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Public Act 91-0809
HB3944 Enrolled LRB9111259STsb
AN ACT to amend the various Acts concerning business
organizations.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Securities Law of 1953 is
amended by changing Sections 2.5a, 2.9, 2.12b, 3, 4, 8, 11,
and 12 as follows:
(815 ILCS 5/2.5a) (from Ch. 121 1/2, par. 137.2-5a)
Sec. 2.5a. Offer. "Offer" shall include every offer to
sell or otherwise dispose of, or solicitation of an offer to
purchase, whether orally or by means of publication,
including but not limited to printed and electronic media, a
security or interest in a security for value; provided that
the term "offer" shall not include preliminary negotiations
or agreements between an issuer and any underwriter or among
underwriters who are or are to be in privity of contract with
an issuer, or the circulation or publication of an
identifying statement or circular or preliminary prospectus,
as defined by rules or regulations of the Secretary of State.
(Source: P.A. 89-209, eff. 1-1-96.)
(815 ILCS 5/2.9) (from Ch. 121 1/2, par. 137.2-9)
Sec. 2.9. "Salesperson" means an individual, other than
an issuer or a dealer, employed or appointed or authorized by
a dealer, issuer or controlling person to offer, purchase or
sell securities in this State. The partners or officers of a
dealer or issuer shall not be deemed to be salespersons
within the meaning of this definition if they are not or have
not been regularly engaged in securities offering, purchasing
or selling activities other than transactions for their own
respective accounts. No individual shall be deemed to be a
salesperson solely by reason of effecting transactions in a
covered security to qualified purchasers as described in
Section 18(b)(3) of the Federal 1933 Act, effecting
transactions in a covered security as described in Section
18(b)(4)(D) of the Federal 1933 Act, or engaging in offers or
effecting sales of securities to employees of the issuer of
such securities or to employees of the parent or any majority
wholly-owned subsidiary of such issuer, provided that such
individual is an employee of such issuer, parent or
subsidiary who has not been employed primarily to make such
offers or sales and who receives no special compensation,
directly or indirectly, for or on account of any such offer
or sale. "Salesperson" also means a limited Canadian
salesperson. "Salesperson" also means an individual who, in
this State, communicates with members of the public to
identify prospective customers for the purpose of soliciting
the purchase or sale of securities or related services.
(Source: P.A. 90-70, eff. 7-8-97; 90-667, eff. 7-30-98.)
(815 ILCS 5/2.12b) (from Ch. 121 1/2, par. 137.2-12b)
Sec. 2.12b. Investment adviser representative.
"Investment adviser representative" means, with respect to an
investment adviser who is required to register under this
Act, any partner, officer, director of (or a person occupying
a similar status or performing similar functions), or other
natural person employed by or associated with an investment
adviser, except clerical or ministerial personnel, who in
this State:
(1) makes any recommendations or otherwise renders
advice regarding securities;
(2) manages accounts or portfolios of clients;
(3) determines what recommendation or advice regarding
securities should be given; or
(4) supervises any employee who performs any of the
foregoing; or.
(5) solicits, refers, offers, or negotiates for the sale
of, or sells, investment advisory services.
With respect to a federal covered investment adviser,
"investment adviser representative" means any person who is
an investment adviser representative with a place of business
in this State as such terms are defined by the Securities and
Exchange Commission under Section 203A of the Federal 1940
Investment Advisers Act.
(Source: P.A. 90-70, eff. 7-8-97; 90-667, eff. 7-30-98.)
(815 ILCS 5/3) (from Ch. 121 1/2, par. 137.3)
Sec. 3. The provisions of Sections 2a, 5, 6 and 7 of
this Act shall not apply to any of the following securities:
A. Any security (including a revenue obligation) issued
or guaranteed by the United States, any state, any political
subdivision of a state, or any agency or corporation or other
instrumentality of any one or more of the foregoing, or any
certificate of deposit for any such security.
B. Any security issued or guaranteed by Canada, any
Canadian province, any political subdivision of any such
province, any agency or corporation or other instrumentality
of one or more of the foregoing, or any other foreign
government with which the United States then maintains
diplomatic relations, if the security is recognized as a
valid obligation by the issuer or guarantor.
C. (1) Any security issued by and representing an
interest in or a debt of, or guaranteed by, any bank or
savings bank, bank holding company, or credit union organized
under the laws of the United States, or any bank, savings
bank, savings institution or trust company organized and
supervised under the laws of any state, or any interest or
participation in any common trust fund or similar fund
maintained by any such bank, savings bank, savings
institution or trust company exclusively for the collective
investment and reinvestment of assets contributed thereto by
such bank, savings bank, savings institution or trust company
or any affiliate thereof, in its capacity as fiduciary,
trustee, executor, administrator or guardian.
(2) Any security issued or guaranteed to both principal
and interest by an international bank of which the United
States is a member.
D. (1) Any security issued by and representing an
interest in or a debt of, or guaranteed by, any federal
savings and loan association, or any savings and loan
association or building and loan association organized and
supervised under the laws of any state.
(2) Any security issued or guaranteed by any federal
credit union or any credit union, industrial loan
association, or similar organization organized and supervised
under the laws of any state.
E. Any security issued or guaranteed by any railroad,
other common carrier, public utility or holding company where
such issuer or guarantor is subject to the jurisdiction of
the Interstate Commerce Commission or successor entity, or is
a registered holding company under the Public Utility Holding
Company Act of 1935 or a subsidiary of such a company within
the meaning of that Act, or is regulated in respect of its
rates and charges by a governmental authority of the United
States or any state, or is regulated in respect of the
issuance or guarantee of the security by a governmental
authority of the United States, any state, Canada, or any
Canadian province.
F. Equipment trust certificates in respect of equipment
leased or conditionally sold to a person, if securities
issued by such person would be exempt under subsection E of
this Section.
G. Any security which at the time of sale is listed or
approved for listing upon notice of issuance on the New York
Stock Exchange, Inc., the American Stock Exchange, Inc., the
Pacific Stock Exchange, Inc., the Chicago Stock Exchange,
Inc., the Chicago Board of Trade, the Philadelphia Stock
Exchange, Inc., the Chicago Board Options Exchange,
Incorporated, the National Market System of the Nasdaq Stock
Market, or any other exchange, automated quotation system or
board of trade which the Secretary of State, by rule or
regulation, deems to have substantially equivalent standards
for listing or designation as required by any such exchange,
automated quotation system or board of trade; and securities
senior or of substantially equal rank, both as to dividends
or interest and upon liquidation, to securities so listed or
designated; and warrants and rights to purchase any of the
foregoing; provided, however, that this subsection G shall
not apply to investment fund shares or securities of like
character, which are being continually offered at a price or
prices determined in accordance with a prescribed formula.
The Secretary of State may, after notice and opportunity
for hearing, revoke the exemption afforded by this
subparagraph with respect to any securities by issuing an
order if the Secretary of State finds that the further sale
of the securities in this State would work or tend to work a
fraud on purchasers of the securities.
H. Any security issued by a person organized and
operated not for pecuniary profit and exclusively for
religious, educational, benevolent, fraternal, agricultural,
charitable, athletic, professional, trade, social or
reformatory purposes, or as a chamber of commerce or local
industrial development corporation, or for more than one of
said purposes and no part of the net earnings of which inures
to the benefit of any private stockholder or member.
I. Instruments evidencing indebtedness under an
agreement for the acquisition of property under contract of
conditional sale.
J. A note secured by a first mortgage upon tangible
personal or real property when such mortgage is made,
assigned, sold, transferred and delivered with such note or
other written obligation secured by such mortgage, either to
or for the benefit of the purchaser or lender; or bonds or
notes not more than 10 in number secured by a first mortgage
upon the title in fee simple to real property if the
aggregate principal amount secured by such mortgage does not
exceed $500,000 and also does not exceed 75% of the fair
market value of such real property.
