Illinois General Assembly - Full Text of SB1865
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Full Text of SB1865  93rd General Assembly

SB1865eng 93rd General Assembly


093_SB1865eng

 
SB1865 Engrossed                     LRB093 03738 JLS 11715 b

 1        AN ACT concerning securities regulation.

 2        Be it enacted by the People of  the  State  of  Illinois,
 3    represented in the General Assembly:

 4        Section 5. The Illinois Securities Law of 1953 is amended
 5    by changing Sections 8, 11, 11b, 12, and 14 as follows:

 6        (815 ILCS 5/8) (from Ch. 121 1/2, par. 137.8)
 7        Sec.   8.  Registration   of  dealers,  limited  Canadian
 8    dealers, salespersons, investment  advisers,  and  investment
 9    adviser representatives.

10        A.  Except  as  otherwise  provided in this subsection A,
11    every   dealer,   limited   Canadian   dealer,   salesperson,
12    investment adviser,  and  investment  adviser  representative
13    shall  be registered as such with the Secretary of State.  No
14    dealer  or  salesperson  need  be  registered  as  such  when
15    offering or selling securities in  transactions  exempted  by
16    subsection  A,  B, C, D, E, G, H, I, J, K, M, O, P, Q, R or S
17    of Section 4 of  this  Act,  provided  that  such  dealer  or
18    salesperson  is  not  regularly  engaged  in  the business of
19    offering or selling securities in reliance upon the exemption
20    set forth in subsection G or M of Section 4 of this  Act.  No
21    dealer,   issuer   or   controlling  person  shall  employ  a
22    salesperson unless such salesperson  is  registered  as  such
23    with the Secretary of State or is employed for the purpose of
24    offering   or   selling  securities  solely  in  transactions
25    exempted by subsection A, B, C, D, E, G, H, I, J, K, L, M, O,
26    P, Q, R or S of Section 4 of this  Act;  provided  that  such
27    salesperson   need   not   be   registered   when   effecting
28    transactions  in  this  State  limited  to those transactions
29    described in Section 15(h)(2) of  the  Federal  1934  Act  or
30    engaging  in  the  offer  or sale of securities in respect of
31    which he or she has beneficial ownership and is a controlling
 
SB1865 Engrossed            -2-      LRB093 03738 JLS 11715 b
 1    person.  The Secretary of State may, by rule,  regulation  or
 2    order  and subject to such terms, conditions, and fees as may
 3    be prescribed in such rule, regulation or order, exempt  from
 4    the   registration   requirements   of  this  Section  8  any
 5    investment adviser, if the Secretary of State shall find that
 6    such registration is not necessary in the public interest  by
 7    reason  of  the small  number of clients or otherwise limited
 8    character of operation of such investment adviser.

 9        B.  An  application  for  registration  as  a  dealer  or
10    limited Canadian dealer, executed, verified, or authenticated
11    by or on behalf of the applicant, shall  be  filed  with  the
12    Secretary  of  State,  in such form as the Secretary of State
13    may by rule, regulation or order prescribe, setting forth  or
14    accompanied by:
15             (1)  The  name  and  address  of  the applicant, the
16        location of its principal business office and all  branch
17        offices, if any, and the date of its organization;
18             (2)  A  statement  of  any  other  Federal  or state
19        licenses or registrations which  have  been  granted  the
20        applicant  and whether any such licenses or registrations
21        have ever been refused, cancelled, suspended, revoked  or
22        withdrawn;
23             (3)  The   assets  and  all  liabilities,  including
24        contingent liabilities of the applicant, as of a date not
25        more than 60 days prior to the filing of the application;
26             (4) (a)  A  brief  description  of  any   civil   or
27        criminal  proceeding  of  which  fraud  is  an  essential
28        element  pending  against  the  applicant and whether the
29        applicant has ever been convicted of a felony, or of  any
30        misdemeanor of which fraud is an essential element;
31             (b)  A  list  setting  forth the name, residence and
32        business address and a 10 year occupational statement  of
33        each   principal   of   the  applicant  and  a  statement
34        describing briefly any civil or criminal  proceedings  of
 
SB1865 Engrossed            -3-      LRB093 03738 JLS 11715 b
 1        which  fraud  is an essential element pending against any
 2        such principal and the facts concerning any conviction of
 3        any such principal of a felony, or of any misdemeanor  of
 4        which fraud is an essential element;
 5             (5)  If  the  applicant  is a corporation: a list of
 6        its officers and directors setting  forth  the  residence
 7        and  business  address  of  each;  a 10-year occupational
 8        statement  of  each  such  officer  or  director;  and  a
 9        statement  describing  briefly  any  civil  or   criminal
10        proceedings  of  which  fraud  is  an  essential  element
11        pending  against  each  such  officer or director and the
12        facts  concerning  any  conviction  of  any  officer   or
13        director  of  a  felony,  or  of any misdemeanor of which
14        fraud is an essential element;
15             (6)  If the applicant is a  sole  proprietorship,  a
16        partnership, limited liability company, an unincorporated
17        association or any similar form of business organization:
18        the   name,   residence   and  business  address  of  the
19        proprietor or of each partner, member, officer, director,
20        trustee or manager;  the  limitations,  if  any,  of  the
21        liability of each such individual; a 10-year occupational
22        statement of each such individual; a statement describing
23        briefly  any civil or criminal proceedings of which fraud
24        is  an  essential  element  pending  against  each   such
25        individual and the facts concerning any conviction of any
26        such  individual  of  a  felony, or of any misdemeanor of
27        which fraud is an essential element;
28             (7)  Such additional information as the Secretary of
29        State may by rule or regulation prescribe as necessary to
30        determine  the  applicant's   financial   responsibility,
31        business repute and qualification to act as a dealer.
32             (8) (a)  No   applicant   shall   be  registered  or
33        re-registered as a  dealer  or  limited  Canadian  dealer
34        under this Section unless and until each principal of the
 
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 1        dealer   has  passed  an  examination  conducted  by  the
 2        Secretary of State or a self-regulatory  organization  of
 3        securities  dealers  or similar person, which examination
 4        has been designated by the Secretary  of State  by  rule,
 5        regulation  or  order  to be satisfactory for purposes of
 6        determining  whether   the   applicant   has   sufficient
 7        knowledge  of  the  securities business and laws relating
 8        thereto to act as a registered dealer. Any dealer who was
 9        registered on September 30, 1963, and has continued to be
10        so  registered;  and  any  principal  of  any  registered
11        dealer,  who  was  acting  in  such   capacity   on   and
12        continuously since September 30, 1963; and any individual
13        who has previously passed a securities dealer examination
14        administered by the Secretary of State or any examination
15        designated  by  the Secretary of State to be satisfactory
16        for purposes of determining  whether  the  applicant  has
17        sufficient  knowledge of the securities business and laws
18        relating thereto to act as a registered dealer  by  rule,
19        regulation  or  order,  shall  not be required to pass an
20        examination in order to continue to act in such capacity.
21        The Secretary of State may by order waive the examination
22        requirement  for  any  principal  of  an  applicant   for
23        registration  under  this  subsection  B who has had such
24        experience  or  education  relating  to  the   securities
25        business  as  may be determined by the Secretary of State
26        to be the equivalent of such  examination.   Any  request
27        for  such  a  waiver shall be filed with the Secretary of
28        State in such form  as  may  be  prescribed  by  rule  or
29        regulation.
30             (b)  Unless  an  applicant  is  a member of the body
31        corporate known as  the  Securities  Investor  Protection
32        Corporation  established  pursuant to the Act of Congress
33        of the United States known  as  the  Securities  Investor
34        Protection  Act  of  1970,  as  amended,  a  member of an
 
SB1865 Engrossed            -5-      LRB093 03738 JLS 11715 b
 1        association  of  dealers   registered   as   a   national
 2        securities  association  pursuant  to  Section 15A of the
 3        Federal 1934  Act,  or  a  member  of  a  self-regulatory
 4        organization  or  stock  exchange  in  Canada  which  the
 5        Secretary  of  State  has designated by rule or order, an
 6        applicant shall not be registered or re-registered unless
 7        and until there is filed  with  the  Secretary  of  State
 8        evidence  that  such applicant has in effect insurance or
 9        other equivalent protection for  each  client's  cash  or
10        securities  held  by  such  applicant, and an undertaking
11        that  such  applicant  will  continually  maintain   such
12        insurance  or  other  protection  during  the  period  of
13        registration  or re-registration. Such insurance or other
14        protection shall be  in  a  form  and  amount  reasonably
15        prescribed   by   the  Secretary  of  State  by  rule  or
16        regulation.
17             (9)  The  application  for  the  registration  of  a
18        dealer or limited Canadian dealer  shall  be  accompanied
19        by  a filing fee and a fee for each branch office in this
20        State, in each case in the amount established pursuant to
21        Section  11a  of  this  Act,  which  fees  shall  not  be
22        returnable in any event.
23             (10)  The Secretary of State shall notify the dealer
24        or  limited  Canadian dealer by written notice (which may
25        be  by  electronic  or  facsimile  transmission)  of  the
26        effectiveness of the registration as  a  dealer  in  this
27        State.
28             (11)  Any  change  which  renders no longer accurate
29        any  information  contained  in   any   application   for
30        registration  or  re-registration  of a dealer or limited
31        Canadian dealer shall be reported  to  the  Secretary  of
32        State  within  10  business  days after the occurrence of
33        such change;  but in respect to  assets  and  liabilities
34        only materially adverse changes need be reported.
 
SB1865 Engrossed            -6-      LRB093 03738 JLS 11715 b
 1        C.  Any   registered  dealer,  limited  Canadian  dealer,
 2    issuer,  or  controlling  person  desiring  to   register   a
 3    salesperson  shall  file an application with the Secretary of
 4    State, in such form as the Secretary of State may by rule  or
 5    regulation  prescribe,  which  the salesperson is required by
 6    this Section to provide to the dealer, issuer, or controlling
 7    person,  executed,  verified,   or   authenticated   by   the
 8    salesperson setting forth or accompanied by:
 9             (1)  the name, residence and business address of the
10        salesperson;
11             (2)  whether   any   federal  or  State  license  or
12        registration  as  dealer,  limited  Canadian  dealer,  or
13        salesperson has ever  been  refused  the  salesperson  or
14        cancelled,   suspended,   revoked,   withdrawn,   barred,
15        limited,  or  otherwise  adversely  affected in a similar
16        manner or whether the salesperson has ever been  censured
17        or expelled;
18             (3)  the  nature  of  employment with, and names and
19        addresses of, employers of the  salesperson  for  the  10
20        years immediately preceding the date of application;
21             (4)  a  brief  description  of any civil or criminal
22        proceedings  of  which  fraud  is  an  essential  element
23        pending  against  the  salesperson,   and   whether   the
24        salesperson  has  ever  been convicted of a felony, or of
25        any misdemeanor of which fraud is an essential element;
26             (5)  such additional information as the Secretary of
27        State may by  rule,  regulation  or  order  prescribe  as
28        necessary  to determine the salesperson's business repute
29        and qualification to act as a salesperson; and
30             (6)  no   individual   shall   be   registered    or
31        re-registered  as a salesperson under this Section unless
32        and until  such  individual  has  passed  an  examination
33        conducted  by the Secretary of State or a self-regulatory
34        organization of securities  dealers  or  similar  person,
 
