee, each in the
amount established pursuant to Section 11a of this Act,
which shall not be returnable in any event.
(8) Any change which renders no longer accurate any
information contained in any application for registration
or re-registration as a salesperson shall be reported to
the Secretary of State within 10 business days after the
occurrence of such change. If the activities are
terminated which rendered an individual a salesperson for
the dealer, issuer or controlling person, the dealer,
issuer or controlling person, as the case may be, shall
notify the Secretary of State, in writing, within 30 days
of the salesperson's cessation of activities, using the
appropriate termination notice form.
(9) A registered salesperson may transfer his or
her registration under this Section 8 for the unexpired
term thereof from one registered dealer or limited
Canadian dealer to another by the giving of notice of the
transfer by the new registered dealer or limited Canadian
dealer to the Secretary of State in such form and subject
to such conditions as the Secretary of State shall by
rule or regulation prescribe. The new registered dealer
or limited Canadian dealer shall promptly file an
application for registration of such salesperson as
provided in this subsection C, accompanied by the filing
fee prescribed by paragraph (7) of this subsection C.
C-5. Except with respect to federal covered investment
advisers whose only clients are investment companies as
defined in the Federal 1940 Act, other investment advisers,
federal covered investment advisers, or any similar person
which the Secretary of State may prescribe by rule or order,
a federal covered investment adviser shall file with the
Secretary of State, prior to acting as a federal covered
investment adviser in this State, such documents as have been
filed with the Securities and Exchange Commission as the
Secretary of State by rule or order may prescribe. The
notification of a federal covered investment adviser shall be
accompanied by a notification filing fee established pursuant
to Section 11a of this Act, which shall not be returnable in
any event. Every person acting as a federal covered
investment adviser in this State shall file a notification
filing and pay an annual notification filing fee established
pursuant to Section 11a of this Act, which is not returnable
in any event. The failure to file any such notification
shall constitute a violation of subsection D of Section 12 of
this Act, subject to the penalties enumerated in Section 14
of this Act. Until October 10, 1999 or other date as may be
legally permissible, a federal covered investment adviser who
fails to file the notification or refuses to pay the fees as
required by this subsection shall register as an investment
adviser with the Secretary of State under Section 8 of this
Act. The civil remedies provided for in subsection A of
Section 13 of this Act and the civil remedies of rescission
and appointment of receiver, conservator, ancillary receiver,
or ancillary conservator provided for in subsection F of
Section 13 of this Act shall not be available against any
person by reason of the failure to file any such notification
or to pay the notification fee or on account of the contents
of any such notification.
D. An application for registration as an investment
adviser, executed, verified, or authenticated by or on behalf
of the applicant, shall be filed with the Secretary of State,
in such form as the Secretary of State may by rule or
regulation prescribe, setting forth or accompanied by:
(1) The name and form of organization under which
the investment adviser engages or intends to engage in
business; the state or country and date of its
organization; the location of the adviser's principal
business office and branch offices, if any; the names and
addresses of the adviser's principal, partners, officers,
directors, and persons performing similar functions or,
if the investment adviser is an individual, of the
individual; and the number of the adviser's employees who
perform investment advisory functions;
(2) The education, the business affiliations for
the past 10 years, and the present business affiliations
of the investment adviser and of the adviser's principal,
partners, officers, directors, and persons performing
similar functions and of any person controlling the
investment adviser;
(3) The nature of the business of the investment
adviser, including the manner of giving advice and
rendering analyses or reports;
(4) The nature and scope of the authority of the
investment adviser with respect to clients' funds and
accounts;
(5) The basis or bases upon which the investment
adviser is compensated;
(6) Whether the investment adviser or any
principal, partner, officer, director, person performing
similar functions or person controlling the investment
adviser (i) within 10 years of the filing of the
application has been convicted of a felony, or of any
misdemeanor of which fraud is an essential element, or
(ii) is permanently or temporarily enjoined by order or
judgment from acting as an investment adviser,
underwriter, dealer, principal or salesperson, or from
engaging in or continuing any conduct or practice in
connection with any such activity or in connection with
the purchase or sale of any security, and in each case
the facts relating to the conviction, order or judgment;
(7) (a) A statement as to whether the investment
adviser is engaged or is to engage primarily in the
business of rendering investment supervisory services;
and
(b) A statement that the investment adviser will
furnish his, her, or its clients with such information as
the Secretary of State deems necessary in the form
prescribed by the Secretary of State by rule or
regulation;
(8) Such additional information as the Secretary of
State may, by rule, regulation or order prescribe as
necessary to determine the applicant's financial
responsibility, business repute and qualification to act
as an investment adviser.
(9) No applicant shall be registered or
re-registered as an investment adviser under this Section
unless and until each principal of the applicant who is
actively engaged in the conduct and management of the
applicant's advisory business in this State has passed an
examination or completed an educational program conducted
by the Secretary of State or an association of investment
advisers or similar person, which examination or
educational program has been designated by the Secretary
of State by rule, regulation or order to be satisfactory
for purposes of determining whether the applicant has
sufficient knowledge of the securities business and laws
relating thereto to conduct the business of a registered
investment adviser.
Any person who was a registered investment adviser
prior to September 30, 1963, and has continued to be so
registered, and any individual who has passed an
investment adviser examination administered by the
Secretary of State, or passed an examination or completed
an educational program designated by the Secretary of
State by rule, regulation or order to be satisfactory for
purposes of determining whether the applicant has
sufficient knowledge of the securities business and laws
relating thereto to conduct the business of a registered
investment adviser, shall not be required to pass an
examination or complete an educational program in order
to continue to act as an investment adviser. The
Secretary of State may by order waive the examination or
educational program requirement for any applicant for
registration under this subsection D if the principal of
the applicant who is actively engaged in the conduct and
management of the applicant's advisory business in this
State has had such experience or education relating to
the securities business as may be determined by the
Secretary of State to be the equivalent of the
examination or educational program. Any request for a
waiver shall be filed with the Secretary of State in such
form as may be prescribed by rule or regulation.
(10) No applicant shall be registered or
re-registered as an investment adviser under this Section
8 unless the application for registration or
re-registration is accompanied by an application for
registration or re-registration for each person acting as
an investment adviser representative on behalf of the
adviser and a Securities Audit and Enforcement Fund fee
that shall not be returnable in any event is paid with
respect to each investment adviser representative.
(11) The application for registration of an
investment adviser shall be accompanied by a filing fee
and a fee for each branch office in this State, in each
case in the amount established pursuant to Section 11a of
this Act, which fees shall not be returnable in any
event.
(12) The Secretary of State shall notify the
investment adviser by written notice (which may be by
electronic or facsimile transmission) of the
effectiveness of the registration as an investment
adviser in this State.
(13) Any change which renders no longer accurate
any information contained in any application for
registration or re-registration of an investment adviser
shall be reported to the Secretary of State within 10
business days after the occurrence of the change. In
respect to assets and liabilities of an investment
adviser that retains custody of clients' cash or
securities or accepts pre-payment of fees in excess of
$500 per client and 6 or more months in advance only
materially adverse changes need be reported by written
notice (which may be by electronic or facsimile
transmission) no later than the close of business on the
second business day following the discovery thereof.
(14) Each application for registration as an
investment adviser shall become effective automatically
on the 45th day following the filing of the application,
required documents or information, and payment of the
required fee unless (i) the Secretary of State has
registered the investment adviser prior to that date or
(ii) an action with respect to the applicant is pending
under Section 11 of this Act.