K. A note or notes not more than 10 in number secured by
a junior mortgage lien if the aggregate principal amount of
the indebtedness represented thereby does not exceed 50% of
the amount of the then outstanding prior lien indebtedness
and provided that the total amount of the indebtedness
(including the indebtedness represented by the subject junior
mortgage note or notes) shall not exceed 90% of the fair
market value of the property securing such indebtedness; and
provided further that each such note or notes shall bear
across the face thereof the following legend in letters at
least as large as 12 point type: "THIS NOTE IS SECURED BY A
JUNIOR MORTGAGE".
L. Any negotiable promissory note or draft, bill of
exchange or bankers' acceptance which arises out of a current
transaction or the proceeds of which have been or are to be
used for current transactions, and which evidences an
obligation to pay cash within 9 months of the date of
issuance exclusive of days of grace, or any renewal of such
note, draft, bill or acceptance which is likewise limited, or
any guarantee of such note, draft, bill or acceptance or of
any such renewal, provided that the note, draft, bill, or
acceptance is a negotiable security eligible for discounting
by banks that are members of the Federal Reserve System. Any
instrument exempted under this subsection from the
requirement of Sections 5, 6, and 7 of this Act shall bear
across the face thereof the following legend in letters at
least as large as 12 point type: "THIS INSTRUMENT IS NEITHER
GUARANTEED, NOR IS THE ISSUANCE THEREOF REGULATED BY ANY
AGENCY OR DEPARTMENT OF THE STATE OF ILLINOIS OR THE UNITED
STATES.". However, the foregoing legend shall not be
required with respect to any such instrument:
(i) sold to a person described in subsection C or H
of Section 4 of this Act;
(ii) sold to a "Qualified Institutional Buyer" as
that term is defined in Rule 144a adopted under the
Securities Act of 1933;
(iii) where the minimum initial subscription for
the purchase of such instrument is $100,000 or more; or
(iv) issued by an issuer that has any class of
securities registered under Section 12 of the Securities
Exchange Act of 1934 or has any outstanding class of
indebtedness rated in one of the 3 highest categories by
a rating agency designated by the Department;
M. Any security issued by and representing an interest
in or a debt of, or guaranteed by, any insurance company
organized under the laws of any state.
N. Any security issued pursuant to (i) a written
compensatory benefit plan (including without limitation, any
purchase, savings, option, bonus, stock appreciation, profit
sharing, thrift, incentive, pension, or similar plan) and
interests in such plans established by one or more of the
issuers thereof or its parents or majority-owned subsidiaries
for the participation of their employees, directors, general
partners, trustees (where the issuer is a business trust),
officers, or consultants or advisers of such issuers or its
parents or majority-owned subsidiaries, provided that bona
fide services are rendered by consultants or advisers and
those services are not in connection with the offer and sale
of securities in a capital-raising transaction or (ii) a
written contract relating to the compensation of any such
person.
O. Any option, put, call, spread or straddle issued by a
clearing agency registered as such under the Federal 1934
Act, if the security, currency, commodity, or other interest
underlying the option, put, call, spread or straddle is not
required to be registered under Section 5.
P. Any security which meets all of the following
conditions:
(1) If the issuer is not organized under the laws
of the United States or a state, it has appointed a duly
authorized agent in the United States for service of
process and has set forth the name and address of the
agent in its prospectus.
(2) A class of the issuer's securities is required
to be and is registered under Section 12 of the Federal
1934 Act, and has been so registered for the three years
immediately preceding the offering date.
(3) Neither the issuer nor a significant subsidiary
has had a material default during the last seven years,
or for the period of the issuer's existence if less than
seven years, in the payment of (i) principal, interest,
dividend, or sinking fund installment on preferred stock
or indebtedness for borrowed money, or (ii) rentals under
leases with terms of three years or more.
(4) The issuer has had consolidated net income,
before extraordinary items and the cumulative effect of
accounting changes, of at least $1,000,000 in four of its
last five fiscal years including its last fiscal year;
and if the offering is of interest bearing securities,
has had for its last fiscal year, net income, before
deduction for income taxes and depreciation, of at least
1-1/2 times the issuer's annual interest expense, giving
effect to the proposed offering and the intended use of
the proceeds. For the purposes of this clause "last
fiscal year" means the most recent year for which audited
financial statements are available, provided that such
statements cover a fiscal period ended not more than 15
months from the commencement of the offering.
(5) If the offering is of stock or shares other
than preferred stock or shares, the securities have
voting rights and the rights include (i) the right to
have at least as many votes per share, and (ii) the right
to vote on at least as many general corporate decisions,
as each of the issuer's outstanding classes of stock or
shares, except as otherwise required by law.
(6) If the offering is of stock or shares, other
than preferred stock or shares, the securities are owned
beneficially or of record, on any date within six months
prior to the commencement of the offering, by at least
1,200 persons, and on that date there are at least
750,000 such shares outstanding with an aggregate market
value, based on the average bid price for that day, of at
least $3,750,000. In connection with the determination
of the number of persons who are beneficial owners of the
stock or shares of an issuer, the issuer or dealer may
rely in good faith for the purposes of this clause upon
written information furnished by the record owners.
(7) The issuer meets the conditions specified in
paragraphs (2), (3) and (4) of this subsection P if
either the issuer or the issuer and the issuer's
predecessor, taken together, meet such conditions and if:
(a) the succession was primarily for the purpose of
changing the state of incorporation of the predecessor or
forming a holding company and the assets and liabilities
of the successor at the time of the succession were
substantially the same as those of the predecessor; or
(b) all predecessors met such conditions at the time of
succession and the issuer has continued to do so since
the succession.
Q. Any security appearing on the List of OTC Margin
Stocks published by the Board of Governors of the Federal
Reserve System or any security incorporated by reference to
the List of OTC Margin Stocks by the Board of Governors of
the Federal Reserve System; any other securities of the same
issuer which are of senior or substantially equal rank; any
securities called for by subscription rights or warrants so
listed or approved; or any warrants or rights to purchase or
subscribe to any of the foregoing.
R. Any security issued by a bona fide agricultural
cooperative operating in this State that is organized under
the laws of this State or as a foreign cooperative
association organized under the law of another state that has
been duly qualified to transact business in this State.
(Source: P.A. 89-209, eff. 1-1-96; 90-70, eff. 7-8-97.)
(815 ILCS 5/4) (from Ch. 121 1/2, par. 137.4)
Sec. 4. Exempt transactions. The provisions of Sections
2a, 5, 6 and 7 of this Act shall not apply to any of the
following transactions, except where otherwise specified in
this Section 4:
A. Any offer or sale, whether through a dealer or
otherwise, of securities by a person who is not an issuer,
underwriter, dealer or controlling person in respect of such
securities, and who, being the bona fide owner of such
securities, disposes thereof for his or her own account;
provided, that such offer or sale is not made directly or
indirectly for the benefit of the issuer or of an underwriter
or controlling person.
B. Any offer, sale, issuance or exchange of securities
of the issuer to or with security holders of the issuer
except to or with persons who are security holders solely by
reason of holding transferable warrants, transferable
options, or similar transferable rights of the issuer, if no
commission or other remuneration is paid or given directly or
indirectly for or on account of the procuring or soliciting
of such sale or exchange (other than a fee paid to
underwriters based on their undertaking to purchase any
securities not purchased by security holders in connection
with such sale or exchange).
C. Any offer, sale or issuance of securities to any
corporation, bank, savings bank, savings institution, savings
and loan association, trust company, insurance company,
building and loan association, or dealer; to a pension fund,
pension trust, or employees' profit sharing trust, other
financial institution or institutional investor, any
government or political subdivision or instrumentality
thereof, whether the purchaser is acting for itself or in
some fiduciary capacity; to any partnership or other
association engaged as a substantial part of its business or
operations in purchasing or holding securities; to any trust
in respect of which a bank or trust company is trustee or
co-trustee; to any entity in which at least 90% of the equity
is owned by persons described under subsection C, H, or S of
this Section 4; to any employee benefit plan within the
meaning of Title I of the Federal ERISA Act if (i) the
investment decision is made by a plan fiduciary as defined in
Section 3(21) of the Federal ERISA Act and such plan
fiduciary is either a bank, savings and loan association,
insurance company, registered investment adviser or an
investment adviser registered under the Federal 1940
Investment Advisers Act, or (ii) the plan has total assets in
excess of $5,000,000, or (iii) in the case of a self-directed
plan, investment decisions are made solely by persons that
are described under subsection C, D, H or S of this Section
4; to any plan established and maintained by, and for the
benefit of the employees of, any state or political
subdivision or agency or instrumentality thereof if such plan
has total assets in excess of $5,000,000; or to any
organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, any Massachusetts or similar business
trust, or any partnership, if such organization, trust, or
partnership has total assets in excess of $5,000,000.