SB1865 Engrossed            -7-      LRB093 03738 JLS 11715 b
 1        which examination has been designated by the Secretary of
 2        State by rule, regulation or order to be satisfactory for
 3        purposes   of   determining  whether  the  applicant  has
 4        sufficient knowledge of the securities business and  laws
 5        relating thereto to act as a registered salesperson.
 6             Any   salesperson   who   was  registered  prior  to
 7        September  30,  1963,  and  has  continued   to   be   so
 8        registered,   and   any   individual  who  has  passed  a
 9        securities salesperson examination  administered  by  the
10        Secretary  of  State  or an examination designated by the
11        Secretary of State by rule, regulation  or  order  to  be
12        satisfactory  for  purposes  of  determining  whether the
13        applicant has  sufficient  knowledge  of  the  securities
14        business and laws relating thereto to act as a registered
15        salesperson, shall not be required to pass an examination
16        in  order  to  continue  to  act  as  a  salesperson. The
17        Secretary of State may by  order  waive  the  examination
18        requirement for any applicant for registration under this
19        subsection  C  who  has  had such experience or education
20        relating to the securities business as may be  determined
21        by  the  Secretary  of State to be the equivalent of such
22        examination.  Any request for  such  a  waiver  shall  be
23        filed  with the Secretary of State in such form as may be
24        prescribed by rule, regulation or order.
25             (7)  The   application   for   registration   of   a
26        salesperson shall be accompanied by a filing  fee  and  a
27        Securities  Audit  and  Enforcement Fund fee, each in the
28        amount established pursuant to Section 11a of  this  Act,
29        which shall not be returnable in any event.
30             (8)  Any change which renders no longer accurate any
31        information contained in any application for registration
32        or  re-registration as a salesperson shall be reported to
33        the Secretary of State within 10 business days after  the
34        occurrence   of   such  change.  If  the  activities  are
 
SB1865 Engrossed            -8-      LRB093 03738 JLS 11715 b
 1        terminated which rendered an individual a salesperson for
 2        the dealer, issuer or  controlling  person,  the  dealer,
 3        issuer  or controlling person, as the case may be,  shall
 4        notify the Secretary of State, in writing, within 30 days
 5        of the salesperson's cessation of activities,  using  the
 6        appropriate termination notice form.
 7             (9)  A  registered  salesperson  may transfer his or
 8        her registration under this Section 8 for  the  unexpired
 9        term  thereof  from  one  registered  dealer  or  limited
10        Canadian dealer to another by the giving of notice of the
11        transfer by the new registered dealer or limited Canadian
12        dealer to the Secretary of State in such form and subject
13        to  such  conditions  as  the Secretary of State shall by
14        rule or regulation prescribe.  The new registered  dealer
15        or   limited  Canadian  dealer  shall  promptly  file  an
16        application  for  registration  of  such  salesperson  as
17        provided in this subsection C, accompanied by the  filing
18        fee prescribed by paragraph (7) of this subsection C.

19        C-5.  Except  with  respect to federal covered investment
20    advisers whose  only  clients  are  investment  companies  as
21    defined  in  the Federal 1940 Act, other investment advisers,
22    federal covered investment advisers, or  any  similar  person
23    which  the Secretary of State may prescribe by rule or order,
24    a federal covered investment  adviser  shall  file  with  the
25    Secretary  of  State,  prior  to  acting as a federal covered
26    investment adviser in this State, such documents as have been
27    filed with the Securities  and  Exchange  Commission  as  the
28    Secretary  of  State  by  rule  or  order may prescribe.  The
29    notification of a federal covered investment adviser shall be
30    accompanied by a notification filing fee established pursuant
31    to Section 11a of this Act, which shall not be returnable  in
32    any   event.   Every  person  acting  as  a  federal  covered
33    investment adviser in this State shall  file  a  notification
34    filing  and pay an annual notification filing fee established
 
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 1    pursuant to Section 11a of this Act, which is not  returnable
 2    in  any  event.   The  failure  to file any such notification
 3    shall constitute a violation of subsection D of Section 12 of
 4    this Act, subject to the penalties enumerated in  Section  14
 5    of  this  Act. Until October 10, 1999 or other date as may be
 6    legally permissible, a federal covered investment adviser who
 7    fails to file the notification or refuses to pay the fees  as
 8    required  by  this subsection shall register as an investment
 9    adviser with the Secretary of State under Section 8  of  this
10    Act.  The  civil  remedies  provided  for  in subsection A of
11    Section 13 of this Act and the civil remedies  of  rescission
12    and appointment of receiver, conservator, ancillary receiver,
13    or  ancillary  conservator  provided  for  in subsection F of
14    Section 13 of this Act shall not  be  available  against  any
15    person by reason of the failure to file any such notification
16    or  to pay the notification fee or on account of the contents
17    of any such notification.

18        D.  An application  for  registration  as  an  investment
19    adviser, executed, verified, or authenticated by or on behalf
20    of the applicant, shall be filed with the Secretary of State,
21    in  such  form  as  the  Secretary  of  State  may by rule or
22    regulation prescribe, setting forth or accompanied by:
23             (1)  The name and form of organization  under  which
24        the  investment  adviser  engages or intends to engage in
25        business;  the  state  or  country  and   date   of   its
26        organization;  the  location  of  the adviser's principal
27        business office and branch offices, if any; the names and
28        addresses of the adviser's principal, partners, officers,
29        directors, and persons performing similar  functions  or,
30        if  the  investment  adviser  is  an  individual,  of the
31        individual; and the number of the adviser's employees who
32        perform investment advisory functions;
33             (2)  The education, the  business  affiliations  for
34        the  past 10 years, and the present business affiliations
 
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 1        of the investment adviser and of the adviser's principal,
 2        partners, officers,  directors,  and  persons  performing
 3        similar  functions  and  of  any  person  controlling the
 4        investment adviser;
 5             (3)  The nature of the business  of  the  investment
 6        adviser,  including  the  manner  of  giving  advice  and
 7        rendering analyses or reports;
 8             (4)  The  nature  and  scope of the authority of the
 9        investment adviser with respect  to  clients'  funds  and
10        accounts;
11             (5)  The  basis  or  bases upon which the investment
12        adviser is compensated;
13             (6)  Whether   the   investment   adviser   or   any
14        principal, partner, officer, director, person  performing
15        similar  functions  or  person controlling the investment
16        adviser  (i)  within  10  years  of  the  filing  of  the
17        application has been convicted of a  felony,  or  of  any
18        misdemeanor  of  which  fraud is an essential element, or
19        (ii) is permanently or temporarily enjoined by  order  or
20        judgment   from   acting   as   an   investment  adviser,
21        underwriter, dealer, principal or  salesperson,  or  from
22        engaging  in  or  continuing  any  conduct or practice in
23        connection with any such activity or in  connection  with
24        the  purchase  or  sale of any security, and in each case
25        the facts relating to the conviction, order or judgment;
26             (7) (a)  A statement as to  whether  the  investment
27        adviser  is  engaged  or  is  to  engage primarily in the
28        business of rendering  investment  supervisory  services;
29        and
30             (b)  A  statement  that  the investment adviser will
31        furnish his, her, or its clients with such information as
32        the Secretary  of  State  deems  necessary  in  the  form
33        prescribed   by   the  Secretary  of  State  by  rule  or
34        regulation;
 
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 1             (8)  Such additional information as the Secretary of
 2        State may, by rule,  regulation  or  order  prescribe  as
 3        necessary   to   determine   the   applicant's  financial
 4        responsibility, business repute and qualification to  act
 5        as an investment adviser.
 6             (9)  No    applicant    shall   be   registered   or
 7        re-registered as an investment adviser under this Section
 8        unless and until each principal of the applicant  who  is
 9        actively  engaged  in  the  conduct and management of the
10        applicant's advisory business in this State has passed an
11        examination or completed an educational program conducted
12        by the Secretary of State or an association of investment
13        advisers  or  similar  person,   which   examination   or
14        educational  program has been designated by the Secretary
15        of State by rule, regulation or order to be  satisfactory
16        for  purposes  of  determining  whether the applicant has
17        sufficient knowledge of the securities business and  laws
18        relating  thereto to conduct the business of a registered
19        investment adviser.
20             Any person who was a registered  investment  adviser
21        prior  to  September 30, 1963, and has continued to be so
22        registered,  and  any  individual  who  has   passed   an
23        investment   adviser   examination  administered  by  the
24        Secretary of State, or passed an examination or completed
25        an educational program designated  by  the  Secretary  of
26        State by rule, regulation or order to be satisfactory for
27        purposes   of   determining  whether  the  applicant  has
28        sufficient knowledge of the securities business and  laws
29        relating  thereto to conduct the business of a registered
30        investment adviser, shall not  be  required  to  pass  an
31        examination  or  complete an educational program in order
32        to  continue  to  act  as  an  investment  adviser.   The
33        Secretary of State may by order waive the examination  or
34        educational  program  requirement  for  any applicant for
 
SB1865 Engrossed            -12-     LRB093 03738 JLS 11715 b
 1        registration under this subsection D if the principal  of
 2        the  applicant who is actively engaged in the conduct and
 3        management of the applicant's advisory business  in  this
 4        State  has  had  such experience or education relating to
 5        the securities business  as  may  be  determined  by  the
 6        Secretary   of   State   to  be  the  equivalent  of  the
 7        examination or educational program.  Any  request  for  a
 8        waiver shall be filed with the Secretary of State in such
 9        form as may be prescribed by rule or regulation.
10             (10)  No    applicant   shall   be   registered   or
11        re-registered as an investment adviser under this Section
12        8   unless   the   application   for   registration    or
13        re-registration  is  accompanied  by  an  application for
14        registration or re-registration for each person acting as
15        an investment adviser representative  on  behalf  of  the
16        adviser  and  a Securities Audit and Enforcement Fund fee
17        that shall not be returnable in any event  is  paid  with
18        respect to each investment adviser representative.
19             (11)  The   application   for   registration  of  an
20        investment adviser shall be accompanied by a  filing  fee
21        and  a  fee for each branch office in this State, in each
22        case in the amount established pursuant to Section 11a of
23        this Act, which fees  shall  not  be  returnable  in  any
24        event.
25             (12)  The   Secretary  of  State  shall  notify  the
26        investment adviser by written notice  (which  may  be  by
27        electronic    or    facsimile    transmission)   of   the
28        effectiveness  of  the  registration  as  an   investment
29        adviser in this State.
30             (13)  Any  change  which  renders no longer accurate
31        any  information  contained  in   any   application   for
32        registration  or re-registration of an investment adviser
33        shall be reported to the Secretary  of  State  within  10
34        business  days  after  the  occurrence of the change.  In
 
SB1865 Engrossed            -13-     LRB093 03738 JLS 11715 b
 1        respect  to  assets  and  liabilities  of  an  investment
 2        adviser  that  retains  custody  of  clients'   cash   or
 3        securities  or  accepts  pre-payment of fees in excess of
 4        $500 per client and 6 or  more  months  in  advance  only
 5        materially  adverse  changes  need be reported by written
 6        notice  (which  may  be  by   electronic   or   facsimile
 7        transmission)  no later than the close of business on the
 8        second business day following the discovery thereof.
 9             (14)  Each  application  for  registration   as   an
10        investment  adviser  shall become effective automatically
11        on the 45th day following the filing of the  application,
12        required  documents  or  information,  and payment of the
13        required fee  unless  (i)  the  Secretary  of  State  has
14        registered  the  investment adviser prior to that date or
15        (ii) an action with respect to the applicant  is  pending
16        under Section 11 of this Act.

