Illinois General Assembly - Full Text of HB4962
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Full Text of HB4962  102nd General Assembly

HB4962 102ND GENERAL ASSEMBLY

  
  

 


 
102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
HB4962

 

Introduced 1/27/2022, by Rep. Kelly M. Burke

 

SYNOPSIS AS INTRODUCED:
 
30 ILCS 235/2  from Ch. 85, par. 902

    Amends the Public Funds Investment Act. Provides that any public agency may invest any public funds, in addition to other investments, in pooled life settlement policies in which each of the underlying insurance policies have no greater than 60-day liquidity and are issued by insurance companies of A-grade investment quality. Provides further requirements concerning the investment of public funds in specified pooled life settlement policies.


LRB102 25332 RJF 34608 b

 

 

A BILL FOR

 

HB4962LRB102 25332 RJF 34608 b

1    AN ACT concerning finance.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Public Funds Investment Act is amended by
5changing Section 2 as follows:
 
6    (30 ILCS 235/2)  (from Ch. 85, par. 902)
7    Sec. 2. Authorized investments.
8    (a) Any public agency may invest any public funds as
9follows:
10        (1) in bonds, notes, certificates of indebtedness,
11    treasury bills or other securities now or hereafter
12    issued, which are guaranteed by the full faith and credit
13    of the United States of America as to principal and
14    interest;
15        (2) in bonds, notes, debentures, or other similar
16    obligations of the United States of America, its agencies,
17    and its instrumentalities;
18        (3) in interest-bearing savings accounts,
19    interest-bearing certificates of deposit or
20    interest-bearing time deposits or any other investments
21    constituting direct obligations of any bank as defined by
22    the Illinois Banking Act;
23        (4) in short-term obligations of corporations

 

 

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1    organized in the United States with assets exceeding
2    $500,000,000 if (i) such obligations are rated at the time
3    of purchase at one of the 3 highest classifications
4    established by at least 2 standard rating services and
5    which mature not later than 270 days from the date of
6    purchase, (ii) such purchases do not exceed 10% of the
7    corporation's outstanding obligations, and (iii) no more
8    than one-third of the public agency's funds may be
9    invested in short-term obligations of corporations under
10    this paragraph (4);
11        (4.5) in obligations of corporations organized in the
12    United States with assets exceeding $500,000,000 if (i)
13    such obligations are rated at the time of purchase at one
14    of the 3 highest classifications established by at least 2
15    standard rating services and which mature more than 270
16    days but less than 3 years from the date of purchase, (ii)
17    such purchases do not exceed 10% of the corporation's
18    outstanding obligations, and (iii) no more than one-third
19    of the public agency's funds may be invested in
20    obligations of corporations under this paragraph (4.5); or
21        (5) in money market mutual funds registered under the
22    Investment Company Act of 1940, provided that the
23    portfolio of any such money market mutual fund is limited
24    to obligations described in paragraph (1) or (2) of this
25    subsection and to agreements to repurchase such
26    obligations; or .

 

 

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1        (6) in pooled life settlement policies in which each
2    of the underlying insurance policies have no greater than
3    60-day liquidity and are issued by insurance companies of
4    A-grade investment quality. The maximum amount that may be
5    invested may be no more than 5% or less of the total assets
6    in the fund plan or account. The modified duration of the
7    investment into a particular pool of life settlements
8    shall not exceed 10 years and the premium on the life
9    settlement policies may be transferable or contractually
10    assigned. The entity that creates the pool of life
11    settlements must be an Illinois-registered entity. The
12    provider of the life settlement policies must be licensed
13    in the State of Illinois.
14    (a-1) In addition to any other investments authorized
15under this Act, a municipality, park district, forest preserve
16district, conservation district, county, or other governmental
17unit may invest its public funds in interest bearing bonds of
18any county, township, city, village, incorporated town,
19municipal corporation, or school district, of the State of
20Illinois, of any other state, or of any political subdivision
21or agency of the State of Illinois or of any other state,
22whether the interest earned thereon is taxable or tax-exempt
23under federal law. The bonds shall be registered in the name of
24the municipality, park district, forest preserve district,
25conservation district, county, or other governmental unit, or
26held under a custodial agreement at a bank. The bonds shall be

 

 