D. The Secretary of State is granted authority to create
by rule or regulation a limited offering transactional
exemption that furthers the objectives of compatibility with
federal exemptions and uniformity among the states. The
Secretary of State shall prescribe by rule or regulation the
amount of the fee for filing any report required under this
subsection, but the fee shall not be less than the minimum
amount nor more than the maximum amount established under
Section 11a of this Act and shall not be returnable in any
event.
E. Any offer or sale of securities by an executor,
administrator, guardian, receiver or trustee in insolvency or
bankruptcy, or at any judicial sale, or at a public sale by
auction held at an advertised time and place, or the offer or
sale of securities in good faith and not for the purpose of
avoiding the provisions of this Act by a pledgee of
securities pledged for a bona fide debt.
F. Any offer or sale by a registered dealer, either as
principal or agent, of any securities (except face amount
certificate contracts and investment fund shares) at a price
reasonably related to the current market price of such
securities, provided:
(1) (a) the securities are issued and outstanding;
(b) the issuer is required to file reports
pursuant to Section 13 or Section 15(d) of the
Federal 1934 Act and has been subject to such
requirements during the 90 day period immediately
preceding the date of the offer or sale, or is an
issuer of a security covered by Section 12(g)(2)(B)
or (G) of the Federal 1934 Act;
(c) the dealer has a reasonable basis for
believing that the issuer is current in filing the
reports required to be filed at regular intervals
pursuant to the provisions of Section 13 or Section
15(d), as the case may be, of the Federal 1934 Act,
or in the case of insurance companies exempted from
Section 12(g) of the Federal 1934 Act by
subparagraph 12(g)(2)(G) thereof, the annual
statement referred to in Section 12(g)(2)(G)(i) of
the Federal 1934 Act; and
(d) the dealer has in its records, and makes
reasonably available upon request to any person
expressing an interest in a proposed transaction in
the securities, the issuer's most recent annual
report filed pursuant to Section 13 or 15(d), as the
case may be, of the Federal 1934 Act or the annual
statement in the case of an insurance company
exempted from Section 12(g) of the Federal 1934 Act
by subparagraph 12(g)(2)(G) thereof, together with
any other reports required to be filed at regular
intervals under the Federal 1934 Act by the issuer
after such annual report or annual statement;
provided that the making available of such reports
pursuant to this subparagraph, unless otherwise
represented, shall not constitute a representation
by the dealer that the information is true and
correct, but shall constitute a representation by
the dealer that the information is reasonably
current; or
(2) (a) prior to any offer or sale, an application
for the authorization thereof and a report as set
forth under sub-paragraph (d) of this paragraph (2)
has been filed by any registered dealer with and
approved by the Secretary of State pursuant to such
rules and regulations as the Secretary of State may
prescribe;
(b) the Secretary of State shall have the
power by order to refuse to approve any application
or report filed pursuant to this paragraph (2) if
(i) the application or report does not
comply with the provisions of this paragraph
(2), or
(ii) the offer or sale of such securities
would work or tend to work a fraud or deceit,
or
(iii) the issuer or the applicant has
violated any of the provisions of this Act;
(c) each application and report filed pursuant
to this paragraph (2) shall be accompanied by a
filing fee and an examination fee in the amount
established pursuant to Section 11a of this Act,
which shall not be returnable in any event;
(d) there shall be submitted to the Secretary
of State no later than 120 days following the end of
the issuer's fiscal year, each year during the
period of the authorization, one copy of a report
which shall contain a balance sheet and income
statement prepared as of the issuer's most recent
fiscal year end certified by an independent
certified public accountant, together with such
current information concerning the securities and
the issuer thereof as the Secretary of State may
prescribe by rule or regulation or order;
(e) prior to any offer or sale of securities
under the provisions of this paragraph (2), each
registered dealer participating in the offer or sale
of such securities shall provide upon request of
prospective purchasers of such securities a copy of
the most recent report required under the provisions
of sub-paragraph (d) of this paragraph (2);
(f) approval of an application filed pursuant
to this paragraph (2) of subsection F shall expire 5
years after the date of the granting of the
approval, unless said approval is sooner terminated
by (1) suspension or revocation by the Secretary of
State in the same manner as is provided for in
subsections E, F and G of Section 11 of this Act, or
(2) the applicant filing with the Secretary of State
an affidavit to the effect that (i) the subject
securities have become exempt under Section 3 of
this Act or (ii) the applicant no longer is capable
of acting as the applicant and stating the reasons
therefor or (iii) the applicant no longer desires to
act as the applicant. In the event of the filing of
an affidavit under either preceding sub-division
(ii) or (iii) the Secretary of State may authorize a
substitution of applicant upon the new applicant
executing the application as originally filed.
However, the aforementioned substituted execution
shall have no effect upon the previously determined
date of expiration of approval of the application.
Notwithstanding the provisions of this subparagraph
(f), approvals granted under this paragraph (2) of
subsection F prior to the effective date of this Act
shall be governed by the provisions of this Act in
effect on such date of approval; and
(g) no person shall be considered to have
violated Section 5 of this Act by reason of any
offer or sale effected in reliance upon an approval
granted under this paragraph (2) after a termination
thereof under the foregoing subparagraph (f) if
official notice of such termination has not been
circulated generally to dealers by the Secretary of
State and if such person sustains the burden of
proof that he or she did not know, and in the
exercise of reasonable care, could not have known,
of the termination; or
(3) the securities, or securities of the same
class, are the subject of an existing registration under
Section 5 of this Act.
The exemption provided in this subsection F shall apply
only if the offer or sale is made in good faith and not for
the purpose of avoiding any of the provisions of this Act,
and only if the offer or sale is not made for the direct or
indirect benefit of the issuer of the securities, or the
controlling person in respect of such issuer.
G. (1) Any offer, sale or issuance of a security,
whether to residents or to non-residents of this State,
where:
(a) all sales of such security to residents of
this State (including the most recent such sale)
within the immediately preceding 12-month period
have been made to not more than 35 persons or have
involved an aggregate sales price of not more than
$1,000,000;
(b) such security is not offered or sold by
means of any general advertising or general
solicitation in this State; and
(c) no commission, discount, or other
remuneration exceeding 20% of the sale price of such
security, if sold to a resident of this State, is
paid or given directly or indirectly for or on
account of such sales.
(2) In computing the number of resident purchasers
or the aggregate sales price under paragraph (1) (a)
above, there shall be excluded any purchaser or dollar
amount of sales price, as the case may be, with respect
to any security which at the time of its sale was exempt
under Section 3 or was registered under Section 5, 6 or 7
or was sold in a transaction exempt under other
subsections of this Section 4.
(3) A prospectus or preliminary prospectus with
respect to a security for which a registration statement
is pending or effective under the Federal 1933 Act shall
not be deemed to constitute general advertising or
general solicitation in this State as such terms are used
in paragraph (1) (b) above, provided that such prospectus
or preliminary prospectus has not been sent or otherwise
delivered to more than 150 residents of this State.
(4) The Secretary of State shall by rule or
regulation require the filing of a report or reports of
sales made in reliance upon the exemption provided by
this subsection G and prescribe the form of such report
and the time within which such report shall be filed.
Such report shall set forth the name and address of the
issuer and of the controlling person, if the sale was for
the direct or indirect benefit of such person, and any
other information deemed necessary by the Secretary of
State to enforce compliance with this subsection G. The
Secretary of State shall prescribe by rule or regulation
the amount of the fee for filing any such report,
established pursuant to Section 11a of this Act, which
shall not be returnable in any event. The Secretary of
State may impose, in such cases as he or she may deem
appropriate, a penalty for failure to file any such
report in a timely manner, but no such penalty shall
exceed an amount equal to five times the filing fee. The
contents of any such report or portion thereof may be
deemed confidential by the Secretary of State by rule or
order and if so deemed shall not be disclosed to the
public except by order of court or in court proceedings.
