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Sen. Daniel Biss
Filed: 5/3/2016
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1 | | AMENDMENT TO HOUSE BILL 6292
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2 | | AMENDMENT NO. ______. Amend House Bill 6292 by replacing |
3 | | everything after the enacting clause with the following:
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4 | | "Section 5. The Illinois Pension Code is amended by adding |
5 | | Sections 1-113.17, 1-113.17a, and 1-113.17b as follows: |
6 | | (40 ILCS 5/1-113.17 new) |
7 | | Sec. 1-113.17. Investment transparency; definitions. As |
8 | | used in this Section and Sections 1-113.17a and 1-113.17b: |
9 | | (a) "Affiliate" means any person directly or indirectly |
10 | | controlling or controlled by, or under direct or indirect |
11 | | common control with, another person. |
12 | | (a-5) "Alternative investment fund" means a private equity |
13 | | fund, hedge fund, absolute return fund, total return fund, or |
14 | | any investment pool that is privately organized, actively |
15 | | managed by investment professionals, and pays performance or |
16 | | incentive fees to investment managers. |
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1 | | (b) "Board" or "public retirement system board" means the |
2 | | board of trustees of a public retirement system and includes |
3 | | the Illinois State Board of Investment established under |
4 | | Article 22A of this Code. |
5 | | (c) "External manager" means either of the following: |
6 | | (1) A person who manages an alternative investment fund |
7 | | and who offers or sells, or has offered or sold, an |
8 | | ownership interest in the alternative investment fund to a |
9 | | board. |
10 | | (2) A general partner, managing member entity, fund |
11 | | manager, fund adviser, or other similar person or entity |
12 | | with decision-making authority over an alternative |
13 | | investment fund. |
14 | | (d) "External manager group" means (1) the external |
15 | | manager, (2) its affiliates, (3) any other parties described in |
16 | | the external manager's marketing materials for the relevant |
17 | | alternative investment fund as providing services to or on |
18 | | behalf of portfolio holdings, and (4) any other parties |
19 | | described in the external manager's affiliated adviser's SEC |
20 | | Form ADV filing as receiving portfolio holding fees or |
21 | | portfolio holding other compensation. "External manager group" |
22 | | does not include the affiliated alternative investment fund in |
23 | | which the public retirement system is an investor, nor does it |
24 | | include an alternative investment fund used to effectuate |
25 | | investments of the affiliated fund in which the public |
26 | | retirement system is an investor. |
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1 | | (e) "Marketing materials" means (1) a prospectus, (2) a |
2 | | private placement memorandum, (3) a prospective investor |
3 | | presentation, (4) a due diligence questionnaire, but only if |
4 | | the questions are authored by an external manager, or (5) any |
5 | | other written material provided by an external manager for the |
6 | | purpose of soliciting a commitment to an alternative investment |
7 | | fund. |
8 | | (f) "New agreement" means an agreement that is proposed or |
9 | | executed after January 1, 2017, and includes any modification |
10 | | to or amendment of such an agreement that modifies or alters |
11 | | any of the provisions required to be disclosed under Section |
12 | | 1-113.17a or 1-113.17b. "New agreement" also means any |
13 | | subsequent agreement that implements, memorializes, or |
14 | | provides detail about such an agreement. |
15 | | (g) "Person" means an individual, corporation, |
16 | | partnership, limited partnership, limited liability company, |
17 | | or association, either domestic or foreign. |
18 | | (h) "Portfolio holding" means any business, partnership, |
19 | | real property, or other business entity or asset in which an |
20 | | alternative investment fund has, at any time, held either an |
21 | | interest in the securities thereof or a real property interest |
22 | | in, or has acted as a lender to, the entity or asset. |
23 | | (i) "Portfolio holding fee" means the total payment |
24 | | obligation of a portfolio holding, regardless of whether it is |
25 | | actually paid or accrued, and regardless of whether the payment |
26 | | obligation is satisfied in cash, securities, or other |
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1 | | consideration, and regardless of whether it is incurred as |
2 | | compensation for services provided or as reimbursement for |
3 | | expenses incurred. |
4 | | (j) "Private equity fund" means a pooled investment entity |
5 | | that is, or holds itself out as being, engaged primarily, or |
6 | | proposes to engage primarily, in investment strategies |
7 | | involving equity or debt financings that are provided for |
8 | | purchasing or expanding private or public companies, or for |
9 | | related purposes such as financing for capital, research and |
10 | | development, introduction of a product or process into the |
11 | | marketplace, or similar needs requiring risk capital. This |
12 | | includes, but is not limited to, financing classified as |
13 | | venture capital, mezzanine, buyout, or growth funds. |
14 | | (k) "Public retirement system" means a pension fund or |
15 | | retirement system subject to this Code and includes the |
16 | | Illinois State Board of Investment established under Article |
17 | | 22A of this Code. |
18 | | (40 ILCS 5/1-113.17a new) |
19 | | Sec. 1-113.17a. Investment transparency; disclosure of |
20 | | alternative investment fund agreements. |
21 | | (a) The definitions in Section 1-113.17 of this Code apply |
22 | | to this Section. |
23 | | (b) Within 90 days after entering into an agreement to |
24 | | invest in an alternative investment fund, a public retirement |
25 | | system must disclose, in the manner provided under this |
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1 | | Section, the existence of the agreement and all of the |
2 | | following parts and provisions of the agreement: |
3 | | (1) All management fee waiver provisions, including, |
4 | | but not limited to, provisions that permit the external |
5 | | manager or general partner to waive fees, or that specify |
6 | | the mechanics of the fee waiver or its repayment, or that |
7 | | specify the magnitude of the fee waiver, or that are |
8 | | necessary to understand how the fee waiver works, and all |
9 | | defined terms related to or affecting the fee waiver. |