D-5. A registered investment adviser or federal covered
investment adviser desiring to register an investment
adviser representative shall file an application with the
Secretary of State, in the form as the Secretary of State may
by rule or order prescribe, which the investment adviser
representative is required by this Section to provide to the
investment adviser, executed, verified, or authenticated by
the investment adviser representative and setting forth or
accompanied by:
(1) The name, residence, and business address of
the investment adviser representative;
(2) A statement whether any federal or state
license or registration as a dealer, salesperson,
investment adviser, or investment adviser representative
has ever been refused, canceled, suspended, revoked or
withdrawn;
(3) The nature of employment with, and names and
addresses of, employers of the investment adviser
representative for the 10 years immediately preceding the
date of application;
(4) A brief description of any civil or criminal
proceedings, of which fraud is an essential element,
pending against the investment adviser representative and
whether the investment adviser representative has ever
been convicted of a felony or of any misdemeanor of which
fraud is an essential element;
(5) Such additional information as the Secretary of
State may by rule or order prescribe as necessary to
determine the investment adviser representative's
business repute or qualification to act as an investment
adviser representative;
(6) Documentation that the individual has passed an
examination conducted by the Secretary of State, an
organization of investment advisers, or similar person,
which examination has been designated by the Secretary of
State by rule or order to be satisfactory for purposes of
determining whether the applicant has sufficient
knowledge of the investment advisory or securities
business and laws relating to that business to act as a
registered investment adviser representative; and
(7) A Securities Audit and Enforcement Fund fee
established under Section 11a of this Act, which shall
not be returnable in any event.
The Secretary of State may by order waive the examination
requirement for an applicant for registration under this
subsection D-5 who has had the experience or education
relating to the investment advisory or securities business as
may be determined by the Secretary of State to be the
equivalent of the examination. A request for a waiver shall
be filed with the Secretary of State in the form as may be
prescribed by rule or order.
A change that renders no longer accurate any information
contained in any application for registration or
re-registration as an investment adviser representative must
be reported to the Secretary of State within 10 business days
after the occurrence of the change. If the activities that
rendered an individual an investment adviser representative
for the investment adviser are terminated, the investment
adviser shall notify the Secretary of State in writing (which
may be by electronic or facsimile transmission), within 30
days of the investment adviser representative's termination,
using the appropriate termination notice form as the
Secretary of State may prescribe by rule or order.
A registered investment adviser representative may
transfer his or her registration under this Section 8 for the
unexpired term of the registration from one registered
investment adviser to another by the giving of notice of the
transfer by the new investment adviser to the Secretary of
State in the form and subject to the conditions as the
Secretary of State shall prescribe. The new registered
investment adviser shall promptly file an application for
registration of the investment adviser representative as
provided in this subsection, accompanied by the Securities
Audit and Enforcement Fund fee prescribed by paragraph (7) of
this subsection D-5.
E. (1) Subject to the provisions of subsection F of
Section 11 of this Act, the registration of a dealer, limited
Canadian dealer, salesperson, investment adviser, or
investment adviser representative may be denied, suspended or
revoked if the Secretary of State finds that the dealer,
limited Canadian dealer, salesperson, investment adviser, or
investment adviser representative or any principal officer,
director, partner, member, trustee, manager or any person who
performs a similar function of the dealer, limited Canadian
dealer, or investment adviser:
(a) has been convicted of any felony during the 10
year period preceding the date of filing of any
application for registration or at any time thereafter,
or of any misdemeanor of which fraud is an essential
element;
(b) has engaged in any unethical practice in
connection with any security, the offer or sale of
securities or in any fraudulent business practice;
(c) has failed to account for any money or
property, or has failed to deliver any security, to any
person entitled thereto when due or within a reasonable
time thereafter;
(d) in the case of a dealer, limited Canadian
dealer, or investment adviser, is insolvent;
(e) in the case of a dealer, limited Canadian
dealer, salesperson, or registered principal of a dealer
or limited Canadian dealer (i) has failed reasonably to
supervise the securities activities of any of its
salespersons or other employees and the failure has
permitted or facilitated a violation of Section 12 of
this Act or (ii) is offering or selling or has offered or
sold securities in this State through a salesperson other
than a registered salesperson, or, in the case of a
salesperson, is selling or has sold securities in this
State for a dealer, limited Canadian dealer, issuer or
controlling person with knowledge that the dealer,
limited Canadian dealer, issuer or controlling person has
not complied with the provisions of this Act or (iii) has
failed reasonably to supervise the implementation of
compliance measures following notice by the Secretary of
State of noncompliance with the Act or with the
regulations promulgated thereunder or both or (iv) has
failed to maintain and enforce written procedures to
supervise the types of business in which it engages and
to supervise the activities of its salespersons that are
reasonably designed to achieve compliance with applicable
securities laws and regulations;
(f) in the case of an investment adviser, has
failed reasonably to supervise the advisory activities of
any of its investment adviser representatives or
employees and the failure has permitted or facilitated a
violation of Section 12 of this Act;
(g) has violated any of the provisions of this Act;
(h) has made any material misrepresentation to the
Secretary of State in connection with any information
deemed necessary by the Secretary of State to determine a
dealer's, limited Canadian dealer's, or investment
adviser's financial responsibility or a dealer's, limited
Canadian dealer's, investment adviser's, salesperson's,
or investment adviser representative's business repute or
qualifications, or has refused to furnish any such
information requested by the Secretary of State;
(i) has had a license or registration under any
Federal or State law regulating the offer or sale of
securities, or commodity futures contracts, or stock
futures contracts refused, cancelled, suspended,
withdrawn, revoked, or otherwise adversely affected in a
similar manner;
(j) has had membership in or association with any
self-regulatory organization registered under the Federal
1934 Act or the Federal 1974 Act suspended, revoked,
refused, expelled, cancelled, barred, limited in any
capacity, or otherwise adversely affected in a similar
manner arising from any fraudulent or deceptive act or a
practice in violation of any rule, regulation or standard
duly promulgated by the self-regulatory organization;
(k) has had any order entered against it after
notice and opportunity for hearing by a securities agency
of any state, any foreign government or agency thereof,
the Securities and Exchange Commission, or the Federal
Commodities Futures Trading Commission arising from any
fraudulent or deceptive act or a practice in violation of
any statute, rule or regulation administered or
promulgated by the agency or commission;
(l) in the case of a dealer or limited Canadian
dealer, fails to maintain a minimum net capital in an
amount which the Secretary of State may by rule or
regulation require;
(m) has conducted a continuing course of dealing of
such nature as to demonstrate an inability to properly
conduct the business of the dealer, limited Canadian
dealer, salesperson, investment adviser, or investment
adviser representative;
(n) has had, after notice and opportunity for
hearing, any injunction or order entered against it or
license or registration refused, cancelled, suspended,
revoked, withdrawn, limited, or otherwise adversely
affected in a similar manner by any state or federal
body, agency or commission regulating banking, insurance,
finance or small loan companies, real estate or mortgage
brokers or companies, if the action resulted from any act
found by the body, agency or commission to be a
fraudulent or deceptive act or practice in violation of
any statute, rule or regulation administered or
promulgated by the body, agency or commission;
(o) has failed to file a return, or to pay the tax,
penalty or interest shown in a filed return, or to pay
any final assessment of tax, penalty or interest, as
required by any tax Act administered by the Illinois
Department of Revenue, until such time as the
requirements of that tax Act are satisfied;
(p) in the case of a natural person who is a
dealer, limited Canadian dealer, salesperson, investment
adviser, or investment adviser representative, has
defaulted on an educational loan guaranteed by the
Illinois Student Assistance Commission, until the natural
person has established a satisfactory repayment record as
determined by the Illinois Student Assistance Commission;
(q) has failed to maintain the books and records
required under this Act or rules or regulations
promulgated under this Act or under any requirements
established by the Securities and Exchange Commission or
a self-regulatory organization within a reasonable time
after receiving notice of any deficiency;
(r) has refused to allow or otherwise impeded
designees of the Secretary of State from conducting an
audit, examination, inspection, or investigation provided
for under Section 8 or 11 of this Act;
(s) has failed to maintain any minimum net capital
or bond requirement set forth in this Act or any rule or
regulation promulgated under this Act;
(t) has refused the Secretary of State or his or
her designee access to any office or location within an
office to conduct an investigation, audit, examination,
or inspection;
(u) has advised or caused a public pension fund or
retirement system established under the Illinois Pension
Code to make an investment or engage in a transaction not
authorized by that Code;
(v) if a corporation, limited liability company, or
limited liability partnership has been suspended,
canceled, revoked, or has failed to register as a foreign
corporation, limited liability company, or limited
liability partnership with the Secretary of State;
(w) is permanently or temporarily enjoined by any
court of competent jurisdiction, including any state,
federal, or foreign government, from engaging in or
continuing any conduct or practice involving any aspect
of the securities or commodities business or in any other
business where the conduct or practice enjoined involved
investments, franchises, insurance, banking, or finance;
(2) If the Secretary of State finds that any registrant
or applicant for registration is no longer in existence or
has ceased to do business as a dealer, limited Canadian
dealer, salesperson, investment adviser, or investment
adviser representative, or is subject to an adjudication as a
person under legal disability or to the control of a
guardian, or cannot be located after reasonable search, or
has failed after written notice to pay to the Secretary of
State any additional fee prescribed by this Section or
specified by rule or regulation, or if a natural person, has
defaulted on an educational loan guaranteed by the Illinois
Student Assistance Commission, the Secretary of State may by
order cancel the registration or application.