The failure to file any such report shall not affect the
availability of such exemption, but such failure to file
any such report shall constitute a violation of
subsection D of Section 12 of this Act, subject to the
penalties enumerated in Section 14 of this Act. The
civil remedies provided for in subsection A of Section 13
of this Act and the civil remedies of rescission and
appointment of a receiver, conservator, ancillary
receiver or ancillary conservator provided for in
subsection F of Section 13 of this Act shall not be
available against any person by reason of the failure to
file any such report or on account of the contents of any
such report.
H. Any offer, sale or issuance of a security to (1) any
natural person who has, or is reasonably believed by the
person relying upon this subsection H to have, a net worth or
joint net worth with that person's spouse, at the time of the
offer, sale or issuance, in excess of $1,000,000 excluding
the value of a principal residence, or (2) any natural person
who had, or is reasonably believed by the person relying upon
this subsection H to have had, an income or joint income with
that person's spouse, in excess of $200,000 in each of the
two most recent years and who reasonably expects, or is
reasonably expected to have, an income in excess of $200,000
in the current year, or (3) any person that is not a natural
person and in which at least 90% of the equity interest is
owned by persons who meet either of the tests set forth in
clauses (1) or (2) of this subsection H; provided that such
security is not offered or sold by means of any general
advertising or general solicitation in this State.
I. Any offer, sale or issuance of securities to or for
the benefit of security holders of any person incident to a
vote by such security holders pursuant to such person's
organizational document or any applicable statute of the
jurisdiction of such person's organization, on a merger,
consolidation, reclassification of securities, or sale or
transfer of assets in consideration of or exchange for
securities of the same or another person.
J. Any offer, sale or issuance of securities in exchange
for one or more outstanding securities, claims or property
interests, or partly in such exchange and partly for cash,
where such offer, sale or issuance is incident to a
reorganization, recapitalization, readjustment, composition
or settlement of a claim, as approved by a court of competent
jurisdiction of the United States, or any state.
K. Any offer, sale or issuance of securities for
patronage, or as patronage refunds, or in connection with
marketing agreements by cooperative associations organized
exclusively for agricultural, producer, marketing,
purchasing, or consumer purposes; and the sale of
subscriptions for or shares of stock of cooperative
associations organized exclusively for agricultural,
producer, marketing, purchasing, or consumer purposes, if no
commission or other remuneration is paid or given directly or
indirectly for or on account of such subscription, sale or
resale, and if any person does not own beneficially more than
5% of the aggregate amount of issued and outstanding capital
stock of such cooperative association.
L. Offers for sale or solicitations of offers to buy
(but not the acceptance thereof), of securities which are the
subject of a pending registration statement filed under the
Federal 1933 Act and which are the subject of a pending
application for registration under this Act.
M. Any offer or sale of preorganization subscriptions
for any securities prior to the incorporation, organization
or formation of any issuer under the laws of the United
States, or any state, or the issuance by such issuer, after
its incorporation, organization or formation, of securities
pursuant to such preorganization subscriptions, provided the
number of subscribers does not exceed 25 and either (1) no
commission or other remuneration is paid or given directly or
indirectly for or on account of such sale or sales or
issuance, or (2) if any commission or other remuneration is
paid or given directly or indirectly for or on account of
such sale or sales or issuance, the securities are not
offered or sold by any means of general advertising or
general solicitation in this State.
N. The execution of orders for purchase of securities by
a registered salesperson and dealer, provided such persons
act as agent for the purchaser, have made no solicitation of
the order to purchase the securities, have no direct interest
in the sale or distribution of the securities ordered,
receive no commission, profit, or other compensation other
than the commissions involved in the purchase and sale of the
securities and deliver to the purchaser written confirmation
of the order which clearly identifies the commissions paid to
the registered dealer.
O. Any offer, sale or issuance of securities, other than
fractional undivided interests in an oil, gas or other
mineral lease, right or royalty, for the direct or indirect
benefit of the issuer thereof, or of a controlling person,
whether through a dealer (acting either as principal or
agent) or otherwise, if the securities sold, immediately
following the sale or sales, together with securities already
owned by the purchaser, would constitute 50% or more of the
equity interest of any one issuer, provided that the number
of purchasers is not more than 5 and provided further that no
commission, discount or other remuneration exceeding 15% of
the aggregate sale price of the securities is paid or given
directly or indirectly for or on account of the sale or
sales.
P. Any offer, sale or issuance of securities (except
face amount certificate contracts and investment fund shares)
issued by and representing an interest in an issuer which is
a business corporation incorporated under the laws of this
State, the purposes of which are to provide capital and
supervision solely for the redevelopment of blighted urban
areas located in a municipality in this State and whose
assets are located entirely within that municipality,
provided: (1) no commission, discount or other remuneration
is paid or given directly or indirectly for or on account of
the sale or sales of such securities; (2) the aggregate
amount of any securities of the issuer owned of record or
beneficially by any one person will not exceed the lesser of
$5,000 or 4% of the equity capitalization of the issuer; (3)
the officers and directors of the corporation have been bona
fide residents of the municipality not less than 3 years
immediately preceding the effectiveness of the offering sheet
for the securities under this subsection P; and (4) the
issuer files with the Secretary of State an offering sheet
descriptive of the securities setting forth:
(a) the name and address of the issuer;
(b) the title and total amount of securities to be
offered;
(c) the price at which the securities are to be
offered; and
(d) such additional information as the Secretary of
State may prescribe by rule and regulation.
The Secretary of State shall within a reasonable time
examine the offering sheet so filed and, unless the Secretary
of State shall make a determination that the offering sheet
so filed does not conform to the requirements of this
subsection P, shall declare the offering sheet to be
effective, which offering sheet shall continue effective for
a period of 12 months from the date it becomes effective.
The fee for examining the offering sheet shall be as
established pursuant to Section 11a of this Act, and shall
not be returnable in any event. The Secretary of State shall
by rule or regulation require the filing of a report or
reports of sales made to residents of this State in reliance
upon the exemption provided by this subsection P and
prescribe the form of such report and the time within which
such report shall be filed. The Secretary of State shall
prescribe by rule or regulation the amount of the fee for
filing any such report, but such fee shall not be less than
the minimum amount nor more than the maximum amount
established pursuant to Section 11a of this Act, and shall
not be returnable in any event. The Secretary of State may
impose, in such cases as he or she may deem appropriate, a
penalty for failure to file any such report in a timely
manner, but no such penalty shall exceed an amount equal to
five times the filing fee. The contents of any such report
shall be deemed confidential and shall not be disclosed to
the public except by order of court or in court proceedings.
The failure to file any such report shall not affect the
availability of such exemption, but such failure to file any
such report shall constitute a violation of subsection D of
Section 12 of this Act, subject to the penalties enumerated
in Section 14 of this Act. The civil remedies provided for
in subsection A of Section 13 of this Act and the civil
remedies of rescission and appointment of a receiver,
conservator, ancillary receiver or ancillary conservator
provided for in subsection F of Section 13 of this Act shall
not be available against any person by reason of the failure
to file any such report or on account of the contents of any
such report.
Q. Any isolated transaction, whether effected by a
dealer or not.
R. Any offer, sale or issuance of a security to any
person who purchases at least $150,000 of the securities
being offered, where the purchaser's total purchase price
does not, or it is reasonably believed by the person relying
upon this subsection R that said purchase price does not,
exceed 20 percent of the purchaser's net worth at the time of
sale, or if a natural person a joint net worth with that
person's spouse, for one or any combination of the following:
(i) cash, (ii) securities for which market quotations are
readily available, (iii) an unconditional obligation to pay
cash or securities for which quotations are readily
available, which obligation is to be discharged within five
years of the sale of the securities to the purchaser, or (iv)
the cancellation of any indebtedness owed by the issuer to
the purchaser; provided that such security is not offered or
sold by means of any general advertising or general
solicitation in this State.
