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1 | AN ACT concerning public employee benefits.
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2 | Be it enacted by the People of the State of Illinois,
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3 | represented in the General Assembly:
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4 | Section 5. The Illinois Pension Code is amended by changing | ||||||
5 | Section 1-113.14 as follows: | ||||||
6 | (40 ILCS 5/1-113.14)
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7 | Sec. 1-113.14. Investment services for retirement systems, | ||||||
8 | pension funds, and investment boards, except those funds | ||||||
9 | established under Articles 3 and 4. | ||||||
10 | (a) For the purposes of this Section, "investment services" | ||||||
11 | means services provided by an investment adviser or a | ||||||
12 | consultant other than qualified fund-of-fund management | ||||||
13 | services as defined in Section 1-113.15. | ||||||
14 | (b) The selection and appointment of an investment adviser | ||||||
15 | or consultant for investment services by the board of a | ||||||
16 | retirement system, pension fund, or investment board subject to | ||||||
17 | this Code, except those whose investments are restricted by | ||||||
18 | Section 1-113.2, shall be made and awarded in accordance with | ||||||
19 | this Section. All contracts for investment services shall be | ||||||
20 | awarded by the board using a competitive process that is | ||||||
21 | substantially similar to the process required for the | ||||||
22 | procurement of professional and artistic services under | ||||||
23 | Article 35 of the Illinois Procurement Code. Each board of |
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1 | trustees shall adopt a policy in accordance with this | ||||||
2 | subsection (b) within 60 days after the effective date of this | ||||||
3 | amendatory Act of the 96th General Assembly. The policy shall | ||||||
4 | be posted on its web site and filed with the Illinois | ||||||
5 | Procurement Policy Board. Exceptions to this Section are | ||||||
6 | allowed for (i) sole source procurements, (ii) emergency | ||||||
7 | procurements, and (iii) at the discretion of the pension fund, | ||||||
8 | retirement system, or board of investment, contracts that are | ||||||
9 | nonrenewable and one year or less in duration, so long as the | ||||||
10 | contract has a value of less than $20,000 , and (iv) in the | ||||||
11 | discretion of the pension fund, retirement system, or | ||||||
12 | investment board, contracts for follow-on funds with the same | ||||||
13 | fund sponsor through closed-end funds .
All exceptions granted | ||||||
14 | under this Section must be published on the system's, fund's, | ||||||
15 | or board's web site, shall name the person authorizing the | ||||||
16 | procurement, and shall include a brief explanation of the | ||||||
17 | reason for the exception. | ||||||
18 | A person, other than a trustee or an employee of a | ||||||
19 | retirement system, pension fund, or investment board, may not | ||||||
20 | act as a consultant or investment adviser under this Section | ||||||
21 | unless that person is registered as an investment adviser under | ||||||
22 | the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1, | ||||||
23 | et seq.) or a bank, as defined in the federal Investment | ||||||
24 | Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.). | ||||||
25 | (c) Investment services provided by an investment adviser | ||||||
26 | or a consultant appointed under this Section shall be rendered |
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1 | pursuant to a written contract between the investment adviser | ||||||
2 | or consultant and the board. | ||||||
3 | The contract shall include all of the following: | ||||||
4 | (1) Acknowledgement in writing by the investment | ||||||
5 | adviser or consultant that he or she is a fiduciary with | ||||||
6 | respect to the pension fund or retirement system. | ||||||
7 | (2) The description of the board's investment policy | ||||||
8 | and notice that the policy is subject to change. | ||||||
9 | (3) (i) Full disclosure of direct and indirect fees, | ||||||
10 | commissions, penalties, and other compensation, including | ||||||
11 | reimbursement for expenses, that may be paid by or on | ||||||
12 | behalf of the consultant in connection with the provision | ||||||
13 | of services to the pension fund or retirement system and | ||||||
14 | (ii) a requirement that the consultant update the | ||||||
15 | disclosure promptly after a modification of those payments | ||||||
16 | or an additional payment. | ||||||
17 | (4) A requirement that the investment adviser or | ||||||
18 | consultant, in conjunction with the board's staff, submit | ||||||
19 | periodic written reports, on at least a quarterly basis, | ||||||
20 | for the board's review at its regularly scheduled meetings. | ||||||
21 | All returns on investment shall be reported as net returns | ||||||
22 | after payment of all fees, commissions, and any other | ||||||
23 | compensation. | ||||||
24 | (5) Disclosure of the names and addresses of (i) the | ||||||
25 | consultant or investment adviser; (ii) any entity that is a | ||||||
