SB1628sam001 101ST GENERAL ASSEMBLY

Sen. Ram Villivalam

Filed: 3/4/2019

10100SB1628sam001 LRB101 05279 JLS 56357 a

AMENDMENT TO SENATE BILL 1628

AMENDMENT NO. ______. Amend Senate Bill 1628 on page 1, by replacing line 5 with the following: "by changing Sections 2.11, 2.12b, 8, and 12 and by adding Section 3.5 as follows:

(815 ILCS 5/2.11) (from Ch. 121 1/2, par. 137.2-11)

Sec. 2.11. Investment adviser. "Investment adviser" means any person who, for compensation, engages in this State in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities or who, in this State for direct or indirect compensation and as part of a regular advisory business, issues or promulgates analyses or reports concerning securities or any financial planner or other person who, as an integral component of other financially related services, provides the foregoing investment advisory services to others for compensation and as part of a business, or who holds himself or herself out as providing the foregoing investment advisory services to others for compensation; but "investment adviser" does not include:

(1) a bank or trust company, or the regular employees of a bank or trust company;

(2) any lawyer, accountant, engineer, geologist or teacher (i) whose performance of such services is solely incidental to the practice of his or her profession or (ii) who:

(A) does not exercise investment discretion with respect to the assets of clients or maintain custody of the assets of clients for the purpose of investing those assets, except when the person is acting as a bona fide fiduciary in a capacity such as an executor, trustee, personal representative, estate or trust agent, guardian, conservator, or person serving in a similar fiduciary capacity;

(B) does not accept or receive, directly or indirectly, any commission, fee, or other remuneration contingent upon the purchase or sale of any specific security by a client of such person; and

(C) does not advise on the purchase or sale of specific securities, except that this clause (C) shall not apply when the advice about specific securities is based on financial statement analyses or tax considerations that are reasonably related to and in connection with the person's profession;

(3) any registered dealer or partner, officer, director or regular employee of a registered dealer, or registered salesperson, whose performance of these services, in each case, is solely incidental to the conduct of the business of the registered dealer or registered salesperson, as the case may be, and who receives no special compensation, directly or indirectly, for such services;

(4) any publisher or regular employee of such publisher of a bona fide newspaper, news magazine or business or financial publication of regular and established paid circulation;

(5) any person whose advice, analyses or reports relate only to securities which are direct obligations of, or obligations guaranteed as to principal or interest by, the United States, any state or any political subdivision of any state, or any public agency or public instrumentality of any one or more of the foregoing;

(5.5) any person who is a federal covered investment adviser; or

(6) any other persons who are not within the intent of this Section as the Secretary of State may designate by rules and regulations or order.

(Source: P.A. 90-70, eff. 7-8-97.)

(815 ILCS 5/2.12b) (from Ch. 121 1/2, par. 137.2-12b)

Sec. 2.12b. Investment adviser representative. "Investment adviser representative" means, with respect to an investment adviser who is required to register under this Act, any partner, officer, director of (or a person occupying a similar status or performing similar functions), or other natural person employed by or associated with an investment adviser, except clerical or ministerial personnel, who in this State:

(1) makes any recommendations or otherwise renders advice regarding securities or investment products;

(2) manages accounts or portfolios of clients;

(3) determines what recommendation or advice regarding securities or investments should be given;

(4) supervises any employee who performs any of the foregoing; or

(5) solicits, refers, offers, or negotiates for the sale of, or sells, investment advisory services.

With respect to a federal covered investment adviser, "investment adviser representative" means any person who is an investment adviser representative with a place of business in this State as such terms are defined by the Securities and Exchange Commission under Section 203A of the Federal 1940 Investment Advisers Act.

(Source: P.A. 90-70, eff. 7-8-97; 90-667, eff. 7-30-98; 91-809, eff. 1-1-01.)

(815 ILCS 5/3.5 new)

Sec. 3.5. Authority of Secretary of State. Notwithstanding any other law, the Secretary of State has the authority to enforce this Act as it pertains to the offer, sale, or investment advice concerning a covered security as defined by Section 2.29."; and

on page 32, by inserting immediately below line 4 the following:

"(815 ILCS 5/12) (from Ch. 121 1/2, par. 137.12)

Sec. 12. Violation. It shall be a violation of the provisions of this Act for any person:

A. To offer or sell any security except in accordance with the provisions of this Act.

B. To deliver to a purchaser any security required to be registered under Section 5, Section 6 or Section 7 hereof unless accompanied or preceded by a prospectus that meets the requirements of the pertinent subsection of Section 5 or of Section 6 or of Section 7.

C. To act as a dealer, Internet portal, salesperson, investment adviser, or investment adviser representative, unless registered as such, where such registration is required, under the provisions of this Act.

D. To fail to file with the Secretary of State any application, report or document required to be filed under the provisions of this Act or any rule or regulation made by the Secretary of State pursuant to this Act or to fail to comply with the terms of any order of the Secretary of State issued pursuant to Section 11 hereof.

E. To make, or cause to be made, (1) in any sworn testimony before the Secretary of State or the Illinois Securities Department within the Office of the Secretary, or application, report or document filed under this Act or any rule or regulation made by the Secretary of State pursuant to this Act, any statement which was false or misleading with respect to any material fact or (2) any statement to the effect that a security (other than a security issued by the State of Illinois) has been in any way endorsed or approved by the Secretary of State or the State of Illinois.

F. To engage in any transaction, practice or course of business in connection with the sale or purchase of securities which works or tends to work a fraud or deceit upon the purchaser or seller thereof.

G. To obtain money or property through the sale of securities by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.

H. To sign or circulate any statement, prospectus, or other paper or document required by any provision of this Act or pertaining to any security knowing or having reasonable grounds to know any material representation therein contained to be false or untrue.

I. To employ any device, scheme or artifice to defraud in connection with the sale or purchase of any security, directly or indirectly.

J. When acting as an investment adviser, investment adviser representative, or federal covered investment adviser, by any means or instrumentality, directly or indirectly:

(1) To employ any device, scheme or artifice to defraud any client or prospective client;

(2) To engage in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client; or

(3) To engage in any act, practice, or course of business which is fraudulent, deceptive or manipulative. The Secretary of State shall for the purposes of this paragraph (3), by rules and regulations, define and prescribe means reasonably designed to prevent such acts, practices, and courses of business as are fraudulent, deceptive, or manipulative.

K. When offering or selling any mineral investment contract or mineral deferred delivery contract:

(1) To employ any device, scheme, or artifice to defraud any customer, prospective customer, or offeree;

(2) To engage in any transaction, practice, or course of business that operates as a fraud or deceit upon any customer, prospective customer, or offeree; or

(3) To engage in any act, practice, or course of business that is fraudulent, deceptive, or manipulative. The Secretary of State shall for the purposes of this paragraph (3), by rules and regulations, define and prescribe means reasonably designed to prevent acts, practices, and courses of business as are fraudulent, deceptive, or manipulative.

L. To knowingly influence, coerce, manipulate, or mislead any person engaged in the preparation or audit of financial statements or appraisals to be used in the offer or sale of securities for the purpose of rendering such financial statements or appraisals materially misleading.

(Source: P.A. 99-182, eff. 1-1-16.)

(815 ILCS 5/2.10a rep.)

Section 10. The Illinois Securities Law of 1953 is amended by repealing Section 2.10a.

Section 99. Effective date. This Act takes effect July 1, 2019.".