(3) Withdrawal of an application for registration or
withdrawal from registration as a dealer, limited Canadian
dealer, salesperson, investment adviser, or investment
adviser representative becomes effective 30 days after
receipt of an application to withdraw or within such shorter
period of time as the Secretary of State may determine,
unless any proceeding is pending under Section 11 of this Act
when the application is filed or a proceeding is instituted
within 30 days after the application is filed. If a
proceeding is pending or instituted, withdrawal becomes
effective at such time and upon such conditions as the
Secretary of State by order determines. If no proceeding is
pending or instituted and withdrawal automatically becomes
effective, the Secretary of State may nevertheless institute
a revocation or suspension proceeding within 2 years after
withdrawal became effective and enter a revocation or
suspension order as of the last date on which registration
was effective.
F. The Secretary of State shall make available upon
request the date that each dealer, investment adviser,
salesperson, or investment adviser representative was granted
registration, together with the name and address of the
dealer, limited Canadian dealer, or issuer on whose behalf
the salesperson is registered, and all orders of the
Secretary of State denying or abandoning an application, or
suspending or revoking registration, or censuring the
persons. The Secretary of State may designate by rule,
regulation or order the statements, information or reports
submitted to or filed with him or her pursuant to this
Section 8 which the Secretary of State determines are of a
sensitive nature and therefore should be exempt from public
disclosure. Any such statement, information or report shall
be deemed confidential and shall not be disclosed to the
public except upon the consent of the person filing or
submitting the statement, information or report or by order
of court or in court proceedings.
G. The registration or re-registration of a dealer or
limited Canadian dealer and of all salespersons registered
upon application of the dealer or limited Canadian dealer
shall expire on the next succeeding anniversary date of the
registration or re-registration of the dealer; and the
registration or re-registration of an investment adviser and
of all investment adviser representatives registered upon
application of the investment adviser shall expire on the
next succeeding anniversary date of the registration of the
investment adviser; provided, that the Secretary of State may
by rule or regulation prescribe an alternate date which any
dealer registered under the Federal 1934 Act or a member of
any self-regulatory association approved pursuant thereto, a
member of a self-regulatory organization or stock exchange in
Canada, or any investment adviser may elect as the expiration
date of its dealer or limited Canadian dealer and salesperson
registrations, or the expiration date of its investment
adviser registration, as the case may be. A registration of
a salesperson registered upon application of an issuer or
controlling person shall expire on the next succeeding
anniversary date of the registration, or upon termination or
expiration of the registration of the securities, if any,
designated in the application for his or her registration or
the alternative date as the Secretary may prescribe by rule
or regulation. Subject to paragraph (9) of subsection C of
this Section 8, a salesperson's registration also shall
terminate upon cessation of his or her employment, or
termination of his or her appointment or authorization, in
each case by the person who applied for the salesperson's
registration, provided that the Secretary of State may by
rule or regulation prescribe an alternate date for the
expiration of the registration.
H. Applications for re-registration of dealers, limited
Canadian dealers, salespersons, investment advisers, and
investment adviser representatives shall be filed with the
Secretary of State prior to the expiration of the then
current registration and shall contain such information as
may be required by the Secretary of State upon initial
application with such omission therefrom or addition thereto
as the Secretary of State may authorize or prescribe. Each
application for re-registration of a dealer, limited Canadian
dealer, or investment adviser shall be accompanied by a
filing fee, each application for re-registration as a
salesperson shall be accompanied by a filing fee and a
Securities Audit and Enforcement Fund fee established
pursuant to Section 11a of this Act, and each application for
re-registration as an investment adviser representative shall
be accompanied by a Securities Audit and Enforcement Fund fee
established under Section 11a of this Act, which shall not be
returnable in any event. Notwithstanding the foregoing,
applications for re-registration of dealers, limited Canadian
dealers, and investment advisers may be filed within 30 days
following the expiration of the registration provided that
the applicant pays the annual registration fee together with
an additional amount equal to the annual registration fee and
files any other information or documents that the Secretary
of State may prescribe by rule or regulation or order. Any
application filed within 30 days following the expiration of
the registration shall be automatically effective as of the
time of the earlier expiration provided that the proper fee
has been paid to the Secretary of State.
Each registered dealer, limited Canadian dealer, or
investment adviser shall continue to be registered if the
registrant changes his, her, or its form of organization
provided that the dealer or investment adviser files an
amendment to his, her, or its application not later than 30
days following the occurrence of the change and pays the
Secretary of State a fee in the amount established under
Section 11a of this Act.
I. (1) Every registered dealer, limited Canadian dealer,
and investment adviser shall make and keep for such periods,
such accounts, correspondence, memoranda, papers, books and
records as the Secretary of State may by rule or regulation
prescribe. All records so required shall be preserved for 3
years unless the Secretary of State by rule, regulation or
order prescribes otherwise for particular types of records.
(2) Every registered dealer, limited Canadian dealer,
and investment adviser shall file such financial reports as
the Secretary of State may by rule or regulation prescribe.
(3) All the books and records referred to in paragraph
(1) of this subsection I are subject at any time or from time
to time to such reasonable periodic, special or other audits,
examinations, or inspections by representatives of the
Secretary of State, within or without this State, as the
Secretary of State deems necessary or appropriate in the
public interest or for the protection of investors.
(4) At the time of an audit, examination, or inspection,
the Secretary of State, by his or her designees, may conduct
an interview of any person employed or appointed by or
affiliated with a registered dealer, limited Canadian dealer,
or investment advisor, provided that the dealer, limited
Canadian dealer, or investment advisor shall be given
reasonable notice of the time and place for the interview.
At the option of the dealer, limited Canadian dealer, or
investment advisor, a representative of the dealer or
investment advisor with supervisory responsibility over the
individual being interviewed may be present at the interview.
J. The Secretary of State may require by rule or
regulation the payment of an additional fee for the filing of
information or documents required to be filed by this Section
which have not been filed in a timely manner. The Secretary
of State may also require by rule or regulation the payment
of an examination fee for administering any examination which
it may conduct pursuant to subsection B, C, D, or D-5 of this
Section 8.
