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90_SB0957
30 ILCS 235/2 from Ch. 85, par. 902
Amends the Public Funds Investment Act. Eliminates short
term obligations as an authorized investment.
SDS/bill0040/bkp
SDS/bill0040/bkp
1 AN ACT to amend the Public Funds Investment Act by
2 changing Section 2.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Public Funds Investment Act is amended by
6 changing Section 2 as follows:
7 (30 ILCS 235/2) (from Ch. 85, par. 902)
8 Sec. 2. Authorized investments.
9 (a) Any public agency may invest any public funds as
10 follows:
11 (1) in bonds, notes, certificates of indebtedness,
12 treasury bills or other securities now or hereafter
13 issued, which are guaranteed by the full faith and credit
14 of the United States of America as to principal and
15 interest;
16 (2) in bonds, notes, debentures, or other similar
17 obligations of the United States of America or its
18 agencies;
19 (3) in interest-bearing savings accounts,
20 interest-bearing certificates of deposit or
21 interest-bearing time deposits or any other investments
22 constituting direct obligations of any bank as defined by
23 the Illinois Banking Act;
24 (4) in short term obligations of corporations
25 organized in the United States with assets exceeding
26 $500,000,000 if (i) such obligations are rated at the
27 time of purchase at one of the 3 highest classifications
28 established by at least 2 standard rating services and
29 which mature not later than 180 days from the date of
30 purchase, (ii) such purchases do not exceed 10% of the
31 corporation's outstanding obligations and (iii) no more
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1 than one-third of the public agency's funds may be
2 invested in short term obligations of corporations; or
3 (4) (5) in money market mutual funds registered
4 under the Investment Company Act of 1940, provided that
5 the portfolio of any such money market mutual fund is
6 limited to obligations described in paragraph (1) or (2)
7 of this subsection and to agreements to repurchase such
8 obligations.
9 (a-1) In addition to any other investments authorized
10 under this Act, a municipality may invest its public funds in
11 interest bearing bonds of any county, township, city,
12 village, incorporated town, municipal corporation, or school
13 district. The bonds shall be registered in the name of the
14 municipality or held under a custodial agreement at a bank.
15 The bonds shall be rated at the time of purchase within the 4
16 highest general classifications established by a rating
17 service of nationally recognized expertise in rating bonds of
18 states and their political subdivisions.
19 (b) Investments may be made only in banks which are
20 insured by the Federal Deposit Insurance Corporation. Any
21 public agency may invest any public funds in short term
22 discount obligations of the Federal National Mortgage
23 Association or in shares or other forms of securities legally
24 issuable by savings banks or savings and loan associations
25 incorporated under the laws of this State or any other state
26 or under the laws of the United States. Investments may be
27 made only in those savings banks or savings and loan
28 associations the shares, or investment certificates of which
29 are insured by the Federal Deposit Insurance Corporation. Any
30 such securities may be purchased at the offering or market
31 price thereof at the time of such purchase. All such
32 securities so purchased shall mature or be redeemable on a
33 date or dates prior to the time when, in the judgment of such
34 governing authority, the public funds so invested will be
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1 required for expenditure by such public agency or its
2 governing authority. The expressed judgment of any such
3 governing authority as to the time when any public funds will
4 be required for expenditure or be redeemable is final and
5 conclusive. Any public agency may invest any public funds in
6 dividend-bearing share accounts, share certificate accounts
7 or class of share accounts of a credit union chartered under
8 the laws of this State or the laws of the United States;
9 provided, however, the principal office of any such credit
10 union must be located within the State of Illinois.
11 Investments may be made only in those credit unions the
12 accounts of which are insured by applicable law.
13 (c) For purposes of this Section, the term "agencies of
14 the United States of America" includes: (i) the federal land
15 banks, federal intermediate credit banks, banks for
16 cooperative, federal farm credit banks, or any other entity
17 authorized to issue debt obligations under the Farm Credit
18 Act of 1971 (12 U.S.C. 2001 et seq.) and Acts amendatory
19 thereto; (ii) the federal home loan banks and the federal
20 home loan mortgage corporation; and (iii) any other agency
21 created by Act of Congress.
22 (d) Except for pecuniary interests permitted under
23 subsection (f) of Section 3-14-4 of the Illinois Municipal
24 Code or under Section 3.2 of the Public Officer Prohibited
25 Practices Act, no person acting as treasurer or financial
26 officer or who is employed in any similar capacity by or for
27 a public agency may do any of the following:
28 (1) have any interest, directly or indirectly, in
29 any investments in which the agency is authorized to
30 invest.
31 (2) have any interest, directly or indirectly, in
32 the sellers, sponsors, or managers of those investments.
33 (3) receive, in any manner, compensation of any
34 kind from any investments in which the agency is
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1 authorized to invest.
2 (e) Any public agency may also invest any public funds
3 in a Public Treasurers' Investment Pool created under Section
4 17 of the State Treasurer Act. Any public agency may also
5 invest any public funds in a fund managed, operated, and
6 administered by a bank, subsidiary of a bank, or subsidiary
7 of a bank holding company or use the services of such an
8 entity to hold and invest or advise regarding the investment
9 of any public funds.
10 (f) To the extent a public agency has custody of funds
11 not owned by it or another public agency and does not
12 otherwise have authority to invest such funds, the public
13 agency may invest such funds as if they were its own. Such
14 funds must be released to the appropriate person at the
15 earliest reasonable time, but in no case exceeding 31 days,
16 after the private person becomes entitled to the receipt of
17 them. All earnings accruing on any investments or deposits
18 made pursuant to the provisions of this Act shall be credited
19 to the public agency by or for which such investments or
20 deposits were made, except as provided otherwise in Section
21 4.1 of the State Finance Act or the Local Governmental Tax
22 Collection Act, and except where by specific statutory
23 provisions such earnings are directed to be credited to and
24 paid to a particular fund.