17        D-5.  A  registered investment adviser or federal covered
18    investment  adviser    desiring  to  register  an  investment
19    adviser representative shall file  an  application  with  the
20    Secretary of State, in the form as the Secretary of State may
21    by  rule  or  order  prescribe,  which the investment adviser
22    representative is required by this Section to provide to  the
23    investment  adviser,  executed, verified, or authenticated by
24    the investment adviser representative and  setting  forth  or
25    accompanied by:
26             (1)  The  name,  residence,  and business address of
27        the investment adviser representative;
28             (2)  A  statement  whether  any  federal  or   state
29        license   or   registration  as  a  dealer,  salesperson,
30        investment adviser, or investment adviser  representative
31        has  ever  been  refused, canceled, suspended, revoked or
32        withdrawn;
33             (3)  The nature of employment with,  and  names  and
34        addresses   of,   employers  of  the  investment  adviser
 
SB1865 Engrossed            -14-     LRB093 03738 JLS 11715 b
 1        representative for the 10 years immediately preceding the
 2        date of application;
 3             (4)  A brief description of any  civil  or  criminal
 4        proceedings,  of  which  fraud  is  an essential element,
 5        pending against the investment adviser representative and
 6        whether the investment adviser  representative  has  ever
 7        been convicted of a felony or of any misdemeanor of which
 8        fraud is an essential element;
 9             (5)  Such additional information as the Secretary of
10        State  may  by  rule  or  order prescribe as necessary to
11        determine   the   investment   adviser   representative's
12        business repute or qualification to act as an  investment
13        adviser representative;
14             (6)  Documentation that the individual has passed an
15        examination  conducted  by  the  Secretary  of  State, an
16        organization of investment advisers, or  similar  person,
17        which examination has been designated by the Secretary of
18        State by rule or order to be satisfactory for purposes of
19        determining   whether   the   applicant   has  sufficient
20        knowledge  of  the  investment  advisory  or   securities
21        business  and  laws relating to that business to act as a
22        registered investment adviser representative; and
23             (7)  A Securities Audit  and  Enforcement  Fund  fee
24        established  under  Section  11a of this Act, which shall
25        not be returnable in any event.
26        The Secretary of State may by order waive the examination
27    requirement for an  applicant  for  registration  under  this
28    subsection  D-5  who  has  had  the  experience  or education
29    relating to the investment advisory or securities business as
30    may be determined  by  the  Secretary  of  State  to  be  the
31    equivalent  of the examination.  A request for a waiver shall
32    be filed with the Secretary of State in the form  as  may  be
33    prescribed by rule or order.
34        A  change that renders no longer accurate any information
 
SB1865 Engrossed            -15-     LRB093 03738 JLS 11715 b
 1    contained   in   any   application   for   registration    or
 2    re-registration  as an investment adviser representative must
 3    be reported to the Secretary of State within 10 business days
 4    after the occurrence of the change.  If the  activities  that
 5    rendered  an  individual an investment adviser representative
 6    for the investment adviser  are  terminated,  the  investment
 7    adviser shall notify the Secretary of State in writing (which
 8    may  be  by  electronic or facsimile transmission), within 30
 9    days of the investment adviser representative's  termination,
10    using   the   appropriate  termination  notice  form  as  the
11    Secretary of State may prescribe by rule or order.
12        A  registered  investment  adviser   representative   may
13    transfer his or her registration under this Section 8 for the
14    unexpired  term  of  the  registration  from  one  registered
15    investment  adviser to another by the giving of notice of the
16    transfer by the new investment adviser to  the  Secretary  of
17    State  in  the  form  and  subject  to  the conditions as the
18    Secretary  of  State  shall  prescribe.  The  new  registered
19    investment adviser shall promptly  file  an  application  for
20    registration  of  the  investment  adviser  representative as
21    provided in this subsection, accompanied  by  the  Securities
22    Audit and Enforcement Fund fee prescribed by paragraph (7) of
23    this subsection D-5.

24        E. (1)  Subject  to  the  provisions  of  subsection F of
25    Section 11 of this Act, the registration of a dealer, limited
26    Canadian  dealer,   salesperson,   investment   adviser,   or
27    investment adviser representative may be denied, suspended or
28    revoked  if  the  Secretary  of  State finds that the dealer,
29    limited Canadian dealer, salesperson, investment adviser,  or
30    investment  adviser  representative or any principal officer,
31    director, partner, member, trustee, manager or any person who
32    performs a similar function of the dealer,  limited  Canadian
33    dealer, or investment adviser:
34             (a)  has  been convicted of any felony during the 10
 
SB1865 Engrossed            -16-     LRB093 03738 JLS 11715 b
 1        year  period  preceding  the  date  of  filing   of   any
 2        application  for  registration or at any time thereafter,
 3        or of any misdemeanor of  which  fraud  is  an  essential
 4        element;
 5             (b)  has   engaged  in  any  unethical  practice  in
 6        connection with  any  security,  the  offer  or  sale  of
 7        securities or in any fraudulent business practice;
 8             (c)  has   failed   to  account  for  any  money  or
 9        property, or has failed to deliver any security,  to  any
10        person  entitled  thereto when due or within a reasonable
11        time thereafter;
12             (d)  in the  case  of  a  dealer,  limited  Canadian
13        dealer, or investment adviser, is insolvent;
14             (e)  in  the  case  of  a  dealer,  limited Canadian
15        dealer, salesperson, or registered principal of a  dealer
16        or  limited  Canadian dealer (i) has failed reasonably to
17        supervise  the  securities  activities  of  any  of   its
18        salespersons  or  other  employees  and  the  failure has
19        permitted or facilitated a violation  of  Section  12  of
20        this Act or (ii) is offering or selling or has offered or
21        sold securities in this State through a salesperson other
22        than  a  registered  salesperson,  or,  in  the case of a
23        salesperson, is selling or has sold  securities  in  this
24        State  for  a  dealer, limited Canadian dealer, issuer or
25        controlling  person  with  knowledge  that  the   dealer,
26        limited Canadian dealer, issuer or controlling person has
27        not complied with the provisions of this Act or (iii) has
28        failed  reasonably  to  supervise  the  implementation of
29        compliance measures following notice by the Secretary  of
30        State   of   noncompliance  with  the  Act  or  with  the
31        regulations promulgated thereunder or both  or  (iv)  has
32        failed  to  maintain  and  enforce  written procedures to
33        supervise the types of business in which it  engages  and
34        to  supervise the activities of its salespersons that are
 
SB1865 Engrossed            -17-     LRB093 03738 JLS 11715 b
 1        reasonably designed to achieve compliance with applicable
 2        securities laws and regulations;
 3             (f)  in the  case  of  an  investment  adviser,  has
 4        failed reasonably to supervise the advisory activities of
 5        any   of   its   investment  adviser  representatives  or
 6        employees and the failure has permitted or facilitated  a
 7        violation of Section 12 of this Act;
 8             (g)  has violated any of the provisions of this Act;
 9             (h)  has  made any material misrepresentation to the
10        Secretary of State in  connection  with  any  information
11        deemed necessary by the Secretary of State to determine a
12        dealer's,   limited   Canadian  dealer's,  or  investment
13        adviser's financial responsibility or a dealer's, limited
14        Canadian dealer's, investment  adviser's,  salesperson's,
15        or investment adviser representative's business repute or
16        qualifications,  or  has  refused  to  furnish  any  such
17        information requested by the Secretary of State;
18             (i)  has  had  a  license  or registration under any
19        Federal or State law regulating  the  offer  or  sale  of
20        securities,  or  commodity  futures  contracts,  or stock
21        futures   contracts   refused,   cancelled,    suspended,
22        withdrawn,  revoked, or otherwise adversely affected in a
23        similar manner;
24             (j)  has had membership in or association  with  any
25        self-regulatory organization registered under the Federal
26        1934  Act  or  the  Federal  1974 Act suspended, revoked,
27        refused, expelled,  cancelled,  barred,  limited  in  any
28        capacity,  or  otherwise  adversely affected in a similar
29        manner arising from any fraudulent or deceptive act or  a
30        practice in violation of any rule, regulation or standard
31        duly promulgated by the self-regulatory organization;
32             (k)  has  had  any  order  entered  against it after
33        notice and opportunity for hearing by a securities agency
34        of any state, any foreign government or  agency  thereof,
 
SB1865 Engrossed            -18-     LRB093 03738 JLS 11715 b
 1        the  Securities  and  Exchange Commission, or the Federal
 2        Commodities Futures Trading Commission arising  from  any
 3        fraudulent or deceptive act or a practice in violation of
 4        any   statute,   rule   or   regulation  administered  or
 5        promulgated by the agency or commission;
 6             (l)  in the case of a  dealer  or  limited  Canadian
 7        dealer,  fails  to  maintain  a minimum net capital in an
 8        amount which the  Secretary  of  State  may  by  rule  or
 9        regulation require;
10             (m)  has conducted a continuing course of dealing of
11        such  nature  as  to demonstrate an inability to properly
12        conduct the business  of  the  dealer,  limited  Canadian
13        dealer,  salesperson,  investment  adviser, or investment
14        adviser representative;
15             (n)  has  had,  after  notice  and  opportunity  for
16        hearing, any injunction or order entered  against  it  or
17        license  or  registration  refused, cancelled, suspended,
18        revoked,  withdrawn,  limited,  or  otherwise   adversely
19        affected  in  a  similar  manner  by any state or federal
20        body, agency or commission regulating banking, insurance,
21        finance or small loan companies, real estate or  mortgage
22        brokers or companies, if the action resulted from any act
23        found   by  the  body,  agency  or  commission  to  be  a
24        fraudulent or deceptive act or practice in  violation  of
25        any   statute,   rule   or   regulation  administered  or
26        promulgated by the body, agency or commission;
27             (o)  has failed to file a return, or to pay the tax,
28        penalty or interest shown in a filed return,  or  to  pay
29        any  final  assessment  of  tax,  penalty or interest, as
30        required by any tax  Act  administered  by  the  Illinois
31        Department   of   Revenue,   until   such   time  as  the
32        requirements of that tax Act are satisfied;
33             (p)  in the case  of  a  natural  person  who  is  a
34        dealer,  limited Canadian dealer, salesperson, investment
 
SB1865 Engrossed            -19-     LRB093 03738 JLS 11715 b
 1        adviser,  or  investment  adviser   representative,   has
 2        defaulted  on  an  educational  loan  guaranteed  by  the
 3        Illinois Student Assistance Commission, until the natural
 4        person has established a satisfactory repayment record as
 5        determined by the Illinois Student Assistance Commission;
 6             (q)  has  failed  to  maintain the books and records
 7        required  under  this  Act  or   rules   or   regulations
 8        promulgated  under  this  Act  or  under any requirements
 9        established by the Securities and Exchange Commission  or
10        a  self-regulatory  organization within a reasonable time
11        after receiving notice of any deficiency;
12             (r)  has  refused  to  allow  or  otherwise  impeded
13        designees of the Secretary of State  from  conducting  an
14        audit, examination, inspection, or investigation provided
15        for under Section 8 or 11 of this Act;
16             (s)  has  failed to maintain any minimum net capital
17        or bond requirement set forth in this Act or any rule  or
18        regulation promulgated under this Act;
19             (t)  has  refused  the  Secretary of State or his or
20        her designee access to any office or location  within  an
21        office  to  conduct an investigation, audit, examination,
22        or inspection;
23             (u)  has advised or caused a public pension fund  or
24        retirement  system established under the Illinois Pension
25        Code to make an investment or engage in a transaction not
26        authorized by that Code;
27             (v)  if a corporation, limited liability company, or
28        limited  liability  partnership   has   been   suspended,
29        canceled, revoked, or has failed to register as a foreign
30        corporation,   limited   liability  company,  or  limited
31        liability partnership with the Secretary of State;
32             (w)  is permanently or temporarily enjoined  by  any
33        court  of  competent  jurisdiction,  including any state,
34        federal, or  foreign  government,  from  engaging  in  or
 
SB1865 Engrossed            -20-     LRB093 03738 JLS 11715 b
 1        continuing  any  conduct or practice involving any aspect
 2        of the securities or commodities business or in any other
 3        business where the conduct or practice enjoined  involved
 4        investments, franchises, insurance, banking, or finance;
 5        (2)  If  the Secretary of State finds that any registrant
 6    or applicant for registration is no longer  in  existence  or
 7    has  ceased  to  do  business  as  a dealer, limited Canadian
 8    dealer,  salesperson,  investment  adviser,   or   investment
 9    adviser representative, or is subject to an adjudication as a
10    person  under  legal  disability  or  to  the  control  of  a
11    guardian,  or  cannot  be located after reasonable search, or
12    has failed after written notice to pay to  the  Secretary  of
13    State  any  additional  fee  prescribed  by  this  Section or
14    specified by rule or regulation, or if a natural person,  has
15    defaulted  on  an educational loan guaranteed by the Illinois
16    Student Assistance Commission, the Secretary of State may  by
17    order cancel the registration or application.
18        (3)  Withdrawal  of  an  application  for registration or
19    withdrawal from registration as a  dealer,  limited  Canadian
20    dealer,   salesperson,   investment  adviser,  or  investment
21    adviser  representative  becomes  effective  30  days   after
22    receipt  of an application to withdraw or within such shorter
23    period of time as  the  Secretary  of  State  may  determine,
24    unless any proceeding is pending under Section 11 of this Act
25    when  the  application is filed or a proceeding is instituted
26    within  30  days  after  the  application  is  filed.   If  a
27    proceeding  is  pending  or  instituted,  withdrawal  becomes
28    effective at such  time  and  upon  such  conditions  as  the
29    Secretary  of State by order determines.  If no proceeding is
30    pending or instituted and  withdrawal  automatically  becomes
31    effective,  the Secretary of State may nevertheless institute
32    a revocation or suspension proceeding within  2  years  after
33    withdrawal   became  effective  and  enter  a  revocation  or
34    suspension order as of the last date  on  which  registration
 
SB1865 Engrossed            -21-     LRB093 03738 JLS 11715 b
 1    was effective.