K. The Secretary of State may declare any application
for registration or limited registration under this Section 8
abandoned by order if the applicant fails to pay any fee or
file any information or document required under this Section
8 or by rule or regulation for more than 30 days after the
required payment or filing date. The applicant may petition
the Secretary of State for a hearing within 15 days after the
applicant's receipt of the order of abandonment, provided
that the petition sets forth the grounds upon which the
applicant seeks a hearing.
L. Any document being filed pursuant to this Section 8
shall be deemed filed, and any fee being paid pursuant to
this Section 8 shall be deemed paid, upon the date of actual
receipt thereof by the Secretary of State or his or her
designee.
M. The Secretary of State shall provide to the Illinois
Student Assistance Commission annually or at mutually agreed
periodic intervals the names and social security numbers of
natural persons registered under subsections B, C, D, and D-5
of this Section. The Illinois Student Assistance Commission
shall determine if any student loan defaulter is registered
as a dealer, limited Canadian dealer, salesperson, or
investment adviser under this Act and report its
determination to the Secretary of State or his or her
designee.
(Source: P.A. 91-809, eff. 1-1-01; 92-308, eff. 1-1-02.)
(815 ILCS 5/11) (from Ch. 121 1/2, par. 137.11)
Sec. 11. Duties and powers of the Secretary of State.
A. (1) The administration of this Act is vested in the
Secretary of State, who may from time to time make, amend and
rescind such rules and regulations as may be necessary to
carry out this Act, including rules and regulations governing
procedures of registration, statements, applications and
reports for various classes of securities, persons and
matters within his or her jurisdiction and defining any
terms, whether or not used in this Act, insofar as the
definitions are not inconsistent with this Act. The rules
and regulations adopted by the Secretary of State under this
Act shall be effective in the manner provided for in the
Illinois Administrative Procedure Act.
(2) Among other things, the Secretary of State shall
have authority, for the purposes of this Act, to prescribe
the form or forms in which required information shall be set
forth, accounting practices, the items or details to be shown
in balance sheets and earning statements, and the methods to
be followed in the preparation of accounts, in the appraisal
or valuation of assets and liabilities, in the determination
of depreciation and depletion, in the differentiation of
recurring and non-recurring income, in the differentiation of
investment and operating income, and in the preparation of
consolidated balance sheets or income accounts of any person,
directly or indirectly, controlling or controlled by the
issuer, or any person under direct or indirect common control
with the issuer.
(3) No provision of this Act imposing any liability
shall apply to any act done or omitted in good faith in
conformity with any rule or regulation of the Secretary of
State under this Act, notwithstanding that the rule or
regulation may, after the act or omission, be amended or
rescinded or be determined by judicial or other authority to
be invalid for any reason.
(4) The Securities Department of the Office of the
Secretary of State shall be deemed a criminal justice agency
for purposes of all federal and state laws and regulations
and, in that capacity, shall be entitled to access to any
information available to criminal justice agencies and has
the power to appoint special agents to conduct all
investigations, searches, seizures, arrests, and other duties
imposed under the provisions of any law administered by the
Department. The special agents have and may exercise all the
powers of peace officers solely for the purpose of enforcing
provisions of this Act.
The Director must authorize to each special agent
employed under this Section a distinct badge that, on its
face, (i) clearly states that the badge is authorized by the
Department and (ii) contains a unique and identifying number.
Special agents shall comply with all training
requirements established for law enforcement officers by
provisions of the Illinois Police Training Act.
(5) The Secretary of State, by rule, may conditionally
or unconditionally exempt any person, security, or
transaction, or any class or classes of persons, securities,
or transactions from any provision of Section 5, 6, 7, 8, 8a,
or 9 of this Act or of any rule promulgated under these
Sections, to the extent that such exemption is necessary or
appropriate in the public interest, and is consistent with
the protection of investors.
B. The Secretary of State may, anything in this Act to
the contrary notwithstanding, require financial statements
and reports of the issuer, dealer, salesperson, or investment
adviser, or investment adviser representative as often as
circumstances may warrant. In addition, the Secretary of
State may secure information or books and records from or
through others and may make or cause to be made
investigations respecting the business, affairs, and property
of the issuer of securities, any person involved in the sale
or offer for sale, purchase or offer to purchase of any
mineral investment contract, mineral deferred delivery
contract, or security and of dealers, salespersons, and
investment advisers, and investment adviser representatives
that are registered or are the subject of an application for
registration under this Act. The costs of an investigation
shall be borne by the registrant or the applicant, provided
that the registrant or applicant shall not be obligated to
pay the costs without his, her or its consent in advance.
C. Whenever it shall appear to the Secretary of State,
either upon complaint or otherwise, that this Act, or any
rule or regulation prescribed under authority thereof, has
been or is about to be violated, he or she may, in his or her
discretion, do one or more both of the following:
(1) require or permit the person to file with the
Secretary of State a statement in writing under oath, or
otherwise, as to all the facts and circumstances
concerning the subject matter which the Secretary of
State believes to be in the public interest to
investigate, audit, examine, or inspect; and
(2) conduct an investigation, audit, examination,
or inspection as necessary or advisable for the
protection of the interests of the public; and.
(3) appoint investigators to conduct all
investigations, searches, seizures, arrests, and other
duties imposed under the provisions of any law
administered by the Department. The Director must
authorize to each investigator employed under this
Section a distinct badge that, on its face, (i) clearly
states that the badge is authorized by the Department and
(ii) contains a unique and identifying number.
D. (1) For the purpose of all investigations, audits,
examinations, or inspections which in the opinion of the
Secretary of State are necessary and proper for the
enforcement of this Act, the Secretary of State or a person
designated by him or her is empowered to administer oaths and
affirmations, subpoena witnesses, take evidence, and require,
by subpoena or other lawful means provided by this Act or the
rules adopted by the Secretary of State, the production of
any books and records, papers, or other documents which the
Secretary of State or a person designated by him or her deems
relevant or material to the inquiry.
(2) The Secretary of State or a person designated by him
or her is further empowered to administer oaths and
affirmations, subpoena witnesses, take evidence, and require
the production of any books and records, papers, or other
documents in this State at the request of a securities agency
of another state, if the activities constituting the alleged
violation for which the information is sought would be in
violation of Section 12 of this Act if the activities had
occurred in this State.
(3) The Circuit Court of any County of this State, upon
application of the Secretary of State or a person designated
by him or her may order the attendance of witnesses, the
production of books and records, papers, accounts and
documents and the giving of testimony before the Secretary of
State or a person designated by him or her; and any failure
to obey the order may be punished by the Circuit Court as a
contempt thereof.
(4) The fees of subpoenaed witnesses under this Act for
attendance and travel shall be the same as fees of witnesses
before the Circuit Courts of this State, to be paid when the
witness is excused from further attendance, provided, the
witness is subpoenaed at the instance of the Secretary of
State; and payment of the fees shall be made and audited in
the same manner as other expenses of the Secretary of State.
(5) Whenever a subpoena is issued at the request of a
complainant or respondent as the case may be, the Secretary
of State may require that the cost of service and the fee of
the witness shall be borne by the party at whose instance the
witness is summoned.
(6) The Secretary of State shall have power at his or
her discretion, to require a deposit to cover the cost of the
service and witness fees and the payment of the legal witness
fee and mileage to the witness served with subpoena.
(7) A subpoena issued under this Act shall be served in
the same manner as a subpoena issued out of a circuit court.
(8) The Secretary of State may in any investigation,
audits, examinations, or inspections cause the taking of
depositions of persons residing within or without this State
in the manner provided in civil actions under the laws of
this State.
