Full Text of SB3162 96th General Assembly
SB3162eng 96TH GENERAL ASSEMBLY
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| AN ACT concerning public employee benefits.
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| Be it enacted by the People of the State of Illinois,
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| represented in the General Assembly:
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| Section 5. The Illinois Pension Code is amended by changing | 5 |
| Section 1-113.14 and by adding Section 1-113.15 as follows: | 6 |
| (40 ILCS 5/1-113.14) | 7 |
| Sec. 1-113.14. Investment services for retirement systems, | 8 |
| pension funds, and investment boards, except those funds | 9 |
| established under Articles 3 and 4. | 10 |
| (a) For the purposes of this Section, "investment services" | 11 |
| means services provided by an investment adviser or a | 12 |
| consultant other than qualified fund-of-fund management | 13 |
| services as defined in Section 1-113.15 . | 14 |
| (b) The selection and appointment of an investment adviser | 15 |
| or consultant for investment services by the board of a | 16 |
| retirement system, pension fund, or investment board subject to | 17 |
| this Code, except those whose investments are restricted by | 18 |
| Section 1-113.2, shall be made and awarded in accordance with | 19 |
| this Section. All contracts for investment services shall be | 20 |
| awarded by the board using a competitive process that is | 21 |
| substantially similar to the process required for the | 22 |
| procurement of professional and artistic services under | 23 |
| Article 35 of the Illinois Procurement Code. Each board of |
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| trustees shall adopt a policy in accordance with this | 2 |
| subsection (b) within 60 days after the effective date of this | 3 |
| amendatory Act of the 96th General Assembly. The policy shall | 4 |
| be posted on its web site and filed with the Illinois | 5 |
| Procurement Policy Board. Exceptions to this Section are | 6 |
| allowed for (i) sole source procurements, (ii) emergency | 7 |
| procurements, and (iii) at the discretion of the pension fund, | 8 |
| retirement system, or board of investment, contracts that are | 9 |
| nonrenewable and one year or less in duration, so long as the | 10 |
| contract has a value of less than $20,000.
All exceptions | 11 |
| granted under this Section must be published on the system's, | 12 |
| fund's, or board's web site, shall name the person authorizing | 13 |
| the procurement, and shall include a brief explanation of the | 14 |
| reason for the exception. | 15 |
| A person, other than a trustee or an employee of a | 16 |
| retirement system, pension fund, or investment board, may not | 17 |
| act as a consultant or investment adviser under this Section | 18 |
| unless that person is registered as an investment adviser under | 19 |
| the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1, | 20 |
| et seq.) or a bank, as defined in the federal Investment | 21 |
| Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.). | 22 |
| (c) Investment services provided by an investment adviser | 23 |
| or a consultant appointed under this Section shall be rendered | 24 |
| pursuant to a written contract between the investment adviser | 25 |
| or consultant and the board. | 26 |
| The contract shall include all of the following: |
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| (1) Acknowledgement in writing by the investment | 2 |
| adviser or consultant that he or she is a fiduciary with | 3 |
| respect to the pension fund or retirement system. | 4 |
| (2) The description of the board's investment policy | 5 |
| and notice that the policy is subject to change. | 6 |
| (3) (i) Full disclosure of direct and indirect fees, | 7 |
| commissions, penalties, and other compensation, including | 8 |
| reimbursement for expenses, that may be paid by or on | 9 |
| behalf of the consultant in connection with the provision | 10 |
| of services to the pension fund or retirement system and | 11 |
| (ii) a requirement that the consultant update the | 12 |
| disclosure promptly after a modification of those payments | 13 |
| or an additional payment. | 14 |
| (4) A requirement that the investment adviser or | 15 |
| consultant, in conjunction with the board's staff, submit | 16 |
| periodic written reports, on at least a quarterly basis, | 17 |
| for the board's review at its regularly scheduled meetings. | 18 |
| All returns on investment shall be reported as net returns | 19 |
| after payment of all fees, commissions, and any other | 20 |
| compensation. | 21 |
| (5) Disclosure of the names and addresses of (i) the | 22 |
| consultant or investment adviser; (ii) any entity that is a | 23 |
| parent of, or owns a controlling interest in, the | 24 |
| consultant or investment adviser; (iii) any entity that is | 25 |
| a subsidiary of, or in which a controlling interest is | 26 |
| owned by, the consultant or investment adviser; (iv) any |
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| persons who have an ownership or distributive income share | 2 |
| in the consultant or investment adviser that is in excess | 3 |
| of 7.5%; or (v) serves as an executive officer of the | 4 |
| consultant or investment adviser. | 5 |
| (6) A disclosure of the names and addresses of all | 6 |
| subcontractors, if applicable, and the expected amount of | 7 |
| money each will receive under the contract, including an | 8 |
| acknowledgment that the contractor must promptly make | 9 |
| notification, in writing, if at any time during the term of | 10 |
| the contract a contractor adds or changes any | 11 |
| subcontractors. For purposes of this subparagraph (6), | 12 |
| "subcontractor" does not include non-investment related | 13 |
| professionals or professionals offering services that are | 14 |
| not directly related to the investment of assets, such as | 15 |
| legal counsel, actuary, proxy-voting services, services | 16 |
| used to track compliance with legal standards, and | 17 |
| investment fund of funds where the board has no direct | 18 |
