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Public Act 096-0741
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| HB0177 Enrolled |
LRB096 03608 RCE 13636 b |
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AN ACT concerning State government.
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Be it enacted by the People of the State of Illinois,
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represented in the General Assembly:
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Section 5. The Public Funds Investment Act is amended by |
changing Section 2 as follows:
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(30 ILCS 235/2) (from Ch. 85, par. 902)
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Sec. 2. Authorized investments.
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(a) Any public agency may invest any public funds as |
follows:
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(1) in bonds, notes, certificates of indebtedness, |
treasury bills or
other securities now or hereafter issued, |
which are guaranteed by the full
faith and credit of the |
United States of America as to principal and interest;
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(2) in bonds, notes, debentures, or other similar |
obligations of the
United States of America, or its |
agencies, and its instrumentalities;
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(3) in interest-bearing savings accounts, |
interest-bearing
certificates of deposit or |
interest-bearing time deposits or any other
investments |
constituting direct obligations of any bank as defined by |
the
Illinois Banking Act;
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(4) in short term obligations of corporations
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organized in the United States with assets exceeding |
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$500,000,000 if (i)
such obligations are rated at the time |
of purchase at one of the 3 highest
classifications |
established by at least 2 standard rating services and
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which mature not later than 270 180 days from the date of |
purchase, (ii)
such purchases do not exceed 10% of the |
corporation's outstanding
obligations and (iii) no more |
than one-third of the public agency's funds
may be invested |
in short term obligations of corporations; or
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(5) in money market mutual funds registered under the |
Investment
Company Act of 1940, provided that the portfolio |
of any such money market
mutual fund is limited to |
obligations described in paragraph (1) or (2) of this
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subsection and to agreements to repurchase such |
obligations.
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(a-1) In addition to any other investments authorized under |
this Act, a
municipality may invest its public funds in |
interest bearing bonds of any
county, township, city, village, |
incorporated town, municipal corporation, or
school district, |
of the State of Illinois, of any other state, or of
any |
political subdivision or
agency of the State of Illinois or of |
any other state, whether the interest
earned thereon is taxable |
or tax-exempt under federal law. The bonds shall
be registered |
in the name of the municipality
or held under a custodial |
agreement at a bank. The bonds shall be rated at the
time of |
purchase within the 4 highest general classifications |
established by a
rating service of nationally recognized |
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expertise in rating bonds of states and
their political |
subdivisions.
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(b) Investments may be made only in banks which are insured |
by the
Federal Deposit Insurance Corporation. Any public agency |
may invest any
public funds in short term discount obligations |
of the Federal National
Mortgage Association or in shares or |
other forms of securities legally
issuable by savings banks or |
savings and loan associations incorporated under
the laws of |
this State or any other state or under the laws of the United
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States. Investments may be made only in those savings banks or |
savings and
loan associations the shares, or investment |
certificates of which are insured
by the Federal Deposit |
Insurance Corporation. Any such securities may be
purchased at |
the offering or market price thereof at the time of such
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purchase. All such securities so purchased shall mature or be |
redeemable on
a date or dates prior to the time when, in the |
judgment of
such governing authority, the public funds so |
invested will be required
for expenditure by such public agency |
or its governing authority. The
expressed judgment of any such |
governing authority as to the time when
any public funds will |
be required for expenditure or be redeemable is
final and |
conclusive. Any public agency may invest any public funds in
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dividend-bearing share accounts, share certificate accounts or |
class of
share accounts of a credit union chartered under the |
laws of this State
or the laws of the United States; provided, |
however, the principal office
of any such credit union must be |
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located within the State of Illinois.
Investments may be made |
only in those credit unions the accounts of which
are insured |
by applicable law.
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(c) For purposes of this Section, the term "agencies of the |
United States
of America" includes: (i) the federal land banks, |
federal intermediate
credit banks, banks for cooperative, |
federal farm credit banks, or any other
entity authorized to |
issue debt obligations under the Farm Credit Act of
1971 (12 |
U.S.C. 2001 et seq.) and Acts amendatory thereto; (ii) the |
federal
home loan banks and the federal home loan mortgage |
corporation; and (iii)
any other agency created by Act of |
Congress.
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(d) Except for pecuniary interests permitted under |
subsection (f) of
Section 3-14-4 of the Illinois Municipal Code |
or under Section 3.2 of
the Public Officer Prohibited Practices |
Act, no person acting as treasurer
or financial officer or who |
is employed in any similar capacity by or for a
public agency |
may do any of the following:
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(1) have any interest, directly or indirectly, in any |
investments in
which the agency is authorized to invest.
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(2) have any interest, directly or indirectly, in the |
sellers,
sponsors, or managers of those investments.
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(3) receive, in any manner, compensation of any kind |
from any
investments in which the agency is authorized to |
invest.
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(e) Any public agency may also invest any public funds in a |
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Public
Treasurers' Investment Pool created under Section 17 of |
the State Treasurer
Act. Any public agency may also invest any |
public funds in a fund managed,
operated, and administered by a |
bank, subsidiary of a bank, or
subsidiary of a bank holding |
company or use the services of such an entity to
hold and |
invest or advise regarding the investment of any public funds.
