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90_SB0693eng
5 ILCS 220/15
30 ILCS 235/2 from Ch. 85, par. 902
Amends the Intergovernmental Cooperation Act and the
Public Funds Investment Act. Provides that nothing in the
Section concerning authorized investments for
intergovernmental risk management entities and nothing in the
Section concerning authorized investments for public agencies
shall be construed to allow an intergovernmental risk
management entity to accept the deposit of public funds
except for risk management purposes. Effective immediately.
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1 AN ACT concerning the deposit of public funds.
2 Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
4 Section 5. The Intergovernmental Cooperation Act is
5 amended by changing Section 15 as follows:
6 (5 ILCS 220/15)
7 Sec. 15. Authorized investments. In addition to other
8 investments authorized by law, an intergovernmental risk
9 management entity created under this Act with assets of at
10 least $5,000,000 and adopting an investment policy under
11 Section 16 of this Act may invest in any combination of the
12 following:
13 (1) the common stocks listed on a recognized
14 exchange or market;
15 (2) stock and convertible debt investments, or
16 investment grade corporate bonds, in or issued by any
17 corporation the book value of which shall not exceed 5%
18 of the total intergovernmental risk management entity's
19 investment account at book value in which those
20 securities are held, determined as of the date of the
21 investment, provided that investments in the stock of any
22 one corporation shall not exceed 5% of the total
23 outstanding stock of the corporation and that the
24 investments in the convertible debt of any one
25 corporation shall not exceed 5% of the total amount of
26 such debt that may be outstanding;
27 (3) the straight preferred stocks or convertible
28 preferred stocks and convertible debt securities issued
29 or guaranteed by a corporation whose common stock is
30 listed on a recognized exchange or market;
31 (4) mutual funds or commingled funds that meet the
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1 following requirements:
2 (i) the mutual fund or commingled fund is
3 managed by an investment company as defined and
4 registered under the federal Investment Company Act
5 of 1940 and registered under the Illinois Securities
6 Law of 1953 or an investment adviser as defined
7 under the federal Investment Advisers Act of 1940;
8 (ii) the mutual fund has been in operation for
9 at least 5 years; and
10 (iii) the mutual fund has total net assets of
11 $250,000,000 or more;
12 (5) commercial grade real estate located in the
13 State of Illinois.
14 Any investment advisor retained by the board of the
15 intergovernmental risk management entity must be a fiduciary,
16 who has the power to manage, acquire, or dispose of any asset
17 of the intergovernmental risk management entity, has
18 acknowledged in writing that he or she is a fiduciary with
19 respect to the intergovernmental risk management entity and
20 that he or she has read and understands the intergovernmental
21 risk management entity's investment policy and will adhere to
22 all of the principles and standards set forth in that policy,
23 and is one or more of the following:
24 (i) registered as an investment adviser under the
25 federal Investment Adviser Act of 1940;
26 (ii) registered as an investment adviser under the
27 Illinois Securities Law of 1953;
28 (iii) a bank, as defined in the federal Investment
29 Adviser Act of 1940;
30 (iv) an insurance company authorized to transact
31 business in this State.
32 Nothing in this Section shall be construed to authorize
33 an intergovernmental risk management entity to accept the
34 deposit of public funds except for risk management purposes.
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1 (Source: P.A. 89-592, eff. 8-1-96.)
2 Section 10. The Public Funds Investment Act is amended
3 by changing Section 2 as follows:
4 (30 ILCS 235/2) (from Ch. 85, par. 902)
5 Sec. 2. Authorized investments.
6 (a) Any public agency may invest any public funds as
7 follows:
8 (1) in bonds, notes, certificates of indebtedness,
9 treasury bills or other securities now or hereafter
10 issued, which are guaranteed by the full faith and credit
11 of the United States of America as to principal and
12 interest;
13 (2) in bonds, notes, debentures, or other similar
14 obligations of the United States of America or its
15 agencies;
16 (3) in interest-bearing savings accounts,
17 interest-bearing certificates of deposit or
18 interest-bearing time deposits or any other investments
19 constituting direct obligations of any bank as defined by
20 the Illinois Banking Act;
21 (4) in short term obligations of corporations
22 organized in the United States with assets exceeding
23 $500,000,000 if (i) such obligations are rated at the
24 time of purchase at one of the 3 highest classifications
25 established by at least 2 standard rating services and
26 which mature not later than 180 days from the date of
27 purchase, (ii) such purchases do not exceed 10% of the
28 corporation's outstanding obligations and (iii) no more
29 than one-third of the public agency's funds may be
30 invested in short term obligations of corporations; or
31 (5) in money market mutual funds registered under
32 the Investment Company Act of 1940, provided that the
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1 portfolio of any such money market mutual fund is limited
2 to obligations described in paragraph (1) or (2) of this
3 subsection and to agreements to repurchase such
4 obligations.