10 | | (2) All indemnification provisions, including, but not |
11 | | limited to, provisions that require the alternative |
12 | | investment fund or its investors to indemnify the external |
13 | | manager or general partner, or any of its affiliates, for |
14 | | settlements or judgments paid, and including all |
15 | | provisions necessary to understand how the indemnification |
16 | | works and all defined terms related to or affecting |
17 | | indemnification. |
18 | | (3) All clawback provisions, including, but not |
19 | | limited to, provisions that allow the external manager or |
20 | | general partner to pay back an amount less than the full |
21 | | cost of the overpayment received by the manager, and |
22 | | including all provisions necessary to understand how the |
23 | | clawback works and all defined terms related to or |
24 | | affecting clawbacks. |
25 | | (4) The cover page and signature block of the |
26 | | agreement. |
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1 | | However, in the case of a new agreement that consists of a |
2 | | modification of or amendment to a previous new agreement for |
3 | | which the disclosures required under this subsection have |
4 | | already been made, it is sufficient for the public retirement |
5 | | system (i) to identify the previous disclosures and disclose |
6 | | only the parts and provisions of the modification of or |
7 | | amendment to the agreement that modify, alter, or affect any of |
8 | | the provisions previously disclosed under this subsection or |
9 | | (ii) to make and disclose a finding that the modification or |
10 | | amendment does not modify, alter, or affect any of the |
11 | | provisions previously disclosed under this subsection, |
12 | | whichever is applicable. |
13 | | (c) The public retirement system shall make the disclosures |
14 | | required under subsection (b) by doing all of the following: |
15 | | (1) filing a copy of the required material with the |
16 | | Public Pension Division of the Illinois Department of |
17 | | Insurance; |
18 | | (2) filing a copy of the required material with the |
19 | | Illinois Secretary of State; and |
20 | | (3) posting and maintaining the required material on |
21 | | the public retirement system's website. |
22 | | (d) A new agreement shall not be deemed to be violated or |
23 | | made invalid by the public retirement system's good faith |
24 | | effort to make the disclosures required under subsection (b) of |
25 | | this Section, nor due to harmless or inadvertent failure by the |
26 | | public retirement system to correctly include or identify a |
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1 | | component of a required disclosure. |
2 | | (e) The following are public records and are subject to |
3 | | disclosure under the Freedom of Information Act: |
4 | | (1) All of the material required to be disclosed under |
5 | | subsection (b) of this Section. |
6 | | (2) Any amounts paid in indemnification and any amounts |
7 | | deducted from payments owed by the general partner or |
8 | | external manager under an agreement establishing or |
9 | | providing for participation in an alternative investment |
10 | | fund by a public retirement system, and any documents |
11 | | submitted to a public retirement system justifying the |
12 | | demand for payment relating to the indemnification. |
13 | | (3) The cover page and a legible copy of the executed |
14 | | signature block of any new agreement to establish or |
15 | | participate in an alternative investment fund by a public |
16 | | retirement system. |
17 | | (40 ILCS 5/1-113.17b new) |
18 | | Sec. 1-113.17b. Investment transparency; disclosure of |
19 | | certain investment fees. |
20 | | (a) The definitions in Section 1-113.17 of this Code apply |
21 | | to this Section. For the purposes of this Section, "carried |
22 | | interest" means a share of the profits of an alternative |
23 | | investment fund that is paid, accrued, or due to the general |
24 | | partner or the external manager or their affiliates. |
25 | | (b) This Section applies to any new agreement that a public |
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1 | | retirement system enters into in order to establish or |
2 | | participate in an alternative investment fund. A public |
3 | | retirement system shall not enter into such new agreement |
4 | | without a written undertaking by the alternative investment |
5 | | fund external managers and general partners that they will |
6 | | comply with this Section and the requirements of the public |
7 | | retirement system pursuant to subsection (c). |
8 | | (c) Every public retirement system shall require its |
9 | | alternative investment fund external managers and general |
10 | | partners to make the following disclosures annually, in a |
11 | | manner and form prescribed by the system, in regard to each |
12 | | alternative investment fund: |
13 | | (1) The fees and expenses that the public retirement |
14 | | system pays directly to the alternative investment fund, or |
15 | | to the alternative investment fund external manager or |
16 | | general partner. |
17 | | (2) The public retirement system's share of all fees |
18 | | and expenses not included in paragraph (1), including |
19 | | carried interest, that are paid or allocated from the |
20 | | alternative investment fund to the external manager or |
21 | | general partners, or that are deducted from payments owed |
22 | | from the external manager or general partners to the |
23 | | alternative investment fund. |
24 | | (3) The amount of all management fee waivers made by |
25 | | the alternative investment fund external managers or |
26 | | general partners. |
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1 | | (4) The total amount of portfolio holding fees incurred |
2 | | by each portfolio holding of the alternative investment |
3 | | fund as payment to any person who is a member of the |
4 | | external manager group. |
5 | | (d) A public retirement system shall make the information |
6 | | received under subsection (c) available by: |
7 | | (1) filing a copy of the received material with the |
8 | | Public Pension Division of the Illinois Department of |
9 | | Insurance; and |
10 | | (2) posting and maintaining the received information |
11 | | on the public retirement system's website, together with |
12 | | sufficient identifying and explanatory material to |
13 | | facilitate access and understanding by the public.
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14 | | Section 99. Effective date. This Act takes effect upon |
15 | | becoming law.".
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