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1rated at the time of purchase within the 4 highest general
2classifications established by a rating service of nationally
3recognized expertise in rating bonds of states and their
4political subdivisions.
5    (b) Investments may be made only in banks which are
6insured by the Federal Deposit Insurance Corporation. Any
7public agency may invest any public funds in short term
8discount obligations of the Federal National Mortgage
9Association or in shares or other forms of securities legally
10issuable by savings banks or savings and loan associations
11incorporated under the laws of this State or any other state or
12under the laws of the United States. Investments may be made
13only in those savings banks or savings and loan associations
14the shares, or investment certificates of which are insured by
15the Federal Deposit Insurance Corporation. Any such securities
16may be purchased at the offering or market price thereof at the
17time of such purchase. All such securities so purchased shall
18mature or be redeemable on a date or dates prior to the time
19when, in the judgment of such governing authority, the public
20funds so invested will be required for expenditure by such
21public agency or its governing authority. The expressed
22judgment of any such governing authority as to the time when
23any public funds will be required for expenditure or be
24redeemable is final and conclusive. Any public agency may
25invest any public funds in dividend-bearing share accounts,
26share certificate accounts or class of share accounts of a

 

 

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1credit union chartered under the laws of this State or the laws
2of the United States; provided, however, the principal office
3of any such credit union must be located within the State of
4Illinois. Investments may be made only in those credit unions
5the accounts of which are insured by applicable law.
6    (c) For purposes of this Section, the term "agencies of
7the United States of America" includes: (i) the federal land
8banks, federal intermediate credit banks, banks for
9cooperative, federal farm credit banks, or any other entity
10authorized to issue debt obligations under the Farm Credit Act
11of 1971 (12 U.S.C. 2001 et seq.) and Acts amendatory thereto;
12(ii) the federal home loan banks and the federal home loan
13mortgage corporation; and (iii) any other agency created by
14Act of Congress.
15    (d) Except for pecuniary interests permitted under
16subsection (f) of Section 3-14-4 of the Illinois Municipal
17Code or under Section 3.2 of the Public Officer Prohibited
18Practices Act, no person acting as treasurer or financial
19officer or who is employed in any similar capacity by or for a
20public agency may do any of the following:
21        (1) have any interest, directly or indirectly, in any
22    investments in which the agency is authorized to invest.
23        (2) have any interest, directly or indirectly, in the
24    sellers, sponsors, or managers of those investments.
25        (3) receive, in any manner, compensation of any kind
26    from any investments in which the agency is authorized to

 

 

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1    invest.
2    (e) Any public agency may also invest any public funds in a
3Public Treasurers' Investment Pool created under Section 17 of
4the State Treasurer Act. Any public agency may also invest any
5public funds in a fund managed, operated, and administered by
6a bank, subsidiary of a bank, or subsidiary of a bank holding
7company or use the services of such an entity to hold and
8invest or advise regarding the investment of any public funds.
9    (f) To the extent a public agency has custody of funds not
10owned by it or another public agency and does not otherwise
11have authority to invest such funds, the public agency may
12invest such funds as if they were its own. Such funds must be
13released to the appropriate person at the earliest reasonable
14time, but in no case exceeding 31 days, after the private
15person becomes entitled to the receipt of them. All earnings
16accruing on any investments or deposits made pursuant to the
17provisions of this Act shall be credited to the public agency
18by or for which such investments or deposits were made, except
19as provided otherwise in Section 4.1 of the State Finance Act
20or the Local Governmental Tax Collection Act, and except where
21by specific statutory provisions such earnings are directed to
22be credited to and paid to a particular fund.
23    (g) A public agency may purchase or invest in repurchase
24agreements of government securities having the meaning set out
25in the Government Securities Act of 1986, as now or hereafter
26amended or succeeded, subject to the provisions of said Act

 

 

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1and the regulations issued thereunder. The government
2securities, unless registered or inscribed in the name of the
3public agency, shall be purchased through banks or trust
4companies authorized to do business in the State of Illinois.
5    (h) Except for repurchase agreements of government
6securities which are subject to the Government Securities Act
7of 1986, as now or hereafter amended or succeeded, no public
8agency may purchase or invest in instruments which constitute
9repurchase agreements, and no financial institution may enter
10into such an agreement with or on behalf of any public agency
11unless the instrument and the transaction meet the following
12requirements:
13        (1) The securities, unless registered or inscribed in
14    the name of the public agency, are purchased through banks
15    or trust companies authorized to do business in the State
16    of Illinois.
17        (2) An authorized public officer after ascertaining
18    which firm will give the most favorable rate of interest,
19    directs the custodial bank to "purchase" specified
20    securities from a designated institution. The "custodial
21    bank" is the bank or trust company, or agency of
22    government, which acts for the public agency in connection
23    with repurchase agreements involving the investment of
24    funds by the public agency. The State Treasurer may act as
25    custodial bank for public agencies executing repurchase
26    agreements. To the extent the Treasurer acts in this