5 (a-1) In addition to any other investments authorized
6 under this Act, a municipality may invest its public funds in
7 interest bearing bonds of any county, township, city,
8 village, incorporated town, municipal corporation, or school
9 district. The bonds shall be registered in the name of the
10 municipality or held under a custodial agreement at a bank.
11 The bonds shall be rated at the time of purchase within the 4
12 highest general classifications established by a rating
13 service of nationally recognized expertise in rating bonds of
14 states and their political subdivisions.
15 (b) Investments may be made only in banks which are
16 insured by the Federal Deposit Insurance Corporation. Any
17 public agency may invest any public funds in short term
18 discount obligations of the Federal National Mortgage
19 Association or in shares or other forms of securities legally
20 issuable by savings banks or savings and loan associations
21 incorporated under the laws of this State or any other state
22 or under the laws of the United States. Investments may be
23 made only in those savings banks or savings and loan
24 associations the shares, or investment certificates of which
25 are insured by the Federal Deposit Insurance Corporation. Any
26 such securities may be purchased at the offering or market
27 price thereof at the time of such purchase. All such
28 securities so purchased shall mature or be redeemable on a
29 date or dates prior to the time when, in the judgment of such
30 governing authority, the public funds so invested will be
31 required for expenditure by such public agency or its
32 governing authority. The expressed judgment of any such
33 governing authority as to the time when any public funds will
34 be required for expenditure or be redeemable is final and
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1 conclusive. Any public agency may invest any public funds in
2 dividend-bearing share accounts, share certificate accounts
3 or class of share accounts of a credit union chartered under
4 the laws of this State or the laws of the United States;
5 provided, however, the principal office of any such credit
6 union must be located within the State of Illinois.
7 Investments may be made only in those credit unions the
8 accounts of which are insured by applicable law.
9 (c) For purposes of this Section, the term "agencies of
10 the United States of America" includes: (i) the federal land
11 banks, federal intermediate credit banks, banks for
12 cooperative, federal farm credit banks, or any other entity
13 authorized to issue debt obligations under the Farm Credit
14 Act of 1971 (12 U.S.C. 2001 et seq.) and Acts amendatory
15 thereto; (ii) the federal home loan banks and the federal
16 home loan mortgage corporation; and (iii) any other agency
17 created by Act of Congress.
18 (d) Except for pecuniary interests permitted under
19 subsection (f) of Section 3-14-4 of the Illinois Municipal
20 Code or under Section 3.2 of the Public Officer Prohibited
21 Practices Act, no person acting as treasurer or financial
22 officer or who is employed in any similar capacity by or for
23 a public agency may do any of the following:
24 (1) have any interest, directly or indirectly, in
25 any investments in which the agency is authorized to
26 invest.
27 (2) have any interest, directly or indirectly, in
28 the sellers, sponsors, or managers of those investments.
29 (3) receive, in any manner, compensation of any
30 kind from any investments in which the agency is
31 authorized to invest.
32 (e) Any public agency may also invest any public funds
33 in a Public Treasurers' Investment Pool created under Section
34 17 of the State Treasurer Act. Any public agency may also
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1 invest any public funds in a fund managed, operated, and
2 administered by a bank, subsidiary of a bank, or subsidiary
3 of a bank holding company or use the services of such an
4 entity to hold and invest or advise regarding the investment
5 of any public funds.
6 (f) To the extent a public agency has custody of funds
7 not owned by it or another public agency and does not
8 otherwise have authority to invest such funds, the public
9 agency may invest such funds as if they were its own. Such
10 funds must be released to the appropriate person at the
11 earliest reasonable time, but in no case exceeding 31 days,
12 after the private person becomes entitled to the receipt of
13 them. All earnings accruing on any investments or deposits
14 made pursuant to the provisions of this Act shall be credited
15 to the public agency by or for which such investments or
16 deposits were made, except as provided otherwise in Section
17 4.1 of the State Finance Act or the Local Governmental Tax
18 Collection Act, and except where by specific statutory
19 provisions such earnings are directed to be credited to and
20 paid to a particular fund.
21 (g) A public agency may purchase or invest in repurchase
22 agreements of government securities having the meaning set
23 out in the Government Securities Act of 1986 subject to the
24 provisions of said Act and the regulations issued thereunder.