 2        F.  The  Secretary  of  State  shall  make available upon
 3    request  the  date  that  each  dealer,  investment  adviser,
 4    salesperson, or investment adviser representative was granted
 5    registration, together with  the  name  and  address  of  the
 6    dealer,  limited  Canadian  dealer, or issuer on whose behalf
 7    the  salesperson  is  registered,  and  all  orders  of   the
 8    Secretary  of  State denying or abandoning an application, or
 9    suspending  or  revoking  registration,  or   censuring   the
10    persons.  The  Secretary  of  State  may  designate  by rule,
11    regulation or order the statements,  information  or  reports
12    submitted  to  or  filed  with  him  or  her pursuant to this
13    Section 8 which the Secretary of State determines  are  of  a
14    sensitive  nature  and therefore should be exempt from public
15    disclosure.  Any such statement, information or report  shall
16    be  deemed  confidential  and  shall  not be disclosed to the
17    public except upon  the  consent  of  the  person  filing  or
18    submitting  the  statement, information or report or by order
19    of court or in court proceedings.

20        G.  The registration or re-registration of  a  dealer  or
21    limited  Canadian  dealer  and of all salespersons registered
22    upon application of the dealer  or  limited  Canadian  dealer
23    shall  expire  on the next succeeding anniversary date of the
24    registration  or  re-registration  of  the  dealer;  and  the
25    registration or re-registration of an investment adviser  and
26    of  all  investment  adviser  representatives registered upon
27    application of the investment adviser  shall  expire  on  the
28    next  succeeding  anniversary date of the registration of the
29    investment adviser; provided, that the Secretary of State may
30    by rule or regulation prescribe an alternate date  which  any
31    dealer  registered  under the Federal 1934 Act or a member of
32    any self-regulatory association approved pursuant thereto,  a
33    member of a self-regulatory organization or stock exchange in
 
SB1865 Engrossed            -22-     LRB093 03738 JLS 11715 b
 1    Canada, or any investment adviser may elect as the expiration
 2    date of its dealer or limited Canadian dealer and salesperson
 3    registrations,  or  the  expiration  date  of  its investment
 4    adviser registration, as the case may be.  A registration  of
 5    a  salesperson  registered  upon  application of an issuer or
 6    controlling  person  shall  expire  on  the  next  succeeding
 7    anniversary date of the registration, or upon termination  or
 8    expiration  of  the  registration  of the securities, if any,
 9    designated in the application for his or her registration  or
10    the  alternative  date as the Secretary may prescribe by rule
11    or regulation.  Subject to paragraph (9) of subsection  C  of
12    this  Section  8,  a  salesperson's  registration  also shall
13    terminate  upon  cessation  of  his  or  her  employment,  or
14    termination of his or her appointment  or  authorization,  in
15    each  case  by  the  person who applied for the salesperson's
16    registration, provided that the Secretary  of  State  may  by
17    rule  or  regulation  prescribe  an  alternate  date  for the
18    expiration of the registration.

19        H.  Applications for re-registration of dealers,  limited
20    Canadian  dealers,  salespersons,  investment  advisers,  and
21    investment  adviser  representatives  shall be filed with the
22    Secretary of State  prior  to  the  expiration  of  the  then
23    current  registration  and  shall contain such information as
24    may be required  by  the  Secretary  of  State  upon  initial
25    application  with such omission therefrom or addition thereto
26    as the Secretary of State may authorize or  prescribe.   Each
27    application for re-registration of a dealer, limited Canadian
28    dealer,  or  investment  adviser  shall  be  accompanied by a
29    filing  fee,  each  application  for  re-registration  as   a
30    salesperson  shall  be  accompanied  by  a  filing  fee and a
31    Securities  Audit  and  Enforcement  Fund   fee   established
32    pursuant to Section 11a of this Act, and each application for
33    re-registration as an investment adviser representative shall
34    be accompanied by a Securities Audit and Enforcement Fund fee
 
SB1865 Engrossed            -23-     LRB093 03738 JLS 11715 b
 1    established under Section 11a of this Act, which shall not be
 2    returnable  in  any  event.   Notwithstanding  the foregoing,
 3    applications for re-registration of dealers, limited Canadian
 4    dealers, and investment advisers may be filed within 30  days
 5    following  the  expiration  of the registration provided that
 6    the applicant pays the annual registration fee together  with
 7    an additional amount equal to the annual registration fee and
 8    files  any  other information or documents that the Secretary
 9    of State may prescribe by rule or regulation or  order.   Any
10    application  filed within 30 days following the expiration of
11    the registration shall be automatically effective as  of  the
12    time  of  the earlier expiration provided that the proper fee
13    has been paid to the Secretary of State.
14        Each  registered  dealer,  limited  Canadian  dealer,  or
15    investment adviser shall continue to  be  registered  if  the
16    registrant  changes  his,  her,  or  its form of organization
17    provided that the  dealer  or  investment  adviser  files  an
18    amendment  to  his, her, or its application not later than 30
19    days following the occurrence of  the  change  and  pays  the
20    Secretary  of  State  a  fee  in the amount established under
21    Section 11a of this Act.

22        I. (1)  Every registered dealer, limited Canadian dealer,
23    and investment adviser shall make and keep for such  periods,
24    such  accounts,  correspondence, memoranda, papers, books and
25    records as the Secretary of State may by rule  or  regulation
26    prescribe.   All records so required shall be preserved for 3
27    years unless the Secretary of State by  rule,  regulation  or
28    order prescribes otherwise for particular types of records.
29        (2)  Every  registered  dealer,  limited Canadian dealer,
30    and investment adviser shall file such financial  reports  as
31    the Secretary of State may by rule or regulation prescribe.
32        (3)  All  the  books and records referred to in paragraph
33    (1) of this subsection I are subject at any time or from time
34    to time to such reasonable periodic, special or other audits,
 
SB1865 Engrossed            -24-     LRB093 03738 JLS 11715 b
 1    examinations,  or  inspections  by  representatives  of   the
 2    Secretary  of  State,  within  or  without this State, as the
 3    Secretary of State deems  necessary  or  appropriate  in  the
 4    public interest or for the protection of investors.
 5        (4)  At the time of an audit, examination, or inspection,
 6    the  Secretary of State, by his or her designees, may conduct
 7    an interview of  any  person  employed  or  appointed  by  or
 8    affiliated with a registered dealer, limited Canadian dealer,
 9    or  investment  advisor,  provided  that  the dealer, limited
10    Canadian  dealer,  or  investment  advisor  shall  be   given
11    reasonable  notice  of  the time and place for the interview.
12    At the option of the  dealer,  limited  Canadian  dealer,  or
13    investment   advisor,  a  representative  of  the  dealer  or
14    investment advisor with supervisory responsibility  over  the
15    individual being interviewed may be present at the interview.

16        J.  The  Secretary  of  State  may  require  by  rule  or
17    regulation the payment of an additional fee for the filing of
18    information or documents required to be filed by this Section
19    which  have not been filed in a timely manner.  The Secretary
20    of State may also require by rule or regulation  the  payment
21    of an examination fee for administering any examination which
22    it may conduct pursuant to subsection B, C, D, or D-5 of this
23    Section 8.

24        K.  The  Secretary  of  State may declare any application
25    for registration or limited registration under this Section 8
26    abandoned by order if the applicant fails to pay any  fee  or
27    file  any information or document required under this Section
28    8 or by rule or regulation for more than 30  days  after  the
29    required  payment or filing date.  The applicant may petition
30    the Secretary of State for a hearing within 15 days after the
31    applicant's receipt of the  order  of  abandonment,  provided
32    that  the  petition  sets  forth  the  grounds upon which the
33    applicant seeks a hearing.
 
SB1865 Engrossed            -25-     LRB093 03738 JLS 11715 b
 1        L.  Any document being filed pursuant to this  Section  8
 2    shall  be  deemed  filed,  and any fee being paid pursuant to
 3    this Section 8 shall be deemed paid, upon the date of  actual
 4    receipt  thereof  by  the  Secretary  of  State or his or her
 5    designee.

 6        M.  The Secretary of State shall provide to the  Illinois
 7    Student  Assistance Commission annually or at mutually agreed
 8    periodic intervals the names and social security  numbers  of
 9    natural persons registered under subsections B, C, D, and D-5
10    of  this Section.  The Illinois Student Assistance Commission
11    shall determine if any student loan defaulter  is  registered
12    as   a  dealer,  limited  Canadian  dealer,  salesperson,  or
13    investment  adviser   under   this   Act   and   report   its
14    determination  to  the  Secretary  of  State  or  his  or her
15    designee.
16    (Source: P.A. 91-809, eff. 1-1-01; 92-308, eff. 1-1-02.)

17        (815 ILCS 5/11) (from Ch. 121 1/2, par. 137.11)
18        Sec. 11.  Duties and powers of the Secretary of State.
19        A. (1)  The administration of this Act is vested  in  the
20    Secretary of State, who may from time to time make, amend and
21    rescind  such  rules  and  regulations as may be necessary to
22    carry out this Act, including rules and regulations governing
23    procedures  of  registration,  statements,  applications  and
24    reports  for  various  classes  of  securities,  persons  and
25    matters within his  or  her  jurisdiction  and  defining  any
26    terms,  whether  or  not  used  in  this  Act, insofar as the
27    definitions are not inconsistent with this  Act.   The  rules
28    and  regulations adopted by the Secretary of State under this
29    Act shall be effective in the  manner  provided  for  in  the
30    Illinois Administrative Procedure Act.
31        (2)  Among  other  things,  the  Secretary of State shall
32    have authority, for the purposes of this  Act,  to  prescribe
33    the  form or forms in which required information shall be set
 
SB1865 Engrossed            -26-     LRB093 03738 JLS 11715 b
 1    forth, accounting practices, the items or details to be shown
 2    in balance sheets and earning statements, and the methods  to
 3    be  followed in the preparation of accounts, in the appraisal
 4    or valuation of assets and liabilities, in the  determination
 5    of  depreciation  and  depletion,  in  the differentiation of
 6    recurring and non-recurring income, in the differentiation of
 7    investment and operating income, and in  the  preparation  of
 8    consolidated balance sheets or income accounts of any person,
 9    directly  or  indirectly,  controlling  or  controlled by the
10    issuer, or any person under direct or indirect common control
11    with the issuer.
12        (3)  No provision of  this  Act  imposing  any  liability
13    shall  apply  to  any  act  done  or omitted in good faith in
14    conformity with any rule or regulation of  the  Secretary  of
15    State  under  this  Act,  notwithstanding  that  the  rule or
16    regulation may, after the act  or  omission,  be  amended  or
17    rescinded  or be determined by judicial or other authority to
18    be invalid for any reason.
19        (4)  The Securities  Department  of  the  Office  of  the
20    Secretary  of State shall be deemed a criminal justice agency
21    for purposes of all federal and state  laws  and  regulations
22    and,  in  that  capacity,  shall be entitled to access to any
23    information available to criminal justice  agencies  and  has
24    the   power   to   appoint  special  agents  to  conduct  all
25    investigations, searches, seizures, arrests, and other duties
26    imposed under the provisions of any law administered  by  the
27    Department.  The special agents have and may exercise all the
28    powers of peace officers solely for the purpose of  enforcing
29    provisions of this Act.
30        The   Director  must  authorize  to  each  special  agent
31    employed under this Section a distinct  badge  that,  on  its
32    face,  (i) clearly states that the badge is authorized by the
33    Department and (ii) contains a unique and identifying number.
34        Special   agents   shall   comply   with   all   training
 