E. Anything in this Act to the contrary notwithstanding:
(1) If the Secretary of State shall find that the
offer or sale or proposed offer or sale or method of
offer or sale of any securities by any person, whether
exempt or not, in this State, is fraudulent, or would
work or tend to work a fraud or deceit, or is being
offered or sold in violation of Section 12, or there has
been a failure or refusal to submit any notification
filing or fee required under this Act, the Secretary of
State may by written order prohibit or suspend the offer
or sale of securities by that person or deny or revoke
the registration of the securities or the exemption from
registration for the securities.
(2) If the Secretary of State shall find that any
person has violated subsection C, D, E, F, G, H, I, J, or
K of Section 12 of this Act, the Secretary of State may
by written order temporarily or permanently prohibit or
suspend the person from offering or selling any
securities, any mineral investment contract, or any
mineral deferred delivery contract in this State,
provided that any person who is the subject of an order
of permanent prohibition may petition the Secretary of
State for a hearing to present evidence of rehabilitation
or change in circumstances justifying the amendment or
termination of the order of permanent prohibition.
(3) If the Secretary of State shall find that any
person is engaging or has engaged in the business of
selling or offering for sale securities as a dealer or
salesperson or is acting or has acted as an investment
adviser, investment adviser representative, or federal
covered investment adviser, without prior thereto and at
the time thereof having complied with the registration or
notice filing requirements of this Act, the Secretary of
State may by written order prohibit or suspend the person
from engaging in the business of selling or offering for
sale securities, or acting as an investment adviser,
investment adviser representative, or federal covered
investment adviser, in this State.
(4) In addition to any other sanction or remedy
contained in this subsection E, the Secretary of State,
after finding that any provision of this Act has been
violated, may impose a fine as provided by rule,
regulation or order not to exceed $10,000 for each
violation of this Act, may issue an order of public
censure against the violator, and may charge as costs of
investigation all reasonable expenses, including
attorney's fees and witness fees.
F. (1) The Secretary of State shall not deny, suspend or
revoke the registration of securities, suspend or revoke the
registration of a dealer, salesperson, or investment adviser,
or investment adviser representative, prohibit or suspend the
offer or sale of any securities, prohibit or suspend any
person from offering or selling any securities in this State,
prohibit or suspend a dealer or salesperson from engaging in
the business of selling or offering for sale securities,
prohibit or suspend a person from acting as an investment
adviser or federal covered investment adviser, or investment
adviser representative, impose any fine for violation of this
Act, issue an order of public censure, or enter into an
agreed settlement except after an opportunity for hearing
upon not less than 10 days notice given by personal service
or registered mail or certified mail, return receipt
requested, to the person or persons concerned. Such notice
shall state the date and time and place of the hearing and
shall contain a brief statement of the proposed action of the
Secretary of State and the grounds for the proposed action.
A failure to appear at the hearing or otherwise respond to
the allegations set forth in the notice of hearing shall
constitute an admission of any facts alleged therein and
shall constitute sufficient basis to enter an order.
(2) Anything herein contained to the contrary
notwithstanding, the Secretary of State may temporarily
prohibit or suspend, for a maximum period of 90 days, by an
order effective immediately, the offer or sale or
registration of securities, the registration of a dealer,
salesperson, investment adviser, or investment adviser
representative, or the offer or sale of securities by any
person, or the business of rendering investment advice,
without the notice and prior hearing in this subsection
prescribed, if the Secretary of State shall in his or her
opinion, based on credible evidence, deem it necessary to
prevent an imminent violation of this Act or to prevent
losses to investors which the Secretary of State reasonably
believes will occur as a result of a prior violation of this
Act. Immediately after taking action without such notice and
hearing, the Secretary of State shall deliver a copy of the
temporary order to the respondent named therein by personal
service or registered mail or certified mail, return receipt
requested. The temporary order shall set forth the grounds
for the action and shall advise that the respondent may
request a hearing, that the request for a hearing will not
stop the effectiveness of the temporary order and that
respondent's failure to request a hearing within 30 days
after the date of the entry of the temporary order shall
constitute an admission of any facts alleged therein and
shall constitute sufficient basis to make the temporary order
final. Any provision of this paragraph (2) to the contrary
notwithstanding, the Secretary of State may not pursuant to
the provisions of this paragraph (2) suspend the registration
of a dealer, limited Canadian dealer, salesperson, investment
adviser, or investment adviser representative based upon
sub-paragraph (n) of paragraph (l) of subsection E of Section
8 of this Act or revoke the registration of securities or
revoke the registration of any dealer, salesperson,
investment adviser representative, or investment adviser.
(3) The Secretary of State may issue a temporary order
suspending or delaying the effectiveness of any registration
of securities under subsection A or B of Section 5, 6 or 7 of
this Act subsequent to and upon the basis of the issuance of
any stop, suspension or similar order by the Securities and
Exchange Commission with respect to the securities which are
the subject of the registration under subsection A or B of
Section 5, 6 or 7 of this Act, and the order shall become
effective as of the date and time of effectiveness of the
Securities and Exchange Commission order and shall be vacated
automatically at such time as the order of the Securities and
Exchange Commission is no longer in effect.
(4) When the Secretary of State finds that an
application for registration as a dealer, salesperson, or
investment adviser, or investment adviser representative
should be denied, the Secretary of State may enter an order
denying the registration. Immediately after taking such
action, the Secretary of State shall deliver a copy of the
order to the respondent named therein by personal service or
registered mail or certified mail, return receipt requested.
The order shall state the grounds for the action and that the
matter will be set for hearing upon written request filed
with the Secretary of State within 30 days after the receipt
of the request by the respondent. The respondent's failure
to request a hearing within 30 days after receipt of the
order shall constitute an admission of any facts alleged
therein and shall make the order final. If a hearing is
held, the Secretary of State shall affirm, vacate, or modify
the order.
(5) The findings and decision of the Secretary of State
upon the conclusion of each final hearing held pursuant to
this subsection shall be set forth in a written order signed
on behalf of the Secretary of State by his or her designee
and shall be filed as a public record. All hearings shall be
held before a person designated by the Secretary of State,
and appropriate records thereof shall be kept.
(6) Notwithstanding the foregoing, the Secretary of
State, after notice and opportunity for hearing, may at his
or her discretion enter into an agreed settlement,
stipulation or consent order with a respondent in accordance
with the provisions of the Illinois Administrative Procedure
Act. The provisions of the agreed settlement, stipulation or
consent order shall have the full force and effect of an
order issued by the Secretary of State.
(7) Anything in this Act to the contrary
notwithstanding, whenever the Secretary of State finds that a
person is currently expelled from, refused membership in or
association with, or limited in any material capacity by a
self-regulatory organization registered under the Federal
1934 Act or the Federal 1974 Act because of a fraudulent or
deceptive act or a practice in violation of a rule,
regulation, or standard duly promulgated by the
self-regulatory organization, the Secretary of State may, at
his or her discretion, enter a Summary Order of Prohibition,
which shall prohibit the offer or sale of any securities,
mineral investment contract, or mineral deferred delivery
contract by the person in this State. The order shall take
effect immediately upon its entry. Immediately after taking
the action the Secretary of State shall deliver a copy of the
order to the named Respondent by personal service or
registered mail or certified mail, return receipt requested.
A person who is the subject of an Order of Prohibition may
petition the Secretary of State for a hearing to present
evidence of rehabilitation or change in circumstances
justifying the amendment or termination of the Order of
Prohibition.
G. No administrative action shall be brought by the
Secretary of State for relief under this Act or upon or
because of any of the matters for which relief is granted by
this Act after the earlier to occur of (i) 3 years from the
date upon which the Secretary of State had notice of facts
which in the exercise of reasonable diligence would lead to
actual knowledge of the alleged violation of the Act, or (ii)
5 years from the date on which the alleged violation
occurred.