25 The government securities, unless registered or inscribed in
26 the name of the public agency, shall be purchased through
27 banks or trust companies authorized to do business in the
28 State of Illinois.
29 (h) Except for repurchase agreements of government
30 securities which are subject to the Government Securities Act
31 of 1986, no public agency may purchase or invest in
32 instruments which constitute repurchase agreements, and no
33 financial institution may enter into such an agreement with
34 or on behalf of any public agency unless the instrument and
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1 the transaction meet the following requirements:
2 (1) The securities, unless registered or inscribed
3 in the name of the public agency, are purchased through
4 banks or trust companies authorized to do business in the
5 State of Illinois.
6 (2) An authorized public officer after ascertaining
7 which firm will give the most favorable rate of interest,
8 directs the custodial bank to "purchase" specified
9 securities from a designated institution. The "custodial
10 bank" is the bank or trust company, or agency of
11 government, which acts for the public agency in
12 connection with repurchase agreements involving the
13 investment of funds by the public agency. The State
14 Treasurer may act as custodial bank for public agencies
15 executing repurchase agreements. To the extent the
16 Treasurer acts in this capacity, he is hereby authorized
17 to pass through to such public agencies any charges
18 assessed by the Federal Reserve Bank.
19 (3) A custodial bank must be a member bank of the
20 Federal Reserve System or maintain accounts with member
21 banks. All transfers of book-entry securities must be
22 accomplished on a Reserve Bank's computer records through
23 a member bank of the Federal Reserve System. These
24 securities must be credited to the public agency on the
25 records of the custodial bank and the transaction must be
26 confirmed in writing to the public agency by the
27 custodial bank.
28 (4) Trading partners shall be limited to banks or
29 trust companies authorized to do business in the State of
30 Illinois or to registered primary reporting dealers.
31 (5) The security interest must be perfected.
32 (6) The public agency enters into a written master
33 repurchase agreement which outlines the basic
34 responsibilities and liabilities of both buyer and
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1 seller.
2 (7) Agreements shall be for periods of 330 days or
3 less.
4 (8) The authorized public officer of the public
5 agency informs the custodial bank in writing of the
6 maturity details of the repurchase agreement.
7 (9) The custodial bank must take delivery of and
8 maintain the securities in its custody for the account of
9 the public agency and confirm the transaction in writing
10 to the public agency. The Custodial Undertaking shall
11 provide that the custodian takes possession of the
12 securities exclusively for the public agency; that the
13 securities are free of any claims against the trading
14 partner; and any claims by the custodian are subordinate
15 to the public agency's claims to rights to those
16 securities.
17 (10) The obligations purchased by a public agency
18 may only be sold or presented for redemption or payment
19 by the fiscal agent bank or trust company holding the
20 obligations upon the written instruction of the public
21 agency or officer authorized to make such investments.
22 (11) The custodial bank shall be liable to the
23 public agency for any monetary loss suffered by the
24 public agency due to the failure of the custodial bank to
25 take and maintain possession of such securities.
26 (i) Notwithstanding the foregoing restrictions on
27 investment in instruments constituting repurchase agreements
28 the Illinois Housing Development Authority may invest in, and
29 any financial institution with capital of at least
30 $250,000,000 may act as custodian for, instruments that
31 constitute repurchase agreements, provided that the Illinois
32 Housing Development Authority, in making each such
33 investment, complies with the safety and soundness guidelines
34 for engaging in repurchase transactions applicable to
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1 federally insured banks, savings banks, savings and loan
2 associations or other depository institutions as set forth in
3 the Federal Financial Institutions Examination Council Policy
4 Statement Regarding Repurchase Agreements and any regulations
5 issued, or which may be issued by the supervisory federal
6 authority pertaining thereto and any amendments thereto;
7 provided further that the securities shall be either (i)
8 direct general obligations of, or obligations the payment of
9 the principal of and/or interest on which are unconditionally
10 guaranteed by, the United States of America or (ii) any
11 obligations of any agency, corporation or subsidiary thereof
12 controlled or supervised by and acting as an instrumentality
13 of the United States Government pursuant to authority granted
14 by the Congress of the United States and provided further
15 that the security interest must be perfected by either the
16 Illinois Housing Development Authority, its custodian or its
17 agent receiving possession of the securities either
18 physically or transferred through a nationally recognized
19 book entry system.
20 (j) In addition to all other investments authorized
21 under this Section, a community college district may invest
22 public funds in any mutual funds that invest primarily in
23 corporate investment grade or global government short term
24 bonds. Purchases of mutual funds that invest primarily in
25 global government short term bonds shall be limited to funds
26 with assets of at least $100 million and that are rated at
27 the time of purchase as one of the 10 highest classifications
28 established by a recognized rating service. The investments
29 shall be subject to approval by the local community college
30 board of trustees. Each community college board of trustees
31 shall develop a policy regarding the percentage of the
32 college's investment portfolio that can be invested in such
33 funds.
34 Nothing in this Section shall be construed to authorize
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1 an intergovernmental risk management entity to accept the
2 deposit of public funds except for risk management purposes.
3 (Source: P.A. 87-288; 87-940; 87-1098; 88-45; 88-355; 88-555,
4 eff. 7-27-94.)
5 Section 99. Effective date. This Act takes effect upon
6 becoming law.