SB1865 Engrossed            -27-     LRB093 03738 JLS 11715 b
 1    requirements established  for  law  enforcement  officers  by
 2    provisions of the Illinois Police Training Act.
 3        (5)  The  Secretary  of State, by rule, may conditionally
 4    or  unconditionally   exempt   any   person,   security,   or
 5    transaction,  or any class or classes of persons, securities,
 6    or transactions from any provision of Section 5, 6, 7, 8, 8a,
 7    or 9 of this Act or  of  any  rule  promulgated  under  these
 8    Sections,  to  the extent that such exemption is necessary or
 9    appropriate in the public interest, and  is  consistent  with
10    the protection of investors.
11        B.  The  Secretary  of State may, anything in this Act to
12    the contrary notwithstanding,  require  financial  statements
13    and reports of the issuer, dealer, salesperson, or investment
14    adviser,  or  investment  adviser  representative as often as
15    circumstances may warrant.  In  addition,  the  Secretary  of
16    State  may  secure  information  or books and records from or
17    through  others  and  may  make   or   cause   to   be   made
18    investigations respecting the business, affairs, and property
19    of  the issuer of securities, any person involved in the sale
20    or offer for sale, purchase  or  offer  to  purchase  of  any
21    mineral   investment   contract,  mineral  deferred  delivery
22    contract, or  security  and  of  dealers,  salespersons,  and
23    investment  advisers,  and investment adviser representatives
24    that are registered or are the subject of an application  for
25    registration  under  this Act.  The costs of an investigation
26    shall be borne by the registrant or the  applicant,  provided
27    that  the  registrant  or applicant shall not be obligated to
28    pay the costs without his, her or its consent in advance.
29        C.  Whenever it shall appear to the Secretary  of  State,
30    either  upon  complaint  or  otherwise, that this Act, or any
31    rule or regulation prescribed under  authority  thereof,  has
32    been or is about to be violated, he or she may, in his or her
33    discretion, do one or more both of the following:
34             (1)  require  or  permit the person to file with the
 
SB1865 Engrossed            -28-     LRB093 03738 JLS 11715 b
 1        Secretary of State a statement in writing under oath,  or
 2        otherwise,   as   to  all  the  facts  and  circumstances
 3        concerning the subject  matter  which  the  Secretary  of
 4        State   believes   to   be  in  the  public  interest  to
 5        investigate, audit, examine, or inspect; and
 6             (2)  conduct an investigation,  audit,  examination,
 7        or   inspection    as  necessary  or  advisable  for  the
 8        protection of the interests of the public; and.
 9             (3)  appoint   investigators    to    conduct    all
10        investigations,  searches,  seizures,  arrests, and other
11        duties  imposed  under  the   provisions   of   any   law
12        administered   by  the  Department.   The  Director  must
13        authorize  to  each  investigator  employed  under   this
14        Section  a  distinct badge that, on its face, (i) clearly
15        states that the badge is authorized by the Department and
16        (ii) contains a unique and identifying number.
17        D. (1)  For the purpose of  all  investigations,  audits,
18    examinations,  or  inspections  which  in  the opinion of the
19    Secretary  of  State  are  necessary  and  proper   for   the
20    enforcement  of  this Act, the Secretary of State or a person
21    designated by him or her is empowered to administer oaths and
22    affirmations, subpoena witnesses, take evidence, and require,
23    by subpoena or other lawful means provided by this Act or the
24    rules adopted by the Secretary of State,  the  production  of
25    any  books  and records, papers, or other documents which the
26    Secretary of State or a person designated by him or her deems
27    relevant or material to the inquiry.
28        (2)  The Secretary of State or a person designated by him
29    or  her  is  further  empowered  to  administer   oaths   and
30    affirmations,  subpoena witnesses, take evidence, and require
31    the production of any books and  records,  papers,  or  other
32    documents in this State at the request of a securities agency
33    of  another state, if the activities constituting the alleged
34    violation for which the information is  sought  would  be  in
 
SB1865 Engrossed            -29-     LRB093 03738 JLS 11715 b
 1    violation  of  Section  12  of this Act if the activities had
 2    occurred in this State.
 3        (3)  The Circuit Court of any County of this State,  upon
 4    application  of the Secretary of State or a person designated
 5    by him or her may order  the  attendance  of  witnesses,  the
 6    production   of  books  and  records,  papers,  accounts  and
 7    documents and the giving of testimony before the Secretary of
 8    State or a person designated by him or her; and  any  failure
 9    to  obey  the order may be punished by the Circuit Court as a
10    contempt thereof.
11        (4)  The fees of subpoenaed witnesses under this Act  for
12    attendance  and travel shall be the same as fees of witnesses
13    before the Circuit Courts of this State, to be paid when  the
14    witness  is  excused  from  further attendance, provided, the
15    witness is subpoenaed at the instance  of  the  Secretary  of
16    State;  and  payment of the fees shall be made and audited in
17    the same manner as other expenses of the Secretary of State.
18        (5)  Whenever a subpoena is issued at the  request  of  a
19    complainant  or  respondent as the case may be, the Secretary
20    of State may require that the cost of service and the fee  of
21    the witness shall be borne by the party at whose instance the
22    witness is summoned.
23        (6)  The  Secretary  of  State shall have power at his or
24    her discretion, to require a deposit to cover the cost of the
25    service and witness fees and the payment of the legal witness
26    fee and mileage to the witness served with subpoena.
27        (7)  A subpoena issued under this Act shall be served  in
28    the same manner as a subpoena issued out of a circuit court.
29        (8)  The  Secretary  of  State  may in any investigation,
30    audits, examinations, or  inspections  cause  the  taking  of
31    depositions  of persons residing within or without this State
32    in the manner provided in civil actions  under  the  laws  of
33    this State.
34        E.  Anything in this Act to the contrary notwithstanding:
 
SB1865 Engrossed            -30-     LRB093 03738 JLS 11715 b
 1             (1)  If  the  Secretary of State shall find that the
 2        offer or sale or proposed offer  or  sale  or  method  of
 3        offer  or  sale  of any securities by any person, whether
 4        exempt or not, in this State,  is  fraudulent,  or  would
 5        work  or  tend  to  work  a  fraud or deceit, or is being
 6        offered or sold in violation of Section 12, or there  has
 7        been  a  failure  or  refusal  to submit any notification
 8        filing or fee required under this Act, the  Secretary  of
 9        State  may by written order prohibit or suspend the offer
10        or sale of securities by that person or  deny  or  revoke
11        the  registration of the securities or the exemption from
12        registration for the securities.
13             (2)  If the Secretary of State shall find  that  any
14        person has violated subsection C, D, E, F, G, H, I, J, or
15        K  of  Section 12 of this Act, the Secretary of State may
16        by written order temporarily or permanently  prohibit  or
17        suspend   the   person   from  offering  or  selling  any
18        securities,  any  mineral  investment  contract,  or  any
19        mineral  deferred  delivery  contract  in   this   State,
20        provided  that  any person who is the subject of an order
21        of permanent prohibition may petition  the  Secretary  of
22        State for a hearing to present evidence of rehabilitation
23        or  change  in  circumstances justifying the amendment or
24        termination of the order of permanent prohibition.
25             (3)  If the Secretary of State shall find  that  any
26        person  is  engaging  or  has  engaged in the business of
27        selling or offering for sale securities as  a  dealer  or
28        salesperson  or  is  acting or has acted as an investment
29        adviser, investment adviser  representative,  or  federal
30        covered  investment adviser, without prior thereto and at
31        the time thereof having complied with the registration or
32        notice filing requirements of this Act, the Secretary  of
33        State may by written order prohibit or suspend the person
34        from  engaging in the business of selling or offering for
 
SB1865 Engrossed            -31-     LRB093 03738 JLS 11715 b
 1        sale securities, or  acting  as  an  investment  adviser,
 2        investment  adviser  representative,  or  federal covered
 3        investment adviser, in this State.
 4             (4)  In addition to any  other  sanction  or  remedy
 5        contained  in  this subsection E, the Secretary of State,
 6        after finding that any provision of  this  Act  has  been
 7        violated,   may  impose  a  fine  as  provided  by  rule,
 8        regulation or  order  not  to  exceed  $10,000  for  each
 9        violation  of  this  Act,  may  issue  an order of public
10        censure against the violator, and may charge as costs  of
11        investigation    all   reasonable   expenses,   including
12        attorney's fees and witness fees.
13        F. (1)  The Secretary of State shall not deny, suspend or
14    revoke  the registration of securities, suspend or revoke the
15    registration of a dealer, salesperson, or investment adviser,
16    or investment adviser representative, prohibit or suspend the
17    offer or sale of any  securities,  prohibit  or  suspend  any
18    person from offering or selling any securities in this State,
19    prohibit  or suspend a dealer or salesperson from engaging in
20    the business of selling  or  offering  for  sale  securities,
21    prohibit  or  suspend  a  person from acting as an investment
22    adviser or federal covered investment adviser, or  investment
23    adviser representative, impose any fine for violation of this
24    Act,  issue  an  order  of  public  censure, or enter into an
25    agreed settlement except after  an  opportunity  for  hearing
26    upon  not  less than 10 days notice given by personal service
27    or   registered  mail  or  certified  mail,  return   receipt
28    requested,  to  the person or persons concerned.  Such notice
29    shall state the date and time and place of  the  hearing  and
30    shall contain a brief statement of the proposed action of the
31    Secretary  of  State and the grounds for the proposed action.
32    A failure to appear at the hearing or  otherwise  respond  to
33    the  allegations  set  forth  in  the notice of hearing shall
34    constitute an admission of  any  facts  alleged  therein  and
 
SB1865 Engrossed            -32-     LRB093 03738 JLS 11715 b
 1    shall constitute sufficient basis to enter an order.
 2        (2)  Anything    herein   contained   to   the   contrary
 3    notwithstanding,  the  Secretary  of  State  may  temporarily
 4    prohibit or suspend, for a maximum period of 90 days,  by  an
 5    order   effective   immediately,   the   offer   or  sale  or
 6    registration of securities, the  registration  of  a  dealer,
 7    salesperson,   investment   adviser,  or  investment  adviser
 8    representative, or the offer or sale  of  securities  by  any
 9    person,  or  the  business  of  rendering  investment advice,
10    without the notice  and  prior  hearing  in  this  subsection
11    prescribed,  if  the  Secretary  of State shall in his or her
12    opinion, based on credible evidence,  deem  it  necessary  to
13    prevent  an  imminent  violation  of  this  Act or to prevent
14    losses to investors which the Secretary of  State  reasonably
15    believes  will occur as a result of a prior violation of this
16    Act.  Immediately after taking action without such notice and
17    hearing, the Secretary of State shall deliver a copy  of  the
18    temporary  order  to the respondent named therein by personal
19    service or registered mail or certified mail, return  receipt
20    requested.   The  temporary order shall set forth the grounds
21    for the action and  shall  advise  that  the  respondent  may
22    request  a  hearing,  that the request for a hearing will not
23    stop the  effectiveness  of  the  temporary  order  and  that
24    respondent's  failure  to  request  a  hearing within 30 days
25    after the date of the entry  of  the  temporary  order  shall
26    constitute  an  admission  of  any  facts alleged therein and
27    shall constitute sufficient basis to make the temporary order
28    final.  Any provision of this paragraph (2) to  the  contrary
29    notwithstanding,  the  Secretary of State may not pursuant to
30    the provisions of this paragraph (2) suspend the registration
31    of a dealer, limited Canadian dealer, salesperson, investment
32    adviser, or  investment  adviser  representative  based  upon
33    sub-paragraph (n) of paragraph (l) of subsection E of Section
34    8  of  this  Act  or revoke the registration of securities or
 