25 (g) A public agency may purchase or invest in repurchase
26 agreements of government securities having the meaning set
27 out in the Government Securities Act of 1986 subject to the
28 provisions of said Act and the regulations issued thereunder.
29 The government securities, unless registered or inscribed in
30 the name of the public agency, shall be purchased through
31 banks or trust companies authorized to do business in the
32 State of Illinois.
33 (h) Except for repurchase agreements of government
34 securities which are subject to the Government Securities Act
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1 of 1986, no public agency may purchase or invest in
2 instruments which constitute repurchase agreements, and no
3 financial institution may enter into such an agreement with
4 or on behalf of any public agency unless the instrument and
5 the transaction meet the following requirements:
6 (1) The securities, unless registered or inscribed
7 in the name of the public agency, are purchased through
8 banks or trust companies authorized to do business in the
9 State of Illinois.
10 (2) An authorized public officer after ascertaining
11 which firm will give the most favorable rate of interest,
12 directs the custodial bank to "purchase" specified
13 securities from a designated institution. The "custodial
14 bank" is the bank or trust company, or agency of
15 government, which acts for the public agency in
16 connection with repurchase agreements involving the
17 investment of funds by the public agency. The State
18 Treasurer may act as custodial bank for public agencies
19 executing repurchase agreements. To the extent the
20 Treasurer acts in this capacity, he is hereby authorized
21 to pass through to such public agencies any charges
22 assessed by the Federal Reserve Bank.
23 (3) A custodial bank must be a member bank of the
24 Federal Reserve System or maintain accounts with member
25 banks. All transfers of book-entry securities must be
26 accomplished on a Reserve Bank's computer records through
27 a member bank of the Federal Reserve System. These
28 securities must be credited to the public agency on the
29 records of the custodial bank and the transaction must be
30 confirmed in writing to the public agency by the
31 custodial bank.
32 (4) Trading partners shall be limited to banks or
33 trust companies authorized to do business in the State of
34 Illinois or to registered primary reporting dealers.
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1 (5) The security interest must be perfected.
2 (6) The public agency enters into a written master
3 repurchase agreement which outlines the basic
4 responsibilities and liabilities of both buyer and
5 seller.
6 (7) Agreements shall be for periods of 330 days or
7 less.
8 (8) The authorized public officer of the public
9 agency informs the custodial bank in writing of the
10 maturity details of the repurchase agreement.
11 (9) The custodial bank must take delivery of and
12 maintain the securities in its custody for the account of
13 the public agency and confirm the transaction in writing
14 to the public agency. The Custodial Undertaking shall
15 provide that the custodian takes possession of the
16 securities exclusively for the public agency; that the
17 securities are free of any claims against the trading
18 partner; and any claims by the custodian are subordinate
19 to the public agency's claims to rights to those
20 securities.
21 (10) The obligations purchased by a public agency
22 may only be sold or presented for redemption or payment
23 by the fiscal agent bank or trust company holding the
24 obligations upon the written instruction of the public
25 agency or officer authorized to make such investments.
26 (11) The custodial bank shall be liable to the
27 public agency for any monetary loss suffered by the
28 public agency due to the failure of the custodial bank to
29 take and maintain possession of such securities.
30 (i) Notwithstanding the foregoing restrictions on
31 investment in instruments constituting repurchase agreements
32 the Illinois Housing Development Authority may invest in, and
33 any financial institution with capital of at least
34 $250,000,000 may act as custodian for, instruments that
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1 constitute repurchase agreements, provided that the Illinois
2 Housing Development Authority, in making each such
3 investment, complies with the safety and soundness guidelines
4 for engaging in repurchase transactions applicable to
5 federally insured banks, savings banks, savings and loan
6 associations or other depository institutions as set forth in
7 the Federal Financial Institutions Examination Council Policy
8 Statement Regarding Repurchase Agreements and any regulations
9 issued, or which may be issued by the supervisory federal
10 authority pertaining thereto and any amendments thereto;
11 provided further that the securities shall be either (i)
12 direct general obligations of, or obligations the payment of
13 the principal of and/or interest on which are unconditionally
14 guaranteed by, the United States of America or (ii) any
15 obligations of any agency, corporation or subsidiary thereof
16 controlled or supervised by and acting as an instrumentality
17 of the United States Government pursuant to authority granted
18 by the Congress of the United States and provided further
19 that the security interest must be perfected by either the
20 Illinois Housing Development Authority, its custodian or its
21 agent receiving possession of the securities either
22 physically or transferred through a nationally recognized
23 book entry system.
24 (j) In addition to all other investments authorized
25 under this Section, a community college district may invest
26 public funds in any mutual funds that invest primarily in
27 corporate investment grade or global government short term
28 bonds. Purchases of mutual funds that invest primarily in
29 global government short term bonds shall be limited to funds
30 with assets of at least $100 million and that are rated at
31 the time of purchase as one of the 10 highest classifications
32 established by a recognized rating service. The investments
33 shall be subject to approval by the local community college
34 board of trustees. Each community college board of trustees
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1 shall develop a policy regarding the percentage of the
2 college's investment portfolio that can be invested in such
3 funds.
4 (Source: P.A. 87-288; 87-940; 87-1098; 88-45; 88-355; 88-555,
5 eff. 7-27-94.)