S. Any offer, sale or issuance of a security to any
person who is, or who is reasonably believed by the person
relying upon this subsection S to be, a director, executive
officer, or general partner of the issuer of the securities
being offered or sold, or any director, executive officer, or
general partner of a general partner of that issuer. For
purposes of this subsection S, "executive officer" shall mean
the president, any vice president in charge of a principal
business unit, division or function (such as sales,
administration or finance), any other officer who performs a
policy making function, or any other person who performs
similar policy making functions for the issuer. Executive
officers of subsidiaries may be deemed executive officers of
the issuer if they perform such policy making functions for
the issuer.
A document being filed pursuant to this Section 4 shall
be deemed filed, and any fee paid pursuant to this Section 4
shall be deemed paid, upon the date of actual receipt thereof
by the Secretary of State.
(Source: P.A. 89-209, eff. 1-1-96; 89-626, eff. 8-9-96;
90-70, eff. 7-8-97.)
(815 ILCS 5/8) (from Ch. 121 1/2, par. 137.8)
Sec. 8. Registration of dealers, limited Canadian
dealers, salespersons, investment advisers, and investment
adviser representatives.
A. Except as otherwise provided in this subsection A,
every dealer, limited Canadian dealer, salesperson,
investment adviser, and investment adviser representative
shall be registered as such with the Secretary of State. No
dealer or salesperson need be registered as such when
offering or selling securities in transactions believed in
good faith to be exempted by subsection A, B, C, D, E, G, H,
I, J, K, M, O, P, Q, R or S of Section 4 of this Act,
provided that such dealer or salesperson is not regularly
engaged in the business of offering or selling securities in
reliance upon the exemption set forth in subsection G or M of
Section 4 of this Act. No dealer, issuer or controlling
person shall employ a salesperson unless such salesperson is
registered as such with the Secretary of State or is employed
for the purpose of offering or selling securities solely in
transactions believed in good faith to be exempted by
subsection A, B, C, D, E, G, H, I, J, K, L, M, O, P, Q, R or
S of Section 4 of this Act; provided that such salesperson
need not be registered when effecting transactions in this
State limited to those transactions described in Section
15(h)(2) of the Federal 1934 Act or engaging in the offer or
sale of securities in respect of which he or she has
beneficial ownership and is a controlling person. The
Secretary of State may, by rule, regulation or order and
subject to such terms, conditions as fees as may be
prescribed in such rule, regulation or order, exempt from the
registration requirements of this Section 8 any investment
adviser, if the Secretary of State shall find that such
registration is not necessary in the public interest by
reason of the small number of clients or otherwise limited
character of operation of such investment adviser.
B. An application for registration as a dealer or
limited Canadian dealer, executed, verified, or authenticated
by or on behalf of the applicant, shall be filed with the
Secretary of State, in such form as the Secretary of State
may by rule, regulation or order prescribe, setting forth or
accompanied by:
(1) The name and address of the applicant, the
location of its principal business office and all branch
offices, if any, and the date of its organization;
(2) A statement of any other Federal or state
licenses or registrations which have been granted the
applicant and whether any such licenses or registrations
have ever been refused, cancelled, suspended, revoked or
withdrawn;
(3) The assets and all liabilities, including
contingent liabilities of the applicant, as of a date not
more than 60 days prior to the filing of the application;
(4) (a) A brief description of any civil or
criminal proceeding of which fraud is an essential
element pending against the applicant and whether the
applicant has ever been convicted of a felony, or of any
misdemeanor of which fraud is an essential element;
(b) A list setting forth the name, residence and
business address and a 10 year occupational statement of
each principal of the applicant and a statement
describing briefly any civil or criminal proceedings of
which fraud is an essential element pending against any
such principal and the facts concerning any conviction of
any such principal of a felony, or of any misdemeanor of
which fraud is an essential element;
(5) If the applicant is a corporation: a list of
its officers and directors setting forth the residence
and business address of each; a 10-year occupational
statement of each such officer or director; and a
statement describing briefly any civil or criminal
proceedings of which fraud is an essential element
pending against each such officer or director and the
facts concerning any conviction of any officer or
director of a felony, or of any misdemeanor of which
fraud is an essential element;
(6) If the applicant is a sole proprietorship, a
partnership, limited liability company, an unincorporated
association or any similar form of business organization:
the name, residence and business address of the
proprietor or of each partner, member, officer, director,
trustee or manager; the limitations, if any, of the
liability of each such individual; a 10-year occupational
statement of each such individual; a statement describing
briefly any civil or criminal proceedings of which fraud
is an essential element pending against each such
individual and the facts concerning any conviction of any
such individual of a felony, or of any misdemeanor of
which fraud is an essential element;
(7) Such additional information as the Secretary of
State may by rule or regulation prescribe as necessary to
determine the applicant's financial responsibility,
business repute and qualification to act as a dealer.
(8) (a) No applicant shall be registered or
re-registered as a dealer or limited Canadian dealer
under this Section unless and until each principal of the
dealer has passed an examination conducted by the
Secretary of State or a self-regulatory organization of
securities dealers or similar person, which examination
has been designated by the Secretary of State by rule,
regulation or order to be satisfactory for purposes of
determining whether the applicant has sufficient
knowledge of the securities business and laws relating
thereto to act as a registered dealer. Any dealer who was
registered on September 30, 1963, and has continued to be
so registered; and any principal of any registered
dealer, who was acting in such capacity on and
continuously since September 30, 1963; and any individual
who has previously passed a securities dealer examination
administered by the Secretary of State or any examination
designated by the Secretary of State to be satisfactory
for purposes of determining whether the applicant has
sufficient knowledge of the securities business and laws
relating thereto to act as a registered dealer by rule,
regulation or order, shall not be required to pass an
examination in order to continue to act in such capacity.
The Secretary of State may by order waive the examination
requirement for any principal of an applicant for
registration under this subsection B who has had such
experience or education relating to the securities
business as may be determined by the Secretary of State
to be the equivalent of such examination. Any request
for such a waiver shall be filed with the Secretary of
State in such form as may be prescribed by rule or
regulation.
(b) Unless an applicant is a member of the body
corporate known as the Securities Investor Protection
Corporation established pursuant to the Act of Congress
of the United States known as the Securities Investor
Protection Act of 1970, as amended, a member of an
association of dealers registered as a national
securities association pursuant to Section 15A of the
Federal 1934 Act, or a member of a self-regulatory
organization or stock exchange in Canada which the
Secretary of State has designated by rule or order, an
applicant shall not be registered or re-registered unless
and until there is filed with the Secretary of State
evidence that such applicant has in effect insurance or
other equivalent protection for each client's cash or
securities held by such applicant, and an undertaking
that such applicant will continually maintain such
insurance or other protection during the period of
registration or re-registration. Such insurance or other
protection shall be in a form and amount reasonably
prescribed by the Secretary of State by rule or
regulation.
(9) The application for the registration of a
dealer or limited Canadian dealer shall be accompanied
by a filing fee and a fee for each branch office in this
State, in each case in the amount established pursuant to
Section 11a of this Act, which fees shall not be
returnable in any event.
(10) The Secretary of State shall notify the dealer
or limited Canadian dealer by written notice (which may
be by electronic or facsimile transmission) of the
effectiveness of the registration as a dealer in this
State.
(11) Any change which renders no longer accurate
any information contained in any application for
registration or re-registration of a dealer or limited
Canadian dealer shall be reported to the Secretary of
State within 10 business days after the occurrence of
such change; but in respect to assets and liabilities
only materially adverse changes need be reported.