H. The action of the Secretary of State in denying,
suspending, or revoking the registration of a dealer, limited
Canadian dealer, salesperson, investment adviser, or
investment adviser representative, in prohibiting any person
from engaging in the business of offering or selling
securities as a dealer, limited Canadian dealer, or
salesperson, in prohibiting or suspending the offer or sale
of securities by any person, in prohibiting a person from
acting as an investment adviser, federal covered investment
adviser, or investment adviser representative, in denying,
suspending, or revoking the registration of securities, in
prohibiting or suspending the offer or sale or proposed offer
or sale of securities, in imposing any fine for violation of
this Act, or in issuing any order shall be subject to
judicial review in the Circuit Courts of Cook or Sangamon
Counties in this State. The Administrative Review Law shall
apply to and govern every action for the judicial review of
final actions or decisions of the Secretary of State under
this Act.
I. Notwithstanding any other provisions of this Act to
the contrary, whenever it shall appear to the Secretary of
State that any person is engaged or about to engage in any
acts or practices which constitute or will constitute a
violation of this Act or of any rule or regulation prescribed
under authority of this Act, the Secretary of State may at
his or her discretion, through the Attorney General take any
of the following actions:
(1) File a complaint and apply for a temporary
restraining order without notice, and upon a proper
showing the court may enter a temporary restraining order
without bond, to enforce this Act.; and
(2) File a complaint and apply for a preliminary or
permanent injunction, and, after notice and a hearing and
upon a proper showing, the court may grant a preliminary
or permanent injunction and may order the defendant to
make an offer of rescission with respect to any sales or
purchases of securities, mineral investment contracts, or
mineral deferred delivery contracts determined by the
court to be unlawful under this Act.
(3) Seek the seizure of assets when probable cause
exists that the assets were obtained by a defendant
through conduct in violation of Section 12, paragraph F,
G, I, J, K, or L of this Act, and thereby subject to a
judicial forfeiture hearing as required under this Act.
(a) In the event that such probable cause
exists that the subject of an investigation who is
alleged to have committed one of the relevant
violations of this Act has in his possession assets
obtained as a result of the conduct giving rise to
the violation, the Secretary of State may seek a
seizure warrant in any circuit court in Illinois.
(b) In seeking a seizure warrant, the
Secretary of State, or his or her designee, shall
submit to the court a sworn affidavit detailing the
probable cause evidence for the seizure, the
location of the assets to be seized, the relevant
violation under Section 12 of this Act, and a
statement detailing any known owners or interest
holders in the assets.
(c) Seizure of the assets shall be made by any
peace officer upon process of the seizure warrant
issued by the court. Following the seizure of assets
under this Act and pursuant to a seizure warrant,
notice of seizure, including a description of the
seized assets, shall immediately be returned to the
issuing court. Seized assets shall be maintained
pending a judicial forfeiture hearing in accordance
with the instructions of the court.
(d) In the event that management of seized
assets becomes necessary to prevent the devaluation,
dissipation, or otherwise to preserve the property,
the court shall have jurisdiction to appoint a
receiver, conservator, ancillary receiver, or
ancillary conservator for that purpose, as provided
in item (2) of this subsection.
(4) Seek the forfeiture of assets obtained through
conduct in violation of Section 12, paragraph F, G, H, I,
J, K, or L when authorized by law. A forfeiture must be
ordered by a circuit court or an action brought by the
Secretary of State as provided for in this Act, under a
verified complaint for forfeiture.
(a) In the event assets have been seized
pursuant to this Act, forfeiture proceedings shall
be instituted by the Attorney General within 45 days
of seizure.
(b) Service of the complaint filed under the
provisions of this Act shall be made in the manner
as provided in civil actions in this State.
(c) Only an owner of or interest holder in the
property may file an answer asserting a claim
against the property. For purposes of this Section,
the owner or interest holder shall be referred to as
claimant.
(d) The answer must be signed by the owner or
interest holder under penalty of perjury and must
set forth:
(i) the caption of the proceedings as set
forth on the notice of pending forfeiture and
the name of the claimant;
(ii) the address at which the claimant
will accept mail;
(iii) the nature and extent of the
claimant's interest in the property;
(iv) the date, identity of the
transferor, and circumstances of the claimant's
acquisition of the interest in the property;
(v) the name and address of all other
persons known to have an interest in the
property;
(vi) the specific provisions of this Act
relied on in asserting that the property is not
subject to forfeiture;
(vii) all essential facts supporting each
assertion; and
(viii) the precise relief sought.
(e) The answer must be filed with the court
within 45 days after service of the complaint.
(f) A property interest is exempt from
forfeiture under this Act if its owner or interest
holder establishes by a preponderance of evidence
that the owner or interest holder:
(i) is not legally accountable for the
conduct giving rise to the forfeiture, did not
acquiesce in it, and did not know and could not
reasonably have known of the conduct or that
the conduct was likely to occur;
(ii) with respect to conveyances, did not
hold the property jointly or in common with a
person whose conduct gave rise to the
forfeiture;
(iii) does not hold the property for the
benefit of or as a nominee for any person whose
conduct gave rise to its forfeiture and the
owner or interest holder acquires it as a bona
fide purchaser for value without knowingly
taking part in the conduct giving rise to the
forfeiture; or
(iv) acquired the interest after the
commencement of the conduct giving rise to its
forfeiture and the owner or interest holder
acquired the interest as a mortgagee, secured
creditor, lienholder, or bona fide purchaser
for value without knowledge of the conduct that
gave rise to the forfeiture.
(g) The hearing must be held within 60 days
after the answer is filed unless continued for good
cause.
(h) During the probable cause portion of the
judicial in rem proceeding wherein the Secretary of
State presents its case-in-chief, the court must
receive and consider, among other things, any
relevant hearsay evidence and information. The laws
of evidence relating to civil actions shall apply to
all other portions of the judicial in rem
proceeding.
(i) The Secretary of State shall show the
existence of probable cause for forfeiture of the
property. If the Secretary of State shows probable
cause, the claimant has the burden of showing by a
preponderance of the evidence that the claimant's
interest in the property is not subject to
forfeiture.
(j) If the Secretary of State does not show
the existence of probable cause or a claimant has an
interest that is exempt under subdivision I (4)(d)
of this Section, the court shall order the interest
in the property returned or conveyed to the claimant
and shall order all other property forfeited to the
Secretary of State pursuant to all provisions of
this Act. If the Secretary of State does show the
existence of probable cause and the claimant does
not establish by a preponderance of the evidence
that the claimant has an interest that is exempt
under subsection D herein, the court shall order all
the property forfeited to the Secretary of State
pursuant to the provisions of the Section.
(k) A defendant convicted in any criminal
proceeding is precluded from later denying the
essential allegations of the criminal offense of
which the defendant was convicted in any proceeding
for violations of the Act giving rise to forfeiture
of property herein regardless of the pendency of an
appeal from that conviction. However, evidence of
the pendency of an appeal is admissible.
(l) An acquittal or dismissal in a criminal
proceeding for violations of the Act giving rise to
the forfeiture of property herein shall not preclude
civil proceedings under this provision; however, for
good cause shown, on a motion by the Secretary of
State, the court may stay civil forfeiture
proceedings during the criminal trial for a related
criminal indictment or information alleging
violation of the provisions of Section 12 of the
Illinois Securities Law of 1953. Property subject to
forfeiture under this Section shall not be subject
to return or release by a court exercising
jurisdiction over a criminal case involving the
seizure of the property unless the return or release
is consented to by the Secretary of State.