| contractual relationship with the investment advisers or | 19 |
| partnerships. | 20 |
| (7) A description of service to be performed. | 21 |
| (8) A description of the need for the service. | 22 |
| (9) A description of the plan for post-performance | 23 |
| review. | 24 |
| (10) A description of the qualifications necessary. | 25 |
| (11) The duration of the contract. | 26 |
| (12) The method for charging and measuring cost. |
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| (d) Notwithstanding any other provision of law, a | 2 |
| retirement system, pension fund, or investment board subject to | 3 |
| this Code, except those whose investments are restricted by | 4 |
| Section 1-113.2 of this Code, shall not enter into a contract | 5 |
| with a consultant that exceeds 5 years in duration. No contract | 6 |
| to provide consulting services may be renewed or extended. At | 7 |
| the end of the term of a contract, however, the consultant is | 8 |
| eligible to compete for a new contract as provided in this | 9 |
| Section. No retirement system, pension fund, or investment | 10 |
| board shall attempt to avoid or contravene the restrictions of | 11 |
| this subsection (d) by any means. | 12 |
| (e) Within 60 days after the effective date of this | 13 |
| amendatory Act of the 96th General Assembly, each investment | 14 |
| adviser or consultant currently providing services or subject | 15 |
| to an existing contract for the provision of services must | 16 |
| disclose to the board of trustees all direct and indirect fees, | 17 |
| commissions, penalties, and other compensation paid by or on | 18 |
| behalf of the investment adviser or consultant in connection | 19 |
| with the provision of those services and shall update that | 20 |
| disclosure promptly after a modification of those payments or | 21 |
| an additional payment. The person shall update the disclosure | 22 |
| promptly after a modification of those payments or an | 23 |
| additional payment. The disclosures required by this | 24 |
| subsection (e) shall be in writing and shall include the date | 25 |
| and amount of each payment and the name and address of each | 26 |
| recipient of a payment. |
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| (f) The retirement system, pension fund, or board of | 2 |
| investment shall develop uniform documents that shall be used | 3 |
| for the solicitation, review, and acceptance of all investment | 4 |
| services. The form shall include the terms contained in | 5 |
| subsection (c) of this Section. All such uniform documents | 6 |
| shall be posted on the retirement system's, pension fund's, or | 7 |
| investment board's web site. | 8 |
| (g) A description of every contract for investment services | 9 |
| shall be posted in a conspicuous manner on the web site of the | 10 |
| retirement system, pension fund, or investment board. The | 11 |
| description must include the name of the person or entity | 12 |
| awarded a contract, the total amount applicable to the | 13 |
| contract, the total fees paid or to be paid, and a disclosure | 14 |
| approved by the board describing the factors that contributed | 15 |
| to the selection of an investment adviser or consultant. | 16 |
| (Source: P.A. 96-6, eff. 4-3-09.) | 17 |
| (40 ILCS 5/1-113.15 new) | 18 |
| Sec. 1-113.15. Qualified fund-of-fund management services. | 19 |
| (a) As used in this Section: | 20 |
| "Qualified fund-of-fund management services" means either | 21 |
| (i) the services of an investment adviser acting in its | 22 |
| capacity as an investment manager of a fund-of-funds or (ii) an | 23 |
| investment adviser acting in its capacity as an investment | 24 |
| manager of a separate account that is invested on a | 25 |
| side-by-side basis in a substantially identical manner to a |
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| fund-of-funds, in each case pursuant to qualified written | 2 |
| agreements. | 3 |
| "Qualified written agreements" means one or more written | 4 |
| contracts to which the investment adviser and the board are | 5 |
| parties and includes all of the following: (i) the matters | 6 |
| described in items (1), (4), (5), (7), (11) and (12) of | 7 |
| subsection (c) of Section 1-113.14; (ii) a description of any | 8 |
| fees, commissions, penalties, and other compensation payable, | 9 |
| if any, directly by the retirement system, pension fund, or | 10 |
| investment board (which shall not include any fees, | 11 |
| commissions, penalties, and other compensation payable from | 12 |
| the assets of the fund-of-funds or separate account); (iii) a | 13 |
| description (or method of calculation) of the fees and expenses | 14 |
| payable by the Fund to the investment adviser, and the timing | 15 |
| of the payment of the fees or expenses; and (iv) a description | 16 |
| (or method of calculation) of any carried interest or other | 17 |
| performance based interests, fees or payments allocable by the | 18 |
| Fund to the investment adviser or an affiliate of the | 19 |
| investment adviser, and the priority of distributions with | 20 |
| respect to such interest. | 21 |
| (b) A description of every contract for qualified | 22 |
| fund-of-fund management services must be posted in a | 23 |
| conspicuous manner on the web site of the retirement system, | 24 |
| pension fund, or investment board. The description must include | 25 |
| the name of the fund-of-funds, the name of its investment | 26 |
| adviser, the total investment commitment of the retirement |
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| system, pension fund, or investment board to invest in such | 2 |
| fund-of-funds, and a disclosure approved by the board | 3 |
| describing the factors that contributed to the investment in | 4 |
| such fund-of-funds. No information that is exempt from | 5 |
| inspection pursuant to Section 7 of the Freedom of Information | 6 |
| Act shall be disclosed under this Section.
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| Section 99. Effective date. This Act takes effect upon | 8 |
| becoming law.
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