C. Any registered dealer, limited Canadian dealer,
issuer, or controlling person desiring to register a
salesperson shall file an application with the Secretary of
State, in such form as the Secretary of State may by rule or
regulation prescribe, which the salesperson is required by
this Section to provide to the dealer, issuer, or controlling
person, executed, verified, or authenticated by the
salesperson setting forth or accompanied by:
(1) The name, residence and business address of the
salesperson;
(2) Whether any federal or State license or
registration as dealer, limited Canadian dealer, or
salesperson has ever been refused the salesperson or
cancelled, suspended, revoked, or withdrawn;
(3) The nature of employment with, and names and
addresses of, employers of the salesperson for the 10
years immediately preceding the date of application;
(4) A brief description of any civil or criminal
proceedings of which fraud is an essential element
pending against the salesperson, and whether the
salesperson has ever been convicted of a felony, or of
any misdemeanor of which fraud is an essential element;
(5) Such additional information as the Secretary of
State may by rule, regulation or order prescribe as
necessary to determine the salesperson's business repute
and qualification to act as a salesperson; and
(6) No individual shall be registered or
re-registered as a salesperson under this Section unless
and until such individual has passed an examination
conducted by the Secretary of State or a self-regulatory
organization of securities dealers or similar person,
which examination has been designated by the Secretary of
State by rule, regulation or order to be satisfactory for
purposes of determining whether the applicant has
sufficient knowledge of the securities business and laws
relating thereto to act as a registered salesperson.
Any salesperson who was registered prior to
September 30, 1963, and has continued to be so
registered, and any individual who has passed a
securities salesperson examination administered by the
Secretary of State or an examination designated by the
Secretary of State by rule, regulation or order to be
satisfactory for purposes of determining whether the
applicant has sufficient knowledge of the securities
business and laws relating thereto to act as a registered
salesperson, shall not be required to pass an examination
in order to continue to act as a salesperson. The
Secretary of State may by order waive the examination
requirement for any applicant for registration under this
subsection C who has had such experience or education
relating to the securities business as may be determined
by the Secretary of State to be the equivalent of such
examination. Any request for such a waiver shall be
filed with the Secretary of State in such form as may be
prescribed by rule, regulation or order.
(7) The application for registration of a
salesperson shall be accompanied by a filing fee and a
Securities Audit and Enforcement Fund fee, each in the
amount established pursuant to Section 11a of this Act,
which shall not be returnable in any event.
(8) Any change which renders no longer accurate any
information contained in any application for registration
or re-registration as a salesperson shall be reported to
the Secretary of State within 10 business days after the
occurrence of such change. If the activities are
terminated which rendered an individual a salesperson for
the dealer, issuer or controlling person, the dealer,
issuer or controlling person, as the case may be, shall
notify the Secretary of State, in writing, within 30 days
of the salesperson's cessation of activities, using the
appropriate termination notice form.
(9) A registered salesperson may transfer his or
her registration under this Section 8 for the unexpired
term thereof from one registered dealer or limited
Canadian dealer to another by the giving of notice of the
transfer by the new registered dealer or limited Canadian
dealer to the Secretary of State in such form and subject
to such conditions as the Secretary of State shall by
rule or regulation prescribe. The new registered dealer
or limited Canadian dealer shall promptly file an
application for registration of such salesperson as
provided in this subsection C, accompanied by the filing
fee prescribed by paragraph (7) of this subsection C.
C-5. Except with respect to federal covered investment
advisers whose only clients are investment companies as
defined in the Federal 1940 Act, other investment advisers,
federal covered investment advisers, or any similar person
which the Secretary of State may prescribe by rule or order,
a federal covered investment adviser shall file with the
Secretary of State, prior to acting as a federal covered
investment adviser in this State, such documents as have been
filed with the Securities and Exchange Commission as the
Secretary of State by rule or order may prescribe. The
notification of a federal covered investment adviser shall be
accompanied by a notification filing fee established pursuant
to Section 11a of this Act, which shall not be returnable in
any event. Every person acting as a federal covered
investment adviser in this State shall file a notification
filing and pay an annual notification filing fee established
pursuant to Section 11a of this Act, which is not returnable
in any event. The failure to file any such notification
shall constitute a violation of subsection D of Section 12 of
this Act, subject to the penalties enumerated in Section 14
of this Act. Until October 10, 1999 or other date as may be
legally permissible, a federal covered investment adviser who
fails to file the notification or refuses to pay the fees as
required by this subsection shall register as an investment
adviser with the Secretary of State under Section 8 of this
Act. The civil remedies provided for in subsection A of
Section 13 of this Act and the civil remedies of rescission
and appointment of receiver, conservator, ancillary receiver,
or ancillary conservator provided for in subsection F of
Section 13 of this Act shall not be available against any
person by reason of the failure to file any such notification
or to pay the notification fee or on account of the contents
of any such notification.
D. An application for registration as an investment
adviser, executed, verified, or authenticated by or on behalf
of the applicant, shall be filed with the Secretary of State,
in such form as the Secretary of State may by rule or
regulation prescribe, setting forth or accompanied by:
(1) The name and form of organization under which
the investment adviser engages or intends to engage in
business; the state or country and date of its
organization; the location of the adviser's principal
business office and branch offices, if any; the names and
addresses of the adviser's principal, partners, officers,
directors, and persons performing similar functions or,
if the investment adviser is an individual, of the
individual; and the number of the adviser's employees who
perform investment advisory functions;
(2) The education, the business affiliations for
the past 10 years, and the present business affiliations
of the investment adviser and of the adviser's principal,
partners, officers, directors, and persons performing
similar functions and of any person controlling the
investment adviser;
(3) The nature of the business of the investment
adviser, including the manner of giving advice and
rendering analyses or reports;
(4) The nature and scope of the authority of the
investment adviser with respect to clients' funds and
accounts;
(5) The basis or bases upon which the investment
adviser is compensated;
(6) Whether the investment adviser or any
principal, partner, officer, director, person performing
similar functions or person controlling the investment
adviser (i) within 10 years of the filing of the
application has been convicted of a felony, or of any
misdemeanor of which fraud is an essential element, or
(ii) is permanently or temporarily enjoined by order or
judgment from acting as an investment adviser,
underwriter, dealer, principal or salesperson, or from
engaging in or continuing any conduct or practice in
connection with any such activity or in connection with
the purchase or sale of any security, and in each case
the facts relating to the conviction, order or judgment;
(7) (a) A statement as to whether the investment
adviser is engaged or is to engage primarily in the
business of rendering investment supervisory services;
and
(b) A statement that the investment adviser will
furnish his, her, or its clients with such information as
the Secretary of State deems necessary in the form
prescribed by the Secretary of State by rule or
regulation;
(8) Such additional information as the Secretary of
State may, by rule, regulation or order prescribe as
necessary to determine the applicant's financial
responsibility, business repute and qualification to act
as an investment adviser.
(9) No applicant shall be registered or
re-registered as an investment adviser under this Section
unless and until each principal of the applicant who is
actively engaged in the conduct and management of the
applicant's advisory business in this State has passed an
examination or completed an educational program conducted
by the Secretary of State or an association of investment
advisers or similar person, which examination or
educational program has been designated by the Secretary
of State by rule, regulation or order to be satisfactory
for purposes of determining whether the applicant has
sufficient knowledge of the securities business and laws
relating thereto to conduct the business of a registered
investment adviser.
Any person who was a registered investment adviser
prior to September 30, 1963, and has continued to be so
registered, and any individual who has passed an
investment adviser examination administered by the
Secretary of State, or passed an examination or completed
an educational program designated by the Secretary of
State by rule, regulation or order to be satisfactory for
purposes of determining whether the applicant has
sufficient knowledge of the securities business and laws
relating thereto to conduct the business of a registered
investment adviser, shall not be required to pass an
examination or complete an educational program in order
to continue to act as an investment adviser. The
Secretary of State may by order waive the examination or
educational program requirement for any applicant for
registration under this subsection D if the principal of
the applicant who is actively engaged in the conduct and
management of the applicant's advisory business in this
State has had such experience or education relating to
the securities business as may be determined by the
Secretary of State to be the equivalent of the
examination or educational program. Any request for a
waiver shall be filed with the Secretary of State in such
form as may be prescribed by rule or regulation.
(10) No applicant shall be registered or
re-registered as an investment adviser under this Section
8 unless the application for registration or
re-registration is accompanied by an application for
registration or re-registration for each person acting as
an investment adviser representative on behalf of the
adviser and a Securities Audit and Enforcement Fund fee
that shall not be returnable in any event is paid with
respect to each investment adviser representative.
(11) The application for registration of an
investment adviser shall be accompanied by a filing fee
and a fee for each branch office in this State, in each
case in the amount established pursuant to Section 11a of
this Act, which fees shall not be returnable in any
event.
