State of Illinois
90th General Assembly
Legislation

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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.
                                                     LRB9003021DNmb
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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.

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