(m) All property declared forfeited under this
Act vests in the State on the commission of the
conduct giving rise to forfeiture together with the
proceeds of the property after that time. Any such
property or proceeds subsequently transferred to any
person remain subject to forfeiture and thereafter
shall be ordered forfeited unless the transferee
claims and establishes in a hearing under the
provisions of this Act that the transferee's
interest is exempt under the Act. Any assets
forfeited to the State shall be disposed of in
following manner:
(i) all forfeited property and assets
shall be liquidated by the Secretary of State
in accordance with all laws and rules governing
the disposition of such property;
(ii) the Secretary of State shall provide
the court at the time the property and assets
are declared forfeited a verified statement of
investors subject to the conduct giving rise to
the forfeiture;
(iii) after payment of any costs of sale,
receivership, storage, or expenses for
preservation of the property seized, other
costs to the State, and payment to claimants
for any amount deemed exempt from forfeiture,
the proceeds from liquidation shall be
distributed pro rata to investors subject to
the conduct giving rise to the forfeiture; and
(iv) any proceeds remaining after all
verified investors have been made whole shall
be distributed 25% to the Securities Investors
Education Fund, 25% to the Securities Audit and
Enforcement Fund, 25% to the Attorney General
or any State's Attorney bringing criminal
charges for the conduct giving rise to the
forfeiture, and 25% to other law enforcement
agencies participating in the investigation of
the criminal charges for the conduct giving
rise to the forfeiture. In the event that no
other law enforcement agencies are involved in
the investigation of the conduct giving rise to
the forfeiture, then the portion to other law
enforcement agencies shall be distributed to
the Securities Investors Education Fund.
(n) The Secretary of State shall notify by
certified mail, return receipt requested, all known
investors in the matter giving rise to the
forfeiture of the forfeiture proceeding and sale of
assets forfeited arising from the violations of this
Act, and shall further publish notice in a paper of
general circulation in the district in which the
violations were prosecuted. The notice to investors
shall identify the name, address, and other
identifying information about any defendant
prosecuted for violations of this Act that resulted
in forfeiture and sale of property, the offense for
which the defendant was convicted, and that the
court has ordered forfeiture and sale of property
for claims of investors who incurred losses or
damages as a result of the violations. Investors may
then file a claim in a form prescribed by the
Secretary of State in order to share in disbursement
of the proceeds from sale of the forfeited property.
Investor claims must be filed with the Secretary of
State within 30 days after receipt of the certified
mail return receipt, or within 30 days after the
last date of publication of the general notice in a
paper of general circulation in the district in
which the violations were prosecuted, whichever
occurs last.
(o) A civil action under this subsection must
be commenced within 5 years after the last conduct
giving rise to the forfeiture became known or should
have become known or 5 years after the forfeitable
property is discovered, whichever is later,
excluding time during which either the property or
claimant is out of this State or in confinement or
during which criminal proceedings relating to the
same conduct are in progress.
(p) If property is seized for evidence and for
forfeiture, the time periods for instituting
judicial forfeiture proceedings shall not begin
until the property is no longer necessary for
evidence.
(q) Notwithstanding other provisions of this
Act, the Secretary of State and a claimant of
forfeitable property may enter into an agreed-upon
settlement concerning the forfeitable property in
such an amount and upon such terms as are set out in
writing in a settlement agreement.
(r) Nothing in this Act shall apply to
property that constitutes reasonable bona fide
attorney's fees paid to an attorney for services
rendered or to be rendered in the forfeiture
proceeding or criminal proceeding relating directly
thereto when the property was paid before its
seizure and before the issuance of any seizure
warrant or court order prohibiting transfer of the
property and when the attorney, at the time he or
she received the property, did not know that it was
property subject to forfeiture under this Act.
The court shall further have jurisdiction and authority,
in addition to the penalties and other remedies in this Act
provided, to enter an order for the appointment of the court
or a person as a receiver, conservator, ancillary receiver or
ancillary conservator for the defendant or the defendant's
assets located in this State, or to require restitution,
damages or disgorgement of profits on behalf of the person or
persons injured by the act or practice constituting the
subject matter of the action, and may assess costs against
the defendant for the use of the State; provided, however,
that the civil remedies of rescission and appointment of a
receiver, conservator, ancillary receiver or ancillary
conservator shall not be available against any person by
reason of the failure to file with the Secretary of State, or
on account of the contents of, any report of sale provided
for in subsection G or P of Section 4, paragraph (2) of
subsection D of Sections 5 and 6, or paragraph (2) of
subsection F of Section 7 of this Act. Appeals may be taken
as in other civil cases.
J. In no case shall the Secretary of State, or any of
his or her employees or agents, in the administration of this
Act, incur any official or personal liability by instituting
an injunction or other proceeding or by denying, suspending
or revoking the registration of a dealer or salesperson, or
by denying, suspending or revoking the registration of
securities or prohibiting the offer or sale of securities, or
by suspending or prohibiting any person from acting as a
dealer, limited Canadian dealer, salesperson, investment
adviser, or investment adviser representative or from
offering or selling securities.
K. No provision of this Act shall be construed to
require or to authorize the Secretary of State to require any
investment adviser or federal covered investment adviser
engaged in rendering investment supervisory services to
disclose the identity, investments, or affairs of any client
of the investment adviser or federal covered investment
adviser, except insofar as the disclosure may be necessary or
appropriate in a particular proceeding or investigation
having as its object the enforcement of this Act.
L. Whenever, after an examination, investigation or
hearing, the Secretary of State deems it of public interest
or advantage, he or she may certify a record to the State's
Attorney of the county in which the act complained of,
examined or investigated occurred. The State's Attorney of
that county within 90 days after receipt of the record shall
file a written statement at the Office of the Secretary of
State, which statement shall set forth the action taken upon
the record, or if no action has been taken upon the record
that fact, together with the reasons therefor, shall be
stated.
M. The Secretary of State may initiate, take, pursue, or
prosecute any action authorized or permitted under Section 6d
of the Federal 1974 Act.
N. (1) Notwithstanding any provision of this Act to the
contrary, to encourage uniform interpretation,
administration, and enforcement of the provisions of this
Act, the Secretary of State may cooperate with the securities
agencies or administrators of one or more states, Canadian
provinces or territories, or another country, the Securities
and Exchange Commission, the Commodity Futures Trading
Commission, the Securities Investor Protection Corporation,
any self-regulatory organization, and any governmental law
enforcement or regulatory agency.
(2) The cooperation authorized by paragraph (1) of this
subsection includes, but is not limited to, the following:
(a) establishing or participating in a central
depository or depositories for registration under this
Act and for documents or records required under this Act;
(b) making a joint audit, inspection, examination,
or investigation;
(c) holding a joint administrative hearing;
(d) filing and prosecuting a joint civil or
criminal proceeding;
(e) sharing and exchanging personnel;
(f) sharing and exchanging information and
documents; or
(g) issuing any joint statement or policy.
(Source: P.A. 91-809, eff. 1-1-01; 92-308, eff. 1-1-02.)
(815 ILCS 5/11b) (from Ch. 121 1/2, par. 137.11b)
Sec. 11b. Special funds. All moneys received by the
State of Illinois in furtherance of activities, duties, and
responsibilities under the Illinois Securities Law of 1953
from government or non-governmental sources, except funds
received pursuant to Section 981, 982, or 1963 of Title 18 of
the United States Code, which shall be deposited into the
Securities Audit and Enforcement Fund, and funds payable as
specific grants or the fines, payments, or fees required
under Section 5, 6, 7, or 8, or in connection with violations
of Section 12 of this Act, the Business Opportunity Sales Law
of 1995, the Illinois Business Brokers Act of 1995, or the
Illinois Loan Brokers Act of 1995 to be deposited into the
Securities Investors Education Fund or the Securities Audit
and Enforcement Fund, shall be placed in the General Revenue
Fund of the State treasury.