SB1865 Engrossed            -33-     LRB093 03738 JLS 11715 b
 1    revoke  the  registration   of   any   dealer,   salesperson,
 2    investment adviser representative, or investment adviser.
 3        (3)  The  Secretary  of State may issue a temporary order
 4    suspending or delaying the effectiveness of any  registration
 5    of securities under subsection A or B of Section 5, 6 or 7 of
 6    this  Act subsequent to and upon the basis of the issuance of
 7    any stop, suspension or similar order by the  Securities  and
 8    Exchange  Commission with respect to the securities which are
 9    the subject of the registration under subsection A  or  B  of
10    Section  5,  6  or  7 of this Act, and the order shall become
11    effective as of the date and time  of  effectiveness  of  the
12    Securities and Exchange Commission order and shall be vacated
13    automatically at such time as the order of the Securities and
14    Exchange Commission is no longer in effect.
15        (4)  When   the   Secretary   of   State  finds  that  an
16    application for registration as  a  dealer,  salesperson,  or
17    investment  adviser,  or  investment  adviser  representative
18    should  be  denied, the Secretary of State may enter an order
19    denying the  registration.   Immediately  after  taking  such
20    action,  the  Secretary  of State shall deliver a copy of the
21    order to the respondent named therein by personal service  or
22    registered  mail or certified mail, return receipt requested.
23    The order shall state the grounds for the action and that the
24    matter will be set for hearing  upon  written  request  filed
25    with  the Secretary of State within 30 days after the receipt
26    of the request by the respondent.  The  respondent's  failure
27    to  request  a  hearing  within  30 days after receipt of the
28    order shall constitute an  admission  of  any  facts  alleged
29    therein  and  shall  make  the  order final.  If a hearing is
30    held, the Secretary of State shall affirm, vacate, or  modify
31    the order.
32        (5)  The  findings and decision of the Secretary of State
33    upon the conclusion of each final hearing  held  pursuant  to
34    this  subsection shall be set forth in a written order signed
 
SB1865 Engrossed            -34-     LRB093 03738 JLS 11715 b
 1    on behalf of the Secretary of State by his  or  her  designee
 2    and shall be filed as a public record.  All hearings shall be
 3    held  before  a  person designated by the Secretary of State,
 4    and appropriate records thereof shall be kept.
 5        (6)  Notwithstanding  the  foregoing,  the  Secretary  of
 6    State, after notice and opportunity for hearing, may  at  his
 7    or   her   discretion   enter   into  an  agreed  settlement,
 8    stipulation or consent order with a respondent in  accordance
 9    with  the provisions of the Illinois Administrative Procedure
10    Act.  The provisions of the agreed settlement, stipulation or
11    consent order shall have the full  force  and  effect  of  an
12    order issued by the Secretary of State.
13        (7)  Anything    in    this    Act    to   the   contrary
14    notwithstanding, whenever the Secretary of State finds that a
15    person is currently expelled from, refused membership  in  or
16    association  with,  or  limited in any material capacity by a
17    self-regulatory organization  registered  under  the  Federal
18    1934  Act  or the Federal 1974 Act because of a fraudulent or
19    deceptive  act  or  a  practice  in  violation  of  a   rule,
20    regulation,    or    standard   duly   promulgated   by   the
21    self-regulatory organization, the Secretary of State may,  at
22    his  or her discretion, enter a Summary Order of Prohibition,
23    which shall prohibit the offer or  sale  of  any  securities,
24    mineral  investment  contract,  or  mineral deferred delivery
25    contract by the person in this State.  The order  shall  take
26    effect  immediately upon its entry.  Immediately after taking
27    the action the Secretary of State shall deliver a copy of the
28    order  to  the  named  Respondent  by  personal  service   or
29    registered  mail or certified mail, return receipt requested.
30    A person who is the subject of an Order  of  Prohibition  may
31    petition  the  Secretary  of  State  for a hearing to present
32    evidence  of  rehabilitation  or  change   in   circumstances
33    justifying  the  amendment  or  termination  of  the Order of
34    Prohibition.
 
SB1865 Engrossed            -35-     LRB093 03738 JLS 11715 b
 1        G.  No administrative action  shall  be  brought  by  the
 2    Secretary  of  State  for  relief  under  this Act or upon or
 3    because of any of the matters for which relief is granted  by
 4    this  Act  after the earlier to occur of (i) 3 years from the
 5    date upon which the Secretary of State had  notice  of  facts
 6    which  in  the exercise of reasonable diligence would lead to
 7    actual knowledge of the alleged violation of the Act, or (ii)
 8    5  years  from  the  date  on  which  the  alleged  violation
 9    occurred.
10        H.  The action of the  Secretary  of  State  in  denying,
11    suspending, or revoking the registration of a dealer, limited
12    Canadian   dealer,   salesperson,   investment   adviser,  or
13    investment adviser representative, in prohibiting any  person
14    from   engaging  in  the  business  of  offering  or  selling
15    securities  as  a  dealer,  limited   Canadian   dealer,   or
16    salesperson,  in  prohibiting or suspending the offer or sale
17    of securities by any person, in  prohibiting  a  person  from
18    acting  as  an investment adviser, federal covered investment
19    adviser, or investment adviser  representative,  in  denying,
20    suspending,  or  revoking  the registration of securities, in
21    prohibiting or suspending the offer or sale or proposed offer
22    or sale of securities, in imposing any fine for violation  of
23    this  Act,  or  in  issuing  any  order  shall  be subject to
24    judicial review in the Circuit Courts  of  Cook  or  Sangamon
25    Counties  in this State.  The Administrative Review Law shall
26    apply to and govern every action for the judicial  review  of
27    final  actions  or  decisions of the Secretary of State under
28    this Act.
29        I.  Notwithstanding any other provisions of this  Act  to
30    the  contrary,  whenever  it shall appear to the Secretary of
31    State that any person is engaged or about to  engage  in  any
32    acts  or  practices  which  constitute  or  will constitute a
33    violation of this Act or of any rule or regulation prescribed
34    under authority of this Act, the Secretary of  State  may  at
 
SB1865 Engrossed            -36-     LRB093 03738 JLS 11715 b
 1    his  or her discretion, through the Attorney General take any
 2    of the following actions:
 3             (1)  File a complaint  and  apply  for  a  temporary
 4        restraining  order  without  notice,  and  upon  a proper
 5        showing the court may enter a temporary restraining order
 6        without bond, to enforce this Act.; and
 7             (2)  File a complaint and apply for a preliminary or
 8        permanent injunction, and, after notice and a hearing and
 9        upon a proper showing, the court may grant a  preliminary
10        or  permanent  injunction  and may order the defendant to
11        make an offer of rescission with respect to any sales  or
12        purchases of securities, mineral investment contracts, or
13        mineral  deferred  delivery  contracts  determined by the
14        court to be unlawful under this Act.
15             (3)  Seek the seizure of assets when probable  cause
16        exists  that  the  assets  were  obtained  by a defendant
17        through conduct in violation of Section 12, paragraph  F,
18        G,  I,  J,  K, or L of this Act, and thereby subject to a
19        judicial forfeiture hearing as required under this Act.
20                  (a)  In the  event  that  such  probable  cause
21             exists  that  the subject of an investigation who is
22             alleged  to  have  committed  one  of  the  relevant
23             violations of this Act has in his possession  assets
24             obtained  as  a result of the conduct giving rise to
25             the violation, the Secretary of  State  may  seek  a
26             seizure warrant in any circuit court in Illinois.
27                  (b)  In   seeking   a   seizure   warrant,  the
28             Secretary of State, or his or  her  designee,  shall
29             submit  to the court a sworn affidavit detailing the
30             probable  cause  evidence  for  the   seizure,   the
31             location  of  the  assets to be seized, the relevant
32             violation under  Section  12  of  this  Act,  and  a
33             statement  detailing  any  known  owners or interest
34             holders in the assets.
 
SB1865 Engrossed            -37-     LRB093 03738 JLS 11715 b
 1                  (c)  Seizure of the assets shall be made by any
 2             peace officer upon process of  the  seizure  warrant
 3             issued by the court. Following the seizure of assets
 4             under  this  Act  and pursuant to a seizure warrant,
 5             notice of seizure, including a  description  of  the
 6             seized  assets, shall immediately be returned to the
 7             issuing court. Seized  assets  shall  be  maintained
 8             pending  a judicial forfeiture hearing in accordance
 9             with the instructions of the court.
10                  (d)  In the event  that  management  of  seized
11             assets becomes necessary to prevent the devaluation,
12             dissipation,  or otherwise to preserve the property,
13             the court  shall  have  jurisdiction  to  appoint  a
14             receiver,   conservator,   ancillary   receiver,  or
15             ancillary conservator for that purpose, as  provided
16             in item (2) of this subsection.
17             (4)  Seek  the forfeiture of assets obtained through
18        conduct in violation of Section 12, paragraph F, G, H, I,
19        J, K, or L when authorized by law.  A forfeiture must  be
20        ordered  by  a  circuit court or an action brought by the
21        Secretary of State as provided for in this Act,  under  a
22        verified complaint for forfeiture.
23                  (a)  In  the  event  assets  have  been  seized
24             pursuant  to  this Act, forfeiture proceedings shall
25             be instituted by the Attorney General within 45 days
26             of seizure.
27                  (b)  Service of the complaint filed  under  the
28             provisions  of  this Act shall be made in the manner
29             as provided in civil actions in this State.
30                  (c)  Only an owner of or interest holder in the
31             property  may  file  an  answer  asserting  a  claim
32             against the property.  For purposes of this Section,
33             the owner or interest holder shall be referred to as
34             claimant.
 
SB1865 Engrossed            -38-     LRB093 03738 JLS 11715 b
 1                  (d)  The answer must be signed by the owner  or
 2             interest  holder  under  penalty of perjury and must
 3             set forth:
 4                       (i)  the caption of the proceedings as set
 5                  forth on the notice of pending  forfeiture  and
 6                  the name of the claimant;
 7                       (ii)  the  address  at  which the claimant
 8                  will accept mail;
 9                       (iii)  the  nature  and  extent   of   the
10                  claimant's interest in the property;
11                       (iv)  the    date,    identity    of   the
12                  transferor, and circumstances of the claimant's
13                  acquisition of the interest in the property;
14                       (v)  the name and  address  of  all  other
15                  persons  known  to  have  an  interest  in  the
16                  property;
17                       (vi)  the  specific provisions of this Act
18                  relied on in asserting that the property is not
19                  subject to forfeiture;
20                       (vii)  all essential facts supporting each
21                  assertion; and
22                       (viii)  the precise relief sought.
23                  (e)  The answer must be filed  with  the  court
24             within 45 days after service of the complaint.
25                  (f)  A   property   interest   is  exempt  from
26             forfeiture under this Act if its owner  or  interest
27             holder  establishes  by  a preponderance of evidence
28             that the owner or interest holder:
29                       (i)  is not legally  accountable  for  the
30                  conduct  giving rise to the forfeiture, did not
31                  acquiesce in it, and did not know and could not
32                  reasonably have known of the  conduct  or  that
33                  the conduct was likely to occur;
34                       (ii)  with respect to conveyances, did not
 
