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90_HB0023ccr001
LRB9000434EGfgccr5
1 90TH GENERAL ASSEMBLY
2 CONFERENCE COMMITTEE REPORT
3 ON HOUSE BILL 23
4 -------------------------------------------------------------
5 -------------------------------------------------------------
6 To the President of the Senate and the Speaker of the
7 House of Representatives:
8 We, the conference committee appointed to consider the
9 differences between the houses in relation to Senate
10 Amendments Nos. 1 and 2 to House Bill 23, recommend the
11 following:
12 (1) that the House concur in Senate Amendments Nos. 1
13 and 2; and
14 (2) that House Bill 23, AS AMENDED, be further amended
15 as follows:
16 with reference to the page and line numbers of Senate
17 Amendment No. 1, on page 2, by replacing lines 18 through 22
18 with the following:
19 "This Act does not apply to pension funds or retirement
20 systems established under the Illinois Pension Code, except
21 as otherwise provided in that Code."; and
22 on page 2, in line 28, after "1-113.11,", by inserting
23 "1-113.12,"; and
24 on page 20, by replacing lines 23 through 26 with the
25 following:
26 "A dealer may not maintain possession of or control over
27 securities of a pension fund subject to the provisions of
28 this Section unless it is registered as a broker-dealer with
29 the U.S. Securities and Exchange Commission and is a member
30 in good standing of the National Association of Securities
31 Dealers, and (1) with respect to securities that are not
32 issued only in book-entry form, (A) all such securities of
33 each fund are either held in safekeeping in a place
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1 reasonably free from risk of destruction or held in custody
2 by a securities depository that is a "clearing agency"
3 registered with the U.S. Securities and Exchange Commission,
4 (B) the dealer is a member of the Securities Investor
5 Protection Corporation, (C) the dealer sends to each fund, no
6 less frequently than each calendar quarter, an itemized
7 statement showing the moneys and securities in the custody or
8 possession of the dealer at the end of such period, and (D)
9 an independent certified public account conducts an audit, no
10 less frequently than each calendar year, that reviews the
11 dealer's internal accounting controls and procedures for
12 safeguarding securities; and (2) with respect to securities
13 that are issued only in book-entry form, (A) all such
14 securities of each fund are held either in a securities
15 depository that is a "clearing agency" registered with the
16 U.S. Securities and Exchange Commission or in a bank that is
17 a member of the Federal Reserve System, (B) the dealer
18 records the ownership interest of the funds in such
19 securities on the dealer's books and records, (C) the dealer
20 is a member of the Securities Investor Protection
21 Corporation, (D) the dealer sends to each fund, no less
22 frequently than each calendar quarter, an itemized statement
23 showing the moneys and securities in the custody or
24 possession of the dealer at the end of such period, and (E)
25 the dealer's financial statement (which shall contain among
26 other things a statement of the dealer's net capital and its
27 required net capital computed in accordance with Rule 15c3-1
28 under the Securities Exchange Act of 1934) is audited
29 annually by an independent certified public accountant, and
30 the dealer's most recent audited financial statement is
31 furnished to the fund. No broker-dealer serving as a
32 custodian for any public pension fund as provided by this Act
33 shall be authorized to serve as an investment advisor for
34 that same public pension funds as described in Section
35 1-101.4 of this Code, to the extent that the investment
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1 advisor acquires or disposes of any asset of that same public
2 pension fund. Notwithstanding the foregoing, in no event may
3 a broker or dealer that is a natural person maintain
4 possession of or control over securities or other assets of a
5 pension fund subject to the provisions of this Section. In
6 maintaining securities of a pension fund subject to the
7 provisions of this Section, each dealer must maintain those
8 securities in conformity with the provisions of Rule
9 15c3-3(b) of the Securities Exchange Act of 1934 (Physical
10 Possession or Control of Securities). The Director of the
11 Department of Insurance may adopt such rules and regulations
12 as shall be necessary and appropriate in his or her judgment
13 to effectuate the purposes of this Section."; and
14 on page 21, by replacing lines 10 through 17 with the
15 following:
16 "(40 ILCS 5/1-113.9 new)
17 Sec. 1-113.9. Illegal investments. A person registered
18 as a dealer, salesperson, or investment adviser under the
19 Illinois Securities Law of 1953 who sells a pension fund a
20 security, or engages in a transaction with a pension fund,
21 that is not authorized by this Code, shall be subject to the
22 penalty provisions of Subsection E of Section 8 of the
23 Illinois Securities Law of 1953, if (1) the dealer,
24 salesperson, or investment adviser has discretionary
25 authority or control over the fund's assets and has
26 acknowledged in writing that it is acting in a fiduciary
27 capacity for the fund, (2) the fund has requested the
28 investment advice of the dealer, salesperson, or investment
29 adviser and has provided the dealer, salesperson, or
30 investment adviser with its investment policy, and the
31 dealer, salesperson, or investment adviser acknowledges in
32 writing that the fund is relying primarily on the investment
33 advice of that dealer, salesperson, or investment adviser, or
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1 (3) the dealer, salesperson, or investment adviser knows or
2 has reason to know that the fund is not capable of
3 independently evaluating investment risk or exercising
4 independent judgment with respect to a particular securities
5 transaction, and nonetheless recommends that the fund engage
6 in that transaction."; and
7 on page 21, in line 19, after "Illinois", by inserting "or a
8 broker-dealer"; and
9 on page 22, below line 5, by inserting the following:
10 "(40 ILCS 5/1-113.12 new)
11 Sec. 1-113.12. Application. Sections 1-113.1 through
12 1-113.10 apply only to pension funds established under
13 Article 3 or 4 of this Code."; and
14 on page 26, by replacing lines 3 through 5 with the
15 following:
16 "The Department may implement a flexible system of
17 examinations under which it directs resources as it deems
18 necessary or appropriate. In consultation with the pension
19 fund being examined, the Division may retain attorneys,
20 independent actuaries, independent certified public
21 accountants, and other professionals and specialists as
22 examiners, the cost of which (except in the case of pension
23 funds established under Article 3 or 4) shall be borne by the
24 pension fund that is the subject of the examination.
25 (b) The Division shall examine or investigate each
26 pension fund established under Article 3 or Article 4 of this
27 Code."; and
28 on page 28, below line 28, by inserting the following:
29 "The Division shall ensure that this automation is
30 designed so as to protect any confidential data it may
31 receive from a pension fund. This Section does not authorize
32 the Division or the Department of Insurance to disclose any
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1 information identifying specific pension fund participants or
2 relating to an identifiable pension fund participant.".
3 Submitted on , 1997.
4 ______________________________ _____________________________
5 Senator Fitzgerald Representative Murphy
6 ______________________________ _____________________________
7 Senator Madigan Representative Smith
8 ______________________________ _____________________________
9 Senator Walsh Representative Hannig
10 ______________________________ _____________________________
11 Senator Jacobs Representative Churchill
12 ______________________________ _____________________________
13 Senator Clayborne Representative Lindner
14 Committee for the Senate Committee for the House