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(f) To the extent a public agency has custody of funds not |
owned by it or
another public agency and does not otherwise |
have authority to invest
such funds, the public agency may |
invest such funds as if they were its
own. Such funds must be |
released to the appropriate person at the
earliest reasonable |
time, but in no case exceeding 31 days, after the
private |
person becomes entitled to the receipt of them. All earnings
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accruing on any investments or deposits made pursuant to the |
provisions
of this Act shall be credited to the public agency |
by or for which such
investments or deposits were made, except |
as provided otherwise in Section
4.1 of the State Finance Act |
or the Local Governmental Tax Collection Act,
and except where |
by specific statutory provisions such earnings are
directed to |
be credited to and paid to a particular fund.
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(g) A public agency may purchase or invest in repurchase |
agreements of
government securities having the meaning set out |
in the Government
Securities Act of 1986, as now or hereafter |
amended or succeeded, subject to the provisions of said Act and |
the
regulations issued thereunder. The government securities, |
unless
registered or inscribed in the name of the public |
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agency, shall be
purchased through banks or trust companies |
authorized to do business in the
State of Illinois.
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(h) Except for repurchase agreements of government |
securities which are
subject to the Government Securities Act |
of 1986, as now or hereafter amended or succeeded, no public |
agency may
purchase or invest in instruments which constitute |
repurchase agreements,
and no financial institution may enter |
into such an agreement with or on
behalf of any public agency |
unless the instrument and the transaction meet
the following |
requirements:
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(1) The securities, unless registered or inscribed in |
the name of the
public agency, are purchased through banks |
or trust companies authorized to
do business in the State |
of Illinois.
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(2) An authorized public officer after ascertaining |
which firm will give
the most favorable rate of interest, |
directs the custodial bank to
"purchase" specified |
securities from a designated institution.
The "custodial |
bank" is the bank or trust company, or agency of
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government, which acts for the public agency in connection |
with repurchase
agreements involving the investment of |
funds by the public agency. The
State Treasurer may act as |
custodial bank for public agencies executing
repurchase |
agreements. To the extent the Treasurer acts in this |
capacity,
he is hereby authorized to pass through to such |
public agencies any charges
assessed by the Federal Reserve |
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Bank.
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(3) A custodial bank must be a member bank of the |
Federal Reserve System
or maintain accounts with member |
banks. All transfers of book-entry
securities must be |
accomplished on a Reserve Bank's computer records
through a |
member bank of the Federal Reserve System. These securities |
must
be credited to the public agency on the records of the |
custodial bank and
the transaction must be confirmed in |
writing to the public agency by
the custodial bank.
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(4) Trading partners shall be limited to banks or trust |
companies
authorized to do business in the State of |
Illinois or to registered primary
reporting dealers.
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(5) The security interest must be perfected.
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(6) The public agency enters into a written master |
repurchase agreement
which outlines the basic |
responsibilities and liabilities of both buyer and
seller.
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(7) Agreements shall be for periods of 330 days or |
less.
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(8) The authorized public officer of the public agency |
informs the
custodial bank in writing of the maturity |
details of the repurchase agreement.
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(9) The custodial bank must take delivery of and |
maintain the
securities in its custody for the account of |
the public agency and confirm
the transaction in writing to |
the public agency. The Custodial Undertaking
shall provide |
that the custodian takes possession of the securities
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exclusively for the public agency; that the securities are |
free of any
claims against the trading partner; and any |
claims by the custodian are
subordinate to the public |
agency's claims to rights to those securities.
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(10) The obligations purchased by a public agency may |
only be sold or
presented for redemption or payment by the |
fiscal agent bank or trust
company holding the obligations |
upon the written instruction of the
public agency or |
officer authorized to make such investments.
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(11) The custodial bank shall be liable to the public |
agency for any
monetary loss suffered by the public agency |
due to the failure of the
custodial bank to take and |
maintain possession of such securities.
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(i) Notwithstanding the foregoing restrictions on |
investment in
instruments constituting repurchase agreements |
the Illinois Housing
Development Authority may invest in, and |
any financial institution with
capital of at least $250,000,000 |
may act as custodian for, instruments
that constitute |
repurchase agreements, provided that the Illinois Housing
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Development Authority, in making each such investment, |
complies with the
safety and soundness guidelines for engaging |
in repurchase transactions
applicable to federally insured |
banks, savings banks, savings and loan
associations or other |
depository institutions as set forth in the Federal
Financial |
Institutions Examination Council Policy Statement Regarding
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Repurchase Agreements and any regulations issued, or which may |
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be issued by the
supervisory federal authority pertaining |
thereto and any amendments thereto;
provided further that the |
securities shall be either (i) direct general
obligations of, |
or obligations the payment of the principal of and/or interest
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on which are unconditionally guaranteed by, the United States |
of America or
(ii) any obligations of any agency, corporation |
or subsidiary thereof
controlled or supervised by and acting as |
an instrumentality of the United
States Government pursuant to |
authority granted by the Congress of the United
States and |
provided further that the security interest must be perfected |
by
either the Illinois Housing Development Authority, its |
custodian or its agent
receiving possession of the securities |
either physically or transferred through
a nationally |
recognized book entry system.
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(j) In addition to all other investments authorized
under |
this Section, a community college district may
invest public |
funds in any mutual funds that
invest primarily in corporate |
investment grade or global government short term
bonds.
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Purchases of mutual funds that invest primarily in global |
government short
term bonds shall be limited to funds with |
assets of at least $100 million and
that are rated at the time |
of purchase as one of the 10 highest classifications
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established by a recognized rating service. The investments |
shall be subject
to approval by the local community college |
board of trustees. Each community
college board of trustees |
shall develop a policy regarding the percentage of
the |