SB1865 Engrossed            -39-     LRB093 03738 JLS 11715 b
 1                  hold  the  property jointly or in common with a
 2                  person  whose  conduct   gave   rise   to   the
 3                  forfeiture;
 4                       (iii)  does  not hold the property for the
 5                  benefit of or as a nominee for any person whose
 6                  conduct gave rise to  its  forfeiture  and  the
 7                  owner  or interest holder acquires it as a bona
 8                  fide  purchaser  for  value  without  knowingly
 9                  taking part in the conduct giving rise  to  the
10                  forfeiture; or
11                       (iv)  acquired   the  interest  after  the
12                  commencement of the conduct giving rise to  its
13                  forfeiture  and  the  owner  or interest holder
14                  acquired the interest as a  mortgagee,  secured
15                  creditor,  lienholder,  or  bona fide purchaser
16                  for value without knowledge of the conduct that
17                  gave rise to the forfeiture.
18                  (g)  The hearing must be held  within  60  days
19             after  the answer is filed unless continued for good
20             cause.
21                  (h)  During the probable cause portion  of  the
22             judicial  in rem proceeding wherein the Secretary of
23             State presents its  case-in-chief,  the  court  must
24             receive   and  consider,  among  other  things,  any
25             relevant hearsay evidence and information. The  laws
26             of evidence relating to civil actions shall apply to
27             all   other   portions   of   the  judicial  in  rem
28             proceeding.
29                  (i)  The Secretary  of  State  shall  show  the
30             existence  of  probable  cause for forfeiture of the
31             property. If the Secretary of State  shows  probable
32             cause,  the  claimant has the burden of showing by a
33             preponderance of the evidence  that  the  claimant's
34             interest   in   the   property  is  not  subject  to
 
SB1865 Engrossed            -40-     LRB093 03738 JLS 11715 b
 1             forfeiture.
 2                  (j)  If the Secretary of State  does  not  show
 3             the existence of probable cause or a claimant has an
 4             interest  that  is exempt under subdivision I (4)(d)
 5             of this Section, the court shall order the  interest
 6             in the property returned or conveyed to the claimant
 7             and  shall order all other property forfeited to the
 8             Secretary of State pursuant  to  all  provisions  of
 9             this  Act.  If  the Secretary of State does show the
10             existence of probable cause and  the  claimant  does
11             not  establish  by  a  preponderance of the evidence
12             that the claimant has an  interest  that  is  exempt
13             under subsection D herein, the court shall order all
14             the  property  forfeited  to  the Secretary of State
15             pursuant to the provisions of the Section.
16                  (k)  A  defendant  convicted  in  any  criminal
17             proceeding  is  precluded  from  later  denying  the
18             essential allegations of  the  criminal  offense  of
19             which  the defendant was convicted in any proceeding
20             for violations of the Act giving rise to  forfeiture
21             of  property herein regardless of the pendency of an
22             appeal from that conviction.  However,  evidence  of
23             the pendency of an appeal is admissible.
24                  (l)  An  acquittal  or  dismissal in a criminal
25             proceeding for violations of the Act giving rise  to
26             the forfeiture of property herein shall not preclude
27             civil proceedings under this provision; however, for
28             good  cause  shown,  on a motion by the Secretary of
29             State,  the  court   may   stay   civil   forfeiture
30             proceedings  during the criminal trial for a related
31             criminal   indictment   or   information    alleging
32             violation  of  the  provisions  of Section 12 of the
33             Illinois Securities Law of 1953. Property subject to
34             forfeiture under this Section shall not  be  subject
 
SB1865 Engrossed            -41-     LRB093 03738 JLS 11715 b
 1             to   return   or   release  by  a  court  exercising
 2             jurisdiction over  a  criminal  case  involving  the
 3             seizure of the property unless the return or release
 4             is consented to by the Secretary of State.
 5                  (m)  All property declared forfeited under this
 6             Act  vests  in  the  State  on the commission of the
 7             conduct giving rise to forfeiture together with  the
 8             proceeds  of  the property after that time. Any such
 9             property or proceeds subsequently transferred to any
10             person remain subject to forfeiture  and  thereafter
11             shall  be  ordered  forfeited  unless the transferee
12             claims  and  establishes  in  a  hearing  under  the
13             provisions  of  this  Act  that   the   transferee's
14             interest   is  exempt  under  the  Act.  Any  assets
15             forfeited to the  State  shall  be  disposed  of  in
16             following manner:
17                       (i)  all  forfeited  property  and  assets
18                  shall  be  liquidated by the Secretary of State
19                  in accordance with all laws and rules governing
20                  the disposition of such property;
21                       (ii)  the Secretary of State shall provide
22                  the court at the time the property  and  assets
23                  are  declared forfeited a verified statement of
24                  investors subject to the conduct giving rise to
25                  the forfeiture;
26                       (iii)  after payment of any costs of sale,
27                  receivership,   storage,   or   expenses    for
28                  preservation  of  the  property  seized,  other
29                  costs  to  the  State, and payment to claimants
30                  for any amount deemed exempt  from  forfeiture,
31                  the   proceeds   from   liquidation   shall  be
32                  distributed pro rata to  investors  subject  to
33                  the conduct giving rise to the forfeiture; and
34                       (iv)  any  proceeds  remaining  after  all
 
SB1865 Engrossed            -42-     LRB093 03738 JLS 11715 b
 1                  verified  investors  have been made whole shall
 2                  be distributed 25% to the Securities  Investors
 3                  Education Fund, 25% to the Securities Audit and
 4                  Enforcement  Fund,  25% to the Attorney General
 5                  or  any  State's  Attorney  bringing   criminal
 6                  charges  for  the  conduct  giving  rise to the
 7                  forfeiture, and 25% to  other  law  enforcement
 8                  agencies  participating in the investigation of
 9                  the criminal charges  for  the  conduct  giving
10                  rise  to  the  forfeiture. In the event that no
11                  other law enforcement agencies are involved  in
12                  the investigation of the conduct giving rise to
13                  the  forfeiture,  then the portion to other law
14                  enforcement agencies shall  be  distributed  to
15                  the Securities Investors Education Fund.
16                  (n)  The  Secretary  of  State  shall notify by
17             certified mail, return receipt requested, all  known
18             investors   in   the   matter  giving  rise  to  the
19             forfeiture of the forfeiture proceeding and sale  of
20             assets forfeited arising from the violations of this
21             Act,  and shall further publish notice in a paper of
22             general circulation in the  district  in  which  the
23             violations  were prosecuted. The notice to investors
24             shall  identify  the  name,   address,   and   other
25             identifying    information   about   any   defendant
26             prosecuted for violations of this Act that  resulted
27             in  forfeiture and sale of property, the offense for
28             which the defendant  was  convicted,  and  that  the
29             court  has  ordered  forfeiture and sale of property
30             for claims  of  investors  who  incurred  losses  or
31             damages as a result of the violations. Investors may
32             then  file  a  claim  in  a  form  prescribed by the
33             Secretary of State in order to share in disbursement
34             of the proceeds from sale of the forfeited property.
 
SB1865 Engrossed            -43-     LRB093 03738 JLS 11715 b
 1             Investor claims must be filed with the Secretary  of
 2             State  within 30 days after receipt of the certified
 3             mail return receipt, or within  30  days  after  the
 4             last  date of publication of the general notice in a
 5             paper of general  circulation  in  the  district  in
 6             which  the  violations  were  prosecuted,  whichever
 7             occurs last.
 8                  (o)  A  civil action under this subsection must
 9             be commenced within 5 years after the  last  conduct
10             giving rise to the forfeiture became known or should
11             have  become  known or 5 years after the forfeitable
12             property  is   discovered,   whichever   is   later,
13             excluding  time  during which either the property or
14             claimant is out of this State or in  confinement  or
15             during  which  criminal  proceedings relating to the
16             same conduct are in progress.
17                  (p)  If property is seized for evidence and for
18             forfeiture,  the  time   periods   for   instituting
19             judicial  forfeiture  proceedings  shall  not  begin
20             until  the  property  is  no  longer  necessary  for
21             evidence.
22                  (q)  Notwithstanding  other  provisions of this
23             Act, the  Secretary  of  State  and  a  claimant  of
24             forfeitable  property  may enter into an agreed-upon
25             settlement concerning the  forfeitable  property  in
26             such an amount and upon such terms as are set out in
27             writing in a settlement agreement.
28                  (r)  Nothing   in   this  Act  shall  apply  to
29             property  that  constitutes  reasonable  bona   fide
30             attorney's  fees  paid  to  an attorney for services
31             rendered  or  to  be  rendered  in  the   forfeiture
32             proceeding  or criminal proceeding relating directly
33             thereto  when  the  property  was  paid  before  its
34             seizure and  before  the  issuance  of  any  seizure
 
SB1865 Engrossed            -44-     LRB093 03738 JLS 11715 b
 1             warrant  or  court order prohibiting transfer of the
 2             property and when the attorney, at the  time  he  or
 3             she  received the property, did not know that it was
 4             property subject to forfeiture under this Act.
 5        The court shall further have jurisdiction and  authority,
 6    in  addition  to the penalties and other remedies in this Act
 7    provided, to enter an order for the appointment of the  court
 8    or a person as a receiver, conservator, ancillary receiver or
 9    ancillary  conservator  for  the defendant or the defendant's
10    assets located in this  State,  or  to  require  restitution,
11    damages or disgorgement of profits on behalf of the person or
12    persons  injured  by  the  act  or  practice constituting the
13    subject matter of the action, and may  assess  costs  against
14    the  defendant  for  the use of the State; provided, however,
15    that the civil remedies of rescission and  appointment  of  a
16    receiver,   conservator,   ancillary  receiver  or  ancillary
17    conservator shall not be  available  against  any  person  by
18    reason of the failure to file with the Secretary of State, or
19    on  account  of  the contents of, any report of sale provided
20    for in subsection G or P  of  Section  4,  paragraph  (2)  of
21    subsection  D  of  Sections  5  and  6,  or  paragraph (2) of
22    subsection F of Section 7 of this Act. Appeals may  be  taken
23    as in other civil cases.
24        J.  In  no  case  shall the Secretary of State, or any of
25    his or her employees or agents, in the administration of this
26    Act, incur any official or personal liability by  instituting
27    an  injunction  or other proceeding or by denying, suspending
28    or revoking the registration of a dealer or  salesperson,  or
29    by  denying,  suspending  or  revoking  the  registration  of
30    securities or prohibiting the offer or sale of securities, or
31    by  suspending  or  prohibiting  any  person from acting as a
32    dealer,  limited  Canadian  dealer,  salesperson,  investment
33    adviser,  or  investment  adviser  representative   or   from
34    offering or selling securities.
 
SB1865 Engrossed            -45-     LRB093 03738 JLS 11715 b
 1        K.  No  provision  of  this  Act  shall  be  construed to
 2    require or to authorize the Secretary of State to require any
 3    investment adviser  or  federal  covered  investment  adviser
 4    engaged  in  rendering  investment  supervisory  services  to
 5    disclose  the identity, investments, or affairs of any client
 6    of the  investment  adviser  or  federal  covered  investment
 7    adviser, except insofar as the disclosure may be necessary or
 8    appropriate  in  a  particular  proceeding  or  investigation
 9    having as its object the enforcement of this Act.
10        L.  Whenever,  after  an  examination,  investigation  or
11    hearing,  the  Secretary of State deems it of public interest
12    or advantage, he or she may certify a record to  the  State's
13    Attorney  of  the  county  in  which  the  act complained of,
14    examined or investigated occurred.  The State's  Attorney  of
15    that  county within 90 days after receipt of the record shall
16    file a written statement at the Office of  the  Secretary  of
17    State,  which statement shall set forth the action taken upon
18    the record, or if no action has been taken  upon  the  record
19    that  fact,  together  with  the  reasons  therefor, shall be
20    stated.
21        M.  The Secretary of State may initiate, take, pursue, or
22    prosecute any action authorized or permitted under Section 6d
23    of the Federal 1974 Act.
24        N. (1)  Notwithstanding any provision of this Act to  the
25    contrary,     to     encourage     uniform    interpretation,
26    administration, and enforcement of  the  provisions  of  this
27    Act, the Secretary of State may cooperate with the securities
28    agencies  or  administrators  of one or more states, Canadian
29    provinces or territories, or another country, the  Securities
30    and   Exchange  Commission,  the  Commodity  Futures  Trading
31    Commission, the Securities Investor  Protection  Corporation,
32    any  self-regulatory  organization,  and any governmental law
33    enforcement or regulatory agency.
34        (2)  The cooperation authorized by paragraph (1) of  this
 
SB1865 Engrossed            -46-     LRB093 03738 JLS 11715 b
 1    subsection includes, but is not limited to, the following:
 2             (a)  establishing  or  participating  in  a  central
 3        depository  or  depositories  for registration under this
 4        Act and for documents or records required under this Act;
 5             (b)  making a joint audit, inspection,  examination,
 6        or investigation;
 7             (c)  holding a joint administrative hearing;
 8             (d)  filing   and   prosecuting  a  joint  civil  or
 9        criminal proceeding;
10             (e)  sharing and exchanging personnel;
11             (f)  sharing   and   exchanging   information    and
12        documents; or
13             (g)  issuing any joint statement or policy.
14    (Source: P.A. 91-809, eff. 1-1-01; 92-308, eff. 1-1-02.)