26 | parent of, or owns a controlling interest in, the |
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1 | consultant or investment adviser; (iii) any entity that is | ||||||
2 | a subsidiary of, or in which a controlling interest is | ||||||
3 | owned by, the consultant or investment adviser; (iv) any | ||||||
4 | persons who have an ownership or distributive income share | ||||||
5 | in the consultant or investment adviser that is in excess | ||||||
6 | of 7.5%; or (v) serves as an executive officer of the | ||||||
7 | consultant or investment adviser. | ||||||
8 | (6) A disclosure of the names and addresses of all | ||||||
9 | subcontractors, if applicable, and the expected amount of | ||||||
10 | money each will receive under the contract, including an | ||||||
11 | acknowledgment that the contractor must promptly make | ||||||
12 | notification, in writing, if at any time during the term of | ||||||
13 | the contract a contractor adds or changes any | ||||||
14 | subcontractors. For purposes of this subparagraph (6), | ||||||
15 | "subcontractor" does not include non-investment related | ||||||
16 | professionals or professionals offering services that are | ||||||
17 | not directly related to the investment of assets, such as | ||||||
18 | legal counsel, actuary, proxy-voting services, services | ||||||
19 | used to track compliance with legal standards, and | ||||||
20 | investment fund of funds where the board has no direct | ||||||
21 | contractual relationship with the investment advisers or | ||||||
22 | partnerships. | ||||||
23 | (7) A description of service to be performed. | ||||||
24 | (8) A description of the need for the service. | ||||||
25 | (9) A description of the plan for post-performance | ||||||
26 | review. |
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1 | (10) A description of the qualifications necessary. | ||||||
2 | (11) The duration of the contract. | ||||||
3 | (12) The method for charging and measuring cost. | ||||||
4 | (d) Notwithstanding any other provision of law, a | ||||||
5 | retirement system, pension fund, or investment board subject to | ||||||
6 | this Code, except those whose investments are restricted by | ||||||
7 | Section 1-113.2 of this Code, shall not enter into a contract | ||||||
8 | with a consultant that exceeds 5 years in duration. No contract | ||||||
9 | to provide consulting services may be renewed or extended. At | ||||||
10 | the end of the term of a contract, however, the consultant is | ||||||
11 | eligible to compete for a new contract as provided in this | ||||||
12 | Section. No retirement system, pension fund, or investment | ||||||
13 | board shall attempt to avoid or contravene the restrictions of | ||||||
14 | this subsection (d) by any means. | ||||||
15 | (e) Within 60 days after the effective date of this | ||||||
16 | amendatory Act of the 96th General Assembly, each investment | ||||||
17 | adviser or consultant currently providing services or subject | ||||||
18 | to an existing contract for the provision of services must | ||||||
19 | disclose to the board of trustees all direct and indirect fees, | ||||||
20 | commissions, penalties, and other compensation paid by or on | ||||||
21 | behalf of the investment adviser or consultant in connection | ||||||
22 | with the provision of those services and shall update that | ||||||
23 | disclosure promptly after a modification of those payments or | ||||||
24 | an additional payment. The person shall update the disclosure | ||||||
25 | promptly after a modification of those payments or an | ||||||
26 | additional payment. The disclosures required by this |
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1 | subsection (e) shall be in writing and shall include the date | ||||||
2 | and amount of each payment and the name and address of each | ||||||
3 | recipient of a payment. | ||||||
4 | (f) The retirement system, pension fund, or board of | ||||||
5 | investment shall develop uniform documents that shall be used | ||||||
6 | for the solicitation, review, and acceptance of all investment | ||||||
7 | services. The form shall include the terms contained in | ||||||
8 | subsection (c) of this Section. All such uniform documents | ||||||
9 | shall be posted on the retirement system's, pension fund's, or | ||||||
10 | investment board's web site. | ||||||
11 | (g) A description of every contract for investment services | ||||||
12 | shall be posted in a conspicuous manner on the web site of the | ||||||
13 | retirement system, pension fund, or investment board. The | ||||||
14 | description must include the name of the person or entity | ||||||
15 | awarded a contract, the total amount applicable to the | ||||||
16 | contract, the total fees paid or to be paid, and a disclosure | ||||||
17 | approved by the board describing the factors that contributed | ||||||
18 | to the selection of an investment adviser or consultant.
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19 | (Source: P.A. 96-6, eff. 4-3-09; 96-1554, eff. 3-18-11.)
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20 | Section 99. Effective date. This Act takes effect upon | ||||||
21 | becoming law.
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