 

 

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1    capacity, he is hereby authorized to pass through to such
2    public agencies any charges assessed by the Federal
3    Reserve Bank.
4        (3) A custodial bank must be a member bank of the
5    Federal Reserve System or maintain accounts with member
6    banks. All transfers of book-entry securities must be
7    accomplished on a Reserve Bank's computer records through
8    a member bank of the Federal Reserve System. These
9    securities must be credited to the public agency on the
10    records of the custodial bank and the transaction must be
11    confirmed in writing to the public agency by the custodial
12    bank.
13        (4) Trading partners shall be limited to banks or
14    trust companies authorized to do business in the State of
15    Illinois or to registered primary reporting dealers.
16        (5) The security interest must be perfected.
17        (6) The public agency enters into a written master
18    repurchase agreement which outlines the basic
19    responsibilities and liabilities of both buyer and seller.
20        (7) Agreements shall be for periods of 330 days or
21    less.
22        (8) The authorized public officer of the public agency
23    informs the custodial bank in writing of the maturity
24    details of the repurchase agreement.
25        (9) The custodial bank must take delivery of and
26    maintain the securities in its custody for the account of

 

 

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1    the public agency and confirm the transaction in writing
2    to the public agency. The Custodial Undertaking shall
3    provide that the custodian takes possession of the
4    securities exclusively for the public agency; that the
5    securities are free of any claims against the trading
6    partner; and any claims by the custodian are subordinate
7    to the public agency's claims to rights to those
8    securities.
9        (10) The obligations purchased by a public agency may
10    only be sold or presented for redemption or payment by the
11    fiscal agent bank or trust company holding the obligations
12    upon the written instruction of the public agency or
13    officer authorized to make such investments.
14        (11) The custodial bank shall be liable to the public
15    agency for any monetary loss suffered by the public agency
16    due to the failure of the custodial bank to take and
17    maintain possession of such securities.
18    (i) Notwithstanding the foregoing restrictions on
19investment in instruments constituting repurchase agreements
20the Illinois Housing Development Authority may invest in, and
21any financial institution with capital of at least
22$250,000,000 may act as custodian for, instruments that
23constitute repurchase agreements, provided that the Illinois
24Housing Development Authority, in making each such investment,
25complies with the safety and soundness guidelines for engaging
26in repurchase transactions applicable to federally insured

 

 

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1banks, savings banks, savings and loan associations or other
2depository institutions as set forth in the Federal Financial
3Institutions Examination Council Policy Statement Regarding
4Repurchase Agreements and any regulations issued, or which may
5be issued by the supervisory federal authority pertaining
6thereto and any amendments thereto; provided further that the
7securities shall be either (i) direct general obligations of,
8or obligations the payment of the principal of and/or interest
9on which are unconditionally guaranteed by, the United States
10of America or (ii) any obligations of any agency, corporation
11or subsidiary thereof controlled or supervised by and acting
12as an instrumentality of the United States Government pursuant
13to authority granted by the Congress of the United States and
14provided further that the security interest must be perfected
15by either the Illinois Housing Development Authority, its
16custodian or its agent receiving possession of the securities
17either physically or transferred through a nationally
18recognized book entry system.
19    (j) In addition to all other investments authorized under
20this Section, a community college district may invest public
21funds in any mutual funds that invest primarily in corporate
22investment grade or global government short term bonds.
23Purchases of mutual funds that invest primarily in global
24government short term bonds shall be limited to funds with
25assets of at least $100 million and that are rated at the time
26of purchase as one of the 10 highest classifications

 

 

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1established by a recognized rating service. The investments
2shall be subject to approval by the local community college
3board of trustees. Each community college board of trustees
4shall develop a policy regarding the percentage of the
5college's investment portfolio that can be invested in such
6funds.
7    Nothing in this Section shall be construed to authorize an
8intergovernmental risk management entity to accept the deposit
9of public funds except for risk management purposes.
10(Source: P.A. 102-285, eff. 8-6-21.)