(Source: P.A. 89-209, eff. 1-1-96.)
(815 ILCS 5/12) (from Ch. 121 1/2, par. 137.12)
Sec. 12. Violation. It shall be a violation of the
provisions of this Act for any person:
A. To offer or sell any security except in accordance
with the provisions of this Act.
B. To deliver to a purchaser any security required to be
registered under Section 5, Section 6 or Section 7 hereof
unless accompanied or preceded by a prospectus that meets the
requirements of the pertinent subsection of Section 5 or of
Section 6 or of Section 7.
C. To act as a dealer, salesperson, investment adviser,
or investment adviser representative, unless registered as
such, where such registration is required, under the
provisions of this Act.
D. To fail to file with the Secretary of State any
application, report or document required to be filed under
the provisions of this Act or any rule or regulation made by
the Secretary of State pursuant to this Act or to fail to
comply with the terms of any order of the Secretary of State
issued pursuant to Section 11 hereof.
E. To make, or cause to be made, (1) in any application,
report or document filed under this Act or any rule or
regulation made by the Secretary of State pursuant to this
Act, any statement which was false or misleading with respect
to any material fact or (2) any statement to the effect that
a security (other than a security issued by the State of
Illinois) has been in any way endorsed or approved by the
Secretary of State or the State of Illinois.
F. To engage in any transaction, practice or course of
business in connection with the sale or purchase of
securities which works or tends to work a fraud or deceit
upon the purchaser or seller thereof.
G. To obtain money or property through the sale of
securities by means of any untrue statement of a material
fact or any omission to state a material fact necessary in
order to make the statements made, in the light of the
circumstances under which they were made, not misleading.
H. To sign or circulate any statement, prospectus, or
other paper or document required by any provision of this Act
or pertaining to any security knowing or having reasonable
grounds to know any material representation therein contained
to be false or untrue.
I. To employ any device, scheme or artifice to defraud
in connection with the sale or purchase of any security,
directly or indirectly.
J. When acting as an investment adviser, investment
adviser representative, or federal covered investment
adviser, by any means or instrumentality, directly or
indirectly:
(1) To employ any device, scheme or artifice to
defraud any client or prospective client;
(2) To engage in any transaction, practice, or
course of business which operates as a fraud or deceit
upon any client or prospective client; or
(3) To engage in any act, practice, or course of
business which is fraudulent, deceptive or manipulative.
The Secretary of State shall for the purposes of this
paragraph (3), by rules and regulations, define and
prescribe means reasonably designed to prevent such acts,
practices, and courses of business as are fraudulent,
deceptive, or manipulative.
K. When offering or selling any mineral investment
contract or mineral deferred delivery contract:
(1) To employ any device, scheme, or artifice to
defraud any customer, prospective customer, or offeree;
(2) To engage in any transaction, practice, or
course of business that operates as a fraud or deceit
upon any customer, prospective customer, or offeree; or
(3) To engage in any act, practice, or course of
business that is fraudulent, deceptive, or manipulative.
The Secretary of State shall for the purposes of this
paragraph (3), by rules and regulations, define and
prescribe means reasonably designed to prevent acts,
practices, and courses of business as are fraudulent,
deceptive, or manipulative.
L. To knowingly influence, coerce, manipulate, or
mislead any person engaged in the preparation or audit of
financial statements or appraisals to be used in the offer or
sale of securities for the purpose of rendering such
financial statements or appraisals materially misleading.
(Source: P.A. 90-70, eff. 7-8-97; 91-809, eff. 1-1-01.)
(815 ILCS 5/14) (from Ch. 121 1/2, par. 137.14)
Sec. 14. Sentence.
A. Any person who violates any of the provisions of
subsection A, B, C, or D of Section 12 or paragraph (3) of
subsection K of Section 12 of this Act shall be guilty of a
Class 4 felony.
B. Any person who violates any of the provisions of
subsection E, F, G, H, I, or J, or paragraph (1) or (2) of
subsection K, or subsection L of Section 12 of this Act shall
be guilty of a Class 3 felony.
B-5. A person who violates a provision of subsection E,
F, G, H, I, or J or paragraph (1) or (2) of subsection K of
Section 12 of this Act by use of a plan, program, or campaign
that is conducted using one or more telephones for the
purpose of inducing the purchase or sale of securities is
guilty of a Class 2 felony.
B-10. A person who in the course of violating a
provision of subsection E, F, G, H, I, or J or paragraph (1)
or (2) of subsection K of Section 12 of this Act induces a
person 60 years of age or older to purchase or sell
securities is guilty of a Class 2 felony.
C. No prosecution for violation of any provision of this
Act shall bar or be barred by any prosecution for the
violation of any other provision of this Act or of any other
statute; but all prosecutions under this Act or based upon
any provision of this Act must be commenced within 3 years
after the violation upon which such prosecution is based;
provided however, that if the accused has intentionally
concealed evidence of a violation of subsection E, F, G, H,
I, J, or K of Section 12 of this Act, the period of
limitation prescribed herein shall be extended up to an
additional 2 years after the proper prosecuting officer
becomes aware of the offense but in no such event shall the
period of limitation so extended be more than 2 years beyond
the expiration of the period otherwise applicable.
D. For the purposes of this Act all persons who shall
sell or offer for sale, or who shall purchase or offer to
purchase, securities in violation of the provisions of this
Act, or who shall in any manner knowingly authorize, aid or
assist in any unlawful conduct under this Act shall be deemed
sale or offering for sale or unlawful purchase or offer to
purchase shall be deemed equally guilty, and may be tried and
punished in the county in which said unlawful sale or
offering for sale or unlawful purchase or offer to purchase
was made, or in the county in which the securities so sold or
offered for sale or so purchased or offered to be purchased
were delivered or proposed to be delivered to the purchaser
thereof or by the seller thereof, as the case may be.
E. Any person who shall be convicted of a second or any
subsequent offense specified in subsection A, B, C, D, or
paragraph (3) of subsection K of Section 12 of this Act shall
be guilty of a Class 3 felony, and any person who shall be
convicted of a second or any subsequent offense specified in
subsection E, F, G, H, I, J, or paragraph (1) or (2) of
subsection K of Section 12 of this Act shall be guilty of a
Class 2 felony.
F. If any person referred to in this Section is not a
natural person, it may upon conviction of a first offense be
fined up to $25,000, and if convicted of a second and
subsequent offense, may be fined up to $50,000, in addition
to any other sentence authorized by law.
G. This Act shall not be construed to repeal or affect
any law now in force relating to the organization of
corporations in this State or the admission of any foreign
corporation to do business in this State.
H. For the purposes of this Act, all persons who sell or
offer for sale, or who purchase or offer to purchase any
mineral investment contract or mineral deferred delivery
contract in violation of the provisions of this Act or who,
in any manner, knowingly authorize, aid, or assist in any
unlawful sale or offer for sale or unlawful purchase or offer
to purchase any mineral investment contract or mineral
deferred delivery contract shall be deemed equally guilty and
may be tried and punished in the county in which the unlawful
sale or offer for sale or unlawful purchase or offer to
purchase any mineral investment contract or mineral deferred
delivery contract was made or in the county in which the
mineral investment contract or mineral deferred delivery
contract so sold or offered for sale or so purchased or
offered to be purchased was delivered or proposed to be
delivered to the purchaser thereof or by the seller thereof,
as the case may be, or in Sangamon County.
(Source: P.A. 92-308, eff. 1-1-02.)
Section 99. Effective date. This Act takes effect upon
becoming law.