Illinois General Assembly - Full Text of SB1899
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Full Text of SB1899  98th General Assembly




State of Illinois
2013 and 2014


Introduced 2/15/2013, by Sen. Daniel Biss


40 ILCS 5/1-113.14

    Amends the General Provisions Article of the Illinois Pension Code. In a Section requiring the use of a competitive selection process for obtaining investment services, creates an additional exception for "contracts for follow-on funds with the same fund sponsor through closed-end funds". Effective immediately.

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SB1899LRB098 07976 EFG 38065 b

1    AN ACT concerning public employee benefits.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 5. The Illinois Pension Code is amended by changing
5Section 1-113.14 as follows:
6    (40 ILCS 5/1-113.14)
7    Sec. 1-113.14. Investment services for retirement systems,
8pension funds, and investment boards, except those funds
9established under Articles 3 and 4.
10    (a) For the purposes of this Section, "investment services"
11means services provided by an investment adviser or a
12consultant other than qualified fund-of-fund management
13services as defined in Section 1-113.15.
14    (b) The selection and appointment of an investment adviser
15or consultant for investment services by the board of a
16retirement system, pension fund, or investment board subject to
17this Code, except those whose investments are restricted by
18Section 1-113.2, shall be made and awarded in accordance with
19this Section. All contracts for investment services shall be
20awarded by the board using a competitive process that is
21substantially similar to the process required for the
22procurement of professional and artistic services under
23Article 35 of the Illinois Procurement Code. Each board of



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1trustees shall adopt a policy in accordance with this
2subsection (b) within 60 days after the effective date of this
3amendatory Act of the 96th General Assembly. The policy shall
4be posted on its web site and filed with the Illinois
5Procurement Policy Board. Exceptions to this Section are
6allowed for (i) sole source procurements, (ii) emergency
7procurements, and (iii) at the discretion of the pension fund,
8retirement system, or board of investment, contracts that are
9nonrenewable and one year or less in duration, so long as the
10contract has a value of less than $20,000, and (iv) in the
11discretion of the pension fund, retirement system, or
12investment board, contracts for follow-on funds with the same
13fund sponsor through closed-end funds. All exceptions granted
14under this Section must be published on the system's, fund's,
15or board's web site, shall name the person authorizing the
16procurement, and shall include a brief explanation of the
17reason for the exception.
18    A person, other than a trustee or an employee of a
19retirement system, pension fund, or investment board, may not
20act as a consultant or investment adviser under this Section
21unless that person is registered as an investment adviser under
22the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1,
23et seq.) or a bank, as defined in the federal Investment
24Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.).
25    (c) Investment services provided by an investment adviser
26or a consultant appointed under this Section shall be rendered



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1pursuant to a written contract between the investment adviser
2or 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
5retirement system, pension fund, or investment board subject to
6this Code, except those whose investments are restricted by
7Section 1-113.2 of this Code, shall not enter into a contract
8with a consultant that exceeds 5 years in duration. No contract
9to provide consulting services may be renewed or extended. At
10the end of the term of a contract, however, the consultant is
11eligible to compete for a new contract as provided in this
12Section. No retirement system, pension fund, or investment
13board shall attempt to avoid or contravene the restrictions of
14this subsection (d) by any means.
15    (e) Within 60 days after the effective date of this
16amendatory Act of the 96th General Assembly, each investment
17adviser or consultant currently providing services or subject
18to an existing contract for the provision of services must
19disclose to the board of trustees all direct and indirect fees,
20commissions, penalties, and other compensation paid by or on
21behalf of the investment adviser or consultant in connection
22with the provision of those services and shall update that
23disclosure promptly after a modification of those payments or
24an additional payment. The person shall update the disclosure
25promptly after a modification of those payments or an
26additional payment. The disclosures required by this



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1subsection (e) shall be in writing and shall include the date
2and amount of each payment and the name and address of each
3recipient of a payment.
4    (f) The retirement system, pension fund, or board of
5investment shall develop uniform documents that shall be used
6for the solicitation, review, and acceptance of all investment
7services. The form shall include the terms contained in
8subsection (c) of this Section. All such uniform documents
9shall be posted on the retirement system's, pension fund's, or
10investment board's web site.
11    (g) A description of every contract for investment services
12shall be posted in a conspicuous manner on the web site of the
13retirement system, pension fund, or investment board. The
14description must include the name of the person or entity
15awarded a contract, the total amount applicable to the
16contract, the total fees paid or to be paid, and a disclosure
17approved by the board describing the factors that contributed
18to the selection of an investment adviser or consultant.
19(Source: P.A. 96-6, eff. 4-3-09; 96-1554, eff. 3-18-11.)
20    Section 99. Effective date. This Act takes effect upon
21becoming law.