15        (815 ILCS 5/11b) (from Ch. 121 1/2, par. 137.11b)
16        Sec.  11b.   Special  funds.   All moneys received by the
17    State of Illinois in furtherance of activities,  duties,  and
18    responsibilities  under  the  Illinois Securities Law of 1953
19    from government or  non-governmental  sources,  except  funds
20    received pursuant to Section 981, 982, or 1963 of Title 18 of
21    the  United  States  Code,  which shall be deposited into the
22    Securities Audit and Enforcement Fund, and funds  payable  as
23    specific  grants  or  the  fines,  payments, or fees required
24    under Section 5, 6, 7, or 8, or in connection with violations
25    of Section 12 of this Act, the Business Opportunity Sales Law
26    of 1995, the Illinois Business Brokers Act of  1995,  or  the
27    Illinois  Loan  Brokers  Act of 1995 to be deposited into the
28    Securities Investors Education Fund or the  Securities  Audit
29    and  Enforcement Fund, shall be placed in the General Revenue
30    Fund of the State treasury.
31    (Source: P.A. 89-209, eff. 1-1-96.)

32        (815 ILCS 5/12) (from Ch. 121 1/2, par. 137.12)
 
SB1865 Engrossed            -47-     LRB093 03738 JLS 11715 b
 1        Sec. 12.  Violation.  It shall  be  a  violation  of  the
 2    provisions of this Act for any person:
 3        A.  To  offer  or  sell any security except in accordance
 4    with the provisions of this Act.
 5        B.  To deliver to a purchaser any security required to be
 6    registered under Section 5, Section 6  or  Section  7  hereof
 7    unless accompanied or preceded by a prospectus that meets the
 8    requirements  of  the pertinent subsection of Section 5 or of
 9    Section 6 or of Section 7.
10        C.  To act as a dealer, salesperson, investment  adviser,
11    or  investment  adviser  representative, unless registered as
12    such,  where  such  registration  is  required,   under   the
13    provisions of this Act.
14        D.  To  fail  to  file  with  the  Secretary of State any
15    application, report or document required to  be  filed  under
16    the  provisions of this Act or any rule or regulation made by
17    the Secretary of State pursuant to this Act  or  to  fail  to
18    comply  with the terms of any order of the Secretary of State
19    issued pursuant to Section 11 hereof.
20        E.  To make, or cause to be made, (1) in any application,
21    report or document filed  under  this  Act  or  any  rule  or
22    regulation  made  by  the Secretary of State pursuant to this
23    Act, any statement which was false or misleading with respect
24    to any material fact or (2) any statement to the effect  that
25    a  security  (other  than  a  security issued by the State of
26    Illinois) has been in any way endorsed  or  approved  by  the
27    Secretary of State or the State of Illinois.
28        F.  To  engage  in any transaction, practice or course of
29    business  in  connection  with  the  sale  or   purchase   of
30    securities  which  works  or  tends to work a fraud or deceit
31    upon the purchaser or seller thereof.
32        G.  To obtain money  or  property  through  the  sale  of
33    securities  by  means  of  any untrue statement of a material
34    fact or any omission to state a material  fact  necessary  in
 
SB1865 Engrossed            -48-     LRB093 03738 JLS 11715 b
 1    order  to  make  the  statements  made,  in  the light of the
 2    circumstances under which they were made, not misleading.
 3        H.  To sign or circulate any  statement,  prospectus,  or
 4    other paper or document required by any provision of this Act
 5    or  pertaining  to  any security knowing or having reasonable
 6    grounds to know any material representation therein contained
 7    to be false or untrue.
 8        I.  To employ any device, scheme or artifice  to  defraud
 9    in  connection  with  the  sale  or purchase of any security,
10    directly or indirectly.
11        J.  When acting  as  an  investment  adviser,  investment
12    adviser   representative,   or   federal  covered  investment
13    adviser,  by  any  means  or  instrumentality,  directly   or
14    indirectly:
15             (1)  To  employ  any  device,  scheme or artifice to
16        defraud any client or prospective client;
17             (2)  To engage  in  any  transaction,  practice,  or
18        course  of  business  which operates as a fraud or deceit
19        upon any client or prospective client; or
20             (3)  To engage in any act, practice,  or  course  of
21        business  which is fraudulent, deceptive or manipulative.
22        The Secretary of State shall for  the  purposes  of  this
23        paragraph  (3),  by  rules  and  regulations,  define and
24        prescribe means reasonably designed to prevent such acts,
25        practices, and courses of  business  as  are  fraudulent,
26        deceptive, or manipulative.
27        K.  When  offering  or  selling  any  mineral  investment
28    contract or mineral deferred delivery contract:
29             (1)  To  employ  any  device, scheme, or artifice to
30        defraud any customer, prospective customer, or offeree;
31             (2)  To engage  in  any  transaction,  practice,  or
32        course  of  business  that  operates as a fraud or deceit
33        upon any customer, prospective customer, or offeree; or
34             (3)  To engage in any act, practice,  or  course  of
 
SB1865 Engrossed            -49-     LRB093 03738 JLS 11715 b
 1        business  that is fraudulent, deceptive, or manipulative.
 2        The Secretary of State shall for  the  purposes  of  this
 3        paragraph  (3),  by  rules  and  regulations,  define and
 4        prescribe means  reasonably  designed  to  prevent  acts,
 5        practices,  and  courses  of  business as are fraudulent,
 6        deceptive, or manipulative.
 7        L.  To  knowingly  influence,  coerce,   manipulate,   or
 8    mislead  any  person  engaged  in the preparation or audit of
 9    financial statements or appraisals to be used in the offer or
10    sale  of  securities  for  the  purpose  of  rendering   such
11    financial statements or appraisals materially misleading.
12    (Source: P.A. 90-70, eff. 7-8-97; 91-809, eff. 1-1-01.)

13        (815 ILCS 5/14) (from Ch. 121 1/2, par. 137.14)
14        Sec. 14.  Sentence.
15        A.  Any  person  who  violates  any  of the provisions of
16    subsection A, B, C, or D of Section 12 or  paragraph  (3)  of
17    subsection  K  of Section 12 of this Act shall be guilty of a
18    Class 4 felony.
19        B.  Any person who violates  any  of  the  provisions  of
20    subsection  E,  F,  G, H, I, or J, or paragraph (1) or (2) of
21    subsection K, or subsection L of Section 12 of this Act shall
22    be guilty of a Class 3 felony.
23        B-5.  A person who violates a provision of subsection  E,
24    F,  G,  H, I, or J or paragraph (1) or (2) of subsection K of
25    Section 12 of this Act by use of a plan, program, or campaign
26    that is conducted  using  one  or  more  telephones  for  the
27    purpose  of  inducing  the  purchase or sale of securities is
28    guilty of a Class 2 felony.
29        B-10.  A  person  who  in  the  course  of  violating   a
30    provision  of subsection E, F, G, H, I, or J or paragraph (1)
31    or (2) of subsection K of Section 12 of this  Act  induces  a
32    person  60  years  of  age  or  older  to  purchase  or  sell
33    securities is guilty of a Class 2 felony.
 
SB1865 Engrossed            -50-     LRB093 03738 JLS 11715 b
 1        C.  No prosecution for violation of any provision of this
 2    Act  shall  bar  or  be  barred  by  any  prosecution for the
 3    violation of any other provision of this Act or of any  other
 4    statute;  but  all  prosecutions under this Act or based upon
 5    any provision of this Act must be commenced  within  3  years
 6    after  the  violation  upon  which such prosecution is based;
 7    provided however,  that  if  the  accused  has  intentionally
 8    concealed  evidence  of a violation of subsection E, F, G, H,
 9    I, J, or  K  of  Section  12  of  this  Act,  the  period  of
10    limitation  prescribed  herein  shall  be  extended  up to an
11    additional 2  years  after  the  proper  prosecuting  officer
12    becomes  aware  of the offense but in no such event shall the
13    period of limitation so extended be more than 2 years  beyond
14    the expiration of the period otherwise applicable.
15        D.  For  the  purposes  of this Act all persons who shall
16    sell or offer for sale, or who shall  purchase  or  offer  to
17    purchase,  securities  in violation of the provisions of this
18    Act, or who shall in any manner knowingly authorize,  aid  or
19    assist in any unlawful conduct under this Act shall be deemed
20    sale  or  offering  for sale or unlawful purchase or offer to
21    purchase shall be deemed equally guilty, and may be tried and
22    punished in  the  county  in  which  said  unlawful  sale  or
23    offering  for  sale or unlawful purchase or offer to purchase
24    was made, or in the county in which the securities so sold or
25    offered for sale or so purchased or offered to  be  purchased
26    were  delivered  or proposed to be delivered to the purchaser
27    thereof or by the seller thereof, as the case may be.
28        E.  Any person who shall be convicted of a second or  any
29    subsequent  offense  specified  in  subsection A, B, C, D, or
30    paragraph (3) of subsection K of Section 12 of this Act shall
31    be guilty of a Class 3 felony, and any person  who  shall  be
32    convicted  of a second or any subsequent offense specified in
33    subsection E, F, G, H, I, J,  or  paragraph  (1)  or  (2)  of
34    subsection  K  of Section 12 of this Act shall be guilty of a
 
SB1865 Engrossed            -51-     LRB093 03738 JLS 11715 b
 1    Class 2 felony.
 2        F.  If any person referred to in this Section  is  not  a
 3    natural  person, it may upon conviction of a first offense be
 4    fined up to  $25,000,  and  if  convicted  of  a  second  and
 5    subsequent  offense,  may be fined up to $50,000, in addition
 6    to any other sentence authorized by law.
 7        G.  This Act shall not be construed to repeal  or  affect
 8    any  law  now  in  force  relating  to  the  organization  of
 9    corporations  in  this  State or the admission of any foreign
10    corporation to do business in this State.
11        H.  For the purposes of this Act, all persons who sell or
12    offer for sale, or who purchase  or  offer  to  purchase  any
13    mineral  investment  contract  or  mineral  deferred delivery
14    contract in violation of the provisions of this Act  or  who,
15    in  any  manner,  knowingly  authorize, aid, or assist in any
16    unlawful sale or offer for sale or unlawful purchase or offer
17    to  purchase  any  mineral  investment  contract  or  mineral
18    deferred delivery contract shall be deemed equally guilty and
19    may be tried and punished in the county in which the unlawful
20    sale or offer for sale  or  unlawful  purchase  or  offer  to
21    purchase  any mineral investment contract or mineral deferred
22    delivery contract was made or in  the  county  in  which  the
23    mineral  investment  contract  or  mineral  deferred delivery
24    contract so sold or offered  for  sale  or  so  purchased  or
25    offered  to  be  purchased  was  delivered  or proposed to be
26    delivered to the purchaser thereof or by the seller  thereof,
27    as the case may be, or in Sangamon County.
28    (Source: P.A. 92-308, eff. 1-1-02.)

29        Section  99.  Effective date.  This Act takes effect upon
30    becoming law.