(12) The Secretary of State shall notify the
investment adviser by written notice (which may be by
electronic or facsimile transmission) of the
effectiveness of the registration as an investment
adviser in this State.
(13) Any change which renders no longer accurate
any information contained in any application for
registration or re-registration of an investment adviser
shall be reported to the Secretary of State within 10
business days after the occurrence of the change. In
respect to assets and liabilities of an investment
adviser that retains custody of clients' cash or
securities or accepts pre-payment of fees in excess of
$500 per client and 6 or more months in advance only
materially adverse changes need be reported by written
notice (which may be by electronic or facsimile
transmission) no later than the close of business on the
second business day following the discovery thereof.
(14) Each application for registration as an
investment adviser shall become effective automatically
on the 45th day following the filing of the application,
required documents or information, and payment of the
required fee unless (i) the Secretary of State has
registered the investment adviser prior to that date or
(ii) an action with respect to the applicant is pending
under Section 11 of this Act.
D-5. A registered investment adviser or federal covered
investment adviser desiring to register an investment
adviser representative shall file an application with the
Secretary of State, in the form as the Secretary of State may
by rule or order prescribe, which the investment adviser
representative is required by this Section to provide to the
investment adviser, executed, verified, or authenticated by
the investment adviser representative and setting forth or
accompanied by:
(1) The name, residence, and business address of
the investment adviser representative;
(2) A statement whether any federal or state
license or registration as a dealer, salesperson,
investment adviser, or investment adviser representative
has ever been refused, canceled, suspended, revoked or
withdrawn;
(3) The nature of employment with, and names and
addresses of, employers of the investment adviser
representative for the 10 years immediately preceding the
date of application;
(4) A brief description of any civil or criminal
proceedings, of which fraud is an essential element,
pending against the investment adviser representative and
whether the investment adviser representative has ever
been convicted of a felony or of any misdemeanor of which
fraud is an essential element;
(5) Such additional information as the Secretary of
State may by rule or order prescribe as necessary to
determine the investment adviser representative's
business repute or qualification to act as an investment
adviser representative;
(6) Documentation that the individual has passed an
examination conducted by the Secretary of State, an
organization of investment advisers, or similar person,
which examination has been designated by the Secretary of
State by rule or order to be satisfactory for purposes of
determining whether the applicant has sufficient
knowledge of the investment advisory or securities
business and laws relating to that business to act as a
registered investment adviser representative; and
(7) A Securities Audit and Enforcement Fund fee
established under Section 11a of this Act, which shall
not be returnable in any event.
The Secretary of State may by order waive the examination
requirement for an applicant for registration under this
subsection D-5 who has had the experience or education
relating to the investment advisory or securities business as
may be determined by the Secretary of State to be the
equivalent of the examination. A request for a waiver shall
be filed with the Secretary of State in the form as may be
prescribed by rule or order.
A change that renders no longer accurate any information
contained in any application for registration or
re-registration as an investment adviser representative must
be reported to the Secretary of State within 10 business days
after the occurrence of the change. If the activities that
rendered an individual an investment adviser representative
for the investment adviser are terminated, the investment
adviser shall notify the Secretary of State in writing (which
may be by electronic or facsimile transmission), within 30
days of the investment adviser representative's termination,
using the appropriate termination notice form as the
Secretary of State may prescribe by rule or order.
A registered investment adviser representative may
transfer his or her registration under this Section 8 for the
unexpired term of the registration from one registered
investment adviser to another by the giving of notice of the
transfer by the new investment adviser to the Secretary of
State in the form and subject to the conditions as the
Secretary of State shall prescribe. The new registered
investment adviser shall promptly file an application for
registration of the investment adviser representative as
provided in this subsection, accompanied by the Securities
Audit and Enforcement Fund fee prescribed by paragraph (7) of
this subsection D-5.
E. (1) Subject to the provisions of subsection F of
Section 11 of this Act, the registration of a dealer, limited
Canadian dealer, salesperson, investment adviser, or
investment adviser representative may be denied, suspended or
revoked if the Secretary of State finds that the dealer,
limited Canadian dealer, salesperson, investment adviser, or
investment adviser representative or any principal officer,
director, partner, member, trustee, manager or any person who
performs a similar function of the dealer, limited Canadian
dealer, or investment adviser:
(a) Has been convicted of any felony during the 10
year period preceding the date of filing of any
application for registration or at any time thereafter,
or of any misdemeanor of which fraud is an essential
element;
(b) Has engaged in any unethical inequitable
practice in the offer or sale of securities or in any
fraudulent business practice;
(c) Has failed to account for any money or
property, or has failed to deliver any security, to any
person entitled thereto when due or within a reasonable
time thereafter;
(d) In the case of a dealer, limited Canadian
dealer, or investment adviser, is insolvent;
(e) In the case of a dealer, or limited Canadian
dealer, salesperson, or registered principal of a dealer
or limited Canadian dealer (i) has failed reasonably to
supervise the securities activities of any of its
salespersons and the failure has permitted or facilitated
a violation of Section 12 of this Act or (ii) is offering
or selling or has offered or sold securities in this
State through a salesperson other than a registered
salesperson, or, in the case of a salesperson, is selling
or has sold securities in this State for a dealer,
limited Canadian dealer, issuer or controlling person
with knowledge that the dealer, limited Canadian dealer,
issuer or controlling person has not complied with the
provisions of this Act or (iii) has failed reasonably to
supervise the implementation of compliance measures
following notice by the Secretary of State of
noncompliance with the Act or with the regulations
promulgated thereunder or both;
(f) In the case of an investment adviser, has
failed reasonably to supervise the advisory activities of
any of its investment adviser representatives or
employees and the failure has permitted or facilitated a
violation of Section 12 of this Act;
(g) Has violated any of the provisions of this Act;
(h) Has made any material misrepresentation to the
Secretary of State in connection with any information
deemed necessary by the Secretary of State to determine a
dealer's, limited Canadian dealer's, or investment
adviser's financial responsibility or a dealer's, limited
Canadian dealer's, investment adviser's, salesperson's,
or investment adviser representative's business repute or
qualifications, or has refused to furnish any such
information requested by the Secretary of State;
(i) Has had a license or registration under any
Federal or State law regulating the offer or sale of
securities or commodity futures contracts, refused,
cancelled, suspended or withdrawn;
(j) Has been suspended or expelled from or refused
membership in or association with or limited in any
capacity by any self-regulatory organization registered
under the Federal 1934 Act or the Federal 1974 Act
arising from any fraudulent or deceptive act or a
practice in violation of any rule, regulation or standard
duly promulgated by the self-regulatory organization;
(k) Has had any order entered against it after
notice and opportunity for hearing by a securities agency
of any state, any foreign government or agency thereof,
the Securities and Exchange Commission, or the Federal
Commodities Futures Trading Commission arising from any
fraudulent or deceptive act or a practice in violation of
any statute, rule or regulation administered or
promulgated by the agency or commission;
(l) In the case of a dealer or limited Canadian
dealer, fails to maintain a minimum net capital in an
amount which the Secretary of State may by rule or
regulation require;
(m) Has conducted a continuing course of dealing of
such nature as to demonstrate an inability to properly
conduct the business of the dealer, limited Canadian
dealer, salesperson, investment adviser, or investment
adviser representative;
(n) Has had, after notice and opportunity for
hearing, any injunction or order entered against it or
license or registration refused, cancelled, suspended,
revoked, withdrawn or limited by any state or federal
body, agency or commission regulating banking, insurance,
finance or small loan companies, real estate or mortgage
brokers or companies, if the action resulted from any act
found by the body, agency or commission to be a
fraudulent or deceptive act or practice in violation of
any statute, rule or regulation administered or
promulgated by the body, agency or commission;
(o) Has failed to file a return, or to pay the tax,
penalty or interest shown in a filed return, or to pay
any final assessment of tax, penalty or interest, as
required by any tax Act administered by the Illinois
Department of Revenue, until such time as the
requirements of that tax Act are satisfied;
(p) In the case of a natural person who is a
dealer, limited Canadian dealer, salesperson, investment
adviser, or investment adviser representative, has
defaulted on an educational loan guaranteed by the
Illinois Student Assistance Commission, until the natural
person has established a satisfactory repayment record as
determined by the Illinois Student Assistance Commission;
(q) Has failed to maintain the books and records
required under this Act or rules or regulations
promulgated under this Act within a reasonable time after
receiving notice of any deficiency;
(r) Has refused to allow or otherwise impeded
designees of the Secretary of State from conducting an
audit, examination, inspection, or investigation provided
for under Section 8 or 11 of this Act;
(s) Has failed to maintain any minimum net capital
or bond requirement set forth in this Act or any rule or
regulation promulgated under this Act;
(t) Has refused the Secretary of State or his or
her designee access to any office or location within an
office to conduct an investigation, audit, examination,
or inspection;
(u) Has advised or caused a public pension fund or
retirement system established under the Illinois Pension
Code to make an investment or engage in a transaction not
authorized by that Code.
