Illinois General Assembly - Illinois Compiled Statutes

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40 ILCS 5/1-113.7

(40 ILCS 5/1-113.7)

Sec. 1-113.7.

Registration of investments; custody and safekeeping.

The
board of trustees may register the investments of its pension fund in the name
of the pension fund, in the nominee name of a bank or trust company authorized
to conduct a trust business in Illinois, or in the nominee name of the Illinois
Public Treasurer's Investment Pool.

The assets of the pension fund and ownership of its investments shall be
protected through third-party custodial safekeeping.  The board of trustees
may appoint as custodian of the investments of its pension fund the treasurer
of the municipality, a bank or trust company authorized to conduct a trust
business in Illinois, or the Illinois Public Treasurer's Investment Pool.

A dealer may not maintain possession of or control over securities of a
pension fund subject to the provisions of this Section unless it is registered
as a broker-dealer with the U.S. Securities and Exchange Commission and is a
member in good standing of the National Association of Securities Dealers, and
(1) with respect to securities that are not issued only in book-entry form,
(A) all such securities of each fund are either held in safekeeping in a place
reasonably free from risk of destruction or held in custody by a securities
depository that is a "clearing agency" registered with the U.S. Securities and
Exchange Commission, (B) the dealer is a member of the Securities Investor
Protection Corporation, (C) the dealer sends to each fund, no less frequently
than each calendar quarter, an itemized statement showing the moneys and
securities in the custody or possession of the dealer at the end of such
period, and (D) an independent certified public accountant
conducts an audit, no less frequently than each calendar year, that reviews
the dealer's internal accounting controls and procedures for safeguarding
securities; and (2) with respect
to securities that are issued only in book-entry form, (A) all such securities
of each fund are held either in a securities depository that is a "clearing
agency" registered with the U.S. Securities and Exchange Commission or in a
bank that is a member of the Federal Reserve System, (B) the dealer records the
ownership interest of the funds in such securities on the dealer's books and
records, (C) the dealer is a member of the Securities Investor Protection
Corporation, (D) the dealer sends to each fund, no less frequently than each
calendar quarter, an itemized statement showing the moneys and securities in
the custody or possession of the dealer at the end of such period, and (E) the
dealer's financial statement (which shall contain among other things a
statement of the dealer's net capital and its required net capital computed in
accordance with Rule 15c3-1 under the Securities Exchange Act of 1934) is
audited annually by an independent certified public accountant, and the
dealer's most recent audited financial statement is furnished to the fund.  No
broker-dealer serving as a custodian for any public pension fund as provided by
this Act shall be authorized to serve as an investment advisor for that same
public pension fund as described in Section 1-101.4 of this Code, to the
extent that the investment advisor acquires or disposes of any asset of that
same public pension fund.
Notwithstanding the foregoing, in no event may a broker or dealer that is a
natural person maintain possession of or control over securities or other
assets of a pension fund subject to the provisions of this Section.  In
maintaining securities of a pension fund subject to the provisions of this
Section, each dealer must maintain those securities in conformity with the
provisions of Rule 15c3-3(b) of the Securities Exchange Act of 1934 (Physical
Possession or Control of Securities).  The Director of the Department of
Insurance may adopt such rules and regulations as shall be necessary and
appropriate in his or her judgment to effectuate the purposes of this
Section.

A bank or trust company authorized to conduct a trust business in Illinois
shall register, deposit, or hold investments for safekeeping, all in accordance
with the obligations and subject to the limitations of the Securities in
Fiduciary Accounts Act.

(Source: P.A. 92-651, eff. 7-11-02.)