(2) If the Secretary of State finds that any registrant
or applicant for registration is no longer in existence or
has ceased to do business as a dealer, limited Canadian
dealer, salesperson, investment adviser, or investment
adviser representative, or is subject to an adjudication as a
person under legal disability or to the control of a
guardian, or cannot be located after reasonable search, or
has failed after written notice to pay to the Secretary of
State any additional fee prescribed by this Section or
specified by rule or regulation, or if a natural person, has
defaulted on an educational loan guaranteed by the Illinois
Student Assistance Commission, the Secretary of State may by
order cancel the registration or application.
(3) Withdrawal of an application for registration or
withdrawal from registration as a dealer, limited Canadian
dealer, salesperson, investment adviser, or investment
adviser representative becomes effective 30 days after
receipt of an application to withdraw or within such shorter
period of time as the Secretary of State may determine,
unless any proceeding is pending under Section 11 of this Act
when the application is filed or a proceeding is instituted
within 30 days after the application is filed. If a
proceeding is pending or instituted, withdrawal becomes
effective at such time and upon such conditions as the
Secretary of State by order determines. If no proceeding is
pending or instituted and withdrawal automatically becomes
effective, the Secretary of State may nevertheless institute
a revocation or suspension proceeding within 2 years one year
after withdrawal became effective and enter a revocation or
suspension order as of the last date on which registration
was effective.
F. The Secretary of State shall make available upon
request the date that each dealer, investment adviser,
salesperson, or investment adviser representative was granted
registration, together with the name and address of the
dealer, limited Canadian dealer, or issuer on whose behalf
the salesperson is registered, and all orders of the
Secretary of State denying or abandoning an application, or
suspending or revoking registration, or censuring the
persons. The Secretary of State may designate by rule,
regulation or order the statements, information or reports
submitted to or filed with him or her pursuant to this
Section 8 which the Secretary of State determines are of a
sensitive nature and therefore should be exempt from public
disclosure. Any such statement, information or report shall
be deemed confidential and shall not be disclosed to the
public except upon the consent of the person filing or
submitting the statement, information or report or by order
of court or in court proceedings.
G. The registration or re-registration of a dealer or
limited Canadian dealer and of all salespersons registered
upon application of the dealer or limited Canadian dealer
shall expire on the next succeeding anniversary date of the
registration or re-registration of the dealer; and the
registration or re-registration of an investment adviser and
of all investment adviser representatives registered upon
application of the investment adviser shall expire on the
next succeeding anniversary date of the registration of the
investment adviser; provided, that the Secretary of State may
by rule or regulation prescribe an alternate date which any
dealer registered under the Federal 1934 Act or a member of
any self-regulatory association approved pursuant thereto, a
member of a self-regulatory organization or stock exchange in
Canada, or any investment adviser may elect as the expiration
date of its dealer or limited Canadian dealer and salesperson
registrations, or the expiration date of its investment
adviser registration, as the case may be. A registration of
a salesperson registered upon application of an issuer or
controlling person shall expire on the next succeeding
anniversary date of the registration, or upon termination or
expiration of the registration of the securities, if any,
designated in the application for his or her registration or
the alternative date as the Secretary may prescribe by rule
or regulation. Subject to paragraph (9) of subsection C of
this Section 8, a salesperson's registration also shall
terminate upon cessation of his or her employment, or
termination of his or her appointment or authorization, in
each case by the person who applied for the salesperson's
registration, provided that the Secretary of State may by
rule or regulation prescribe an alternate date for the
expiration of the registration.
H. Applications for re-registration of dealers, limited
Canadian dealers, salespersons, investment advisers, and
investment adviser representatives shall be filed with the
Secretary of State prior to the expiration of the then
current registration and shall contain such information as
may be required by the Secretary of State upon initial
application with such omission therefrom or addition thereto
as the Secretary of State may authorize or prescribe. Each
application for re-registration of a dealer, limited Canadian
dealer, or investment adviser shall be accompanied by a
filing fee, each application for re-registration as a
salesperson shall be accompanied by a filing fee and a
Securities Audit and Enforcement Fund fee established
pursuant to Section 11a of this Act, and each application for
re-registration as an investment adviser representative shall
be accompanied by a Securities Audit and Enforcement Fund fee
established under Section 11a of this Act, which shall not be
returnable in any event. Notwithstanding the foregoing,
applications for re-registration of dealers, limited Canadian
dealers, and investment advisers may be filed within 30 days
following the expiration of the registration provided that
the applicant pays the annual registration fee together with
an additional amount equal to the annual registration fee and
files any other information or documents that the Secretary
of State may prescribe by rule or regulation or order. Any
application filed within 30 days following the expiration of
the registration shall be automatically effective as of the
time of the earlier expiration provided that the proper fee
has been paid to the Secretary of State.
Each registered dealer, limited Canadian dealer, or
investment adviser shall continue to be registered if the
registrant changes his, her, or its form of organization
provided that the dealer or investment adviser files an
amendment to his, her, or its application not later than 30
days following the occurrence of the change and pays the
Secretary of State a fee in the amount established under
Section 11a of this Act.
I. (1) Every registered dealer, limited Canadian dealer,
and investment adviser shall make and keep for such periods,
such accounts, correspondence, memoranda, papers, books and
records as the Secretary of State may by rule or regulation
prescribe. All records so required shall be preserved for 3
years unless the Secretary of State by rule, regulation or
order prescribes otherwise for particular types of records.
(2) Every registered dealer, limited Canadian dealer,
and investment adviser shall file such financial reports as
the Secretary of State may by rule or regulation prescribe.
(3) All the books and records referred to in paragraph
(1) of this subsection I are subject at any time or from time
to time to such reasonable periodic, special or other audits,
examinations, or inspections by representatives of the
Secretary of State, within or without this State, as the
Secretary of State deems necessary or appropriate in the
public interest or for the protection of investors.
(4) At the time of an audit, examination, or inspection,
the Secretary of State, by his or her designees, may conduct
an interview of any person employed or appointed by or
affiliated with a registered dealer, limited Canadian dealer,
or investment advisor, provided that the dealer, limited
Canadian dealer, or investment advisor shall be given
reasonable notice of the time and place for the interview.
At the option of the dealer, limited Canadian dealer, or
investment advisor, a representative of the dealer or
investment advisor with supervisory responsibility over the
individual being interviewed may be present at the interview.
J. The Secretary of State may require by rule or
regulation the payment of an additional fee for the filing of
information or documents required to be filed by this Section
which have not been filed in a timely manner. The Secretary
of State may also require by rule or regulation the payment
of an examination fee for administering any examination which
it may conduct pursuant to subsection B, C, D, or D-5 of this
Section 8.
K. The Secretary of State may declare any application
for registration or limited registration under this Section 8
abandoned by order if the applicant fails to pay any fee or
file any information or document required under this Section
8 or by rule or regulation for more than 30 days after the
required payment or filing date. The applicant may petition
the Secretary of State for a hearing within 15 days after the
applicant's receipt of the order of abandonment, provided
that the petition sets forth the grounds upon which the
applicant seeks a hearing.
L. Any document being filed pursuant to this Section 8
shall be deemed filed, and any fee being paid pursuant to
this Section 8 shall be deemed paid, upon the date of actual
receipt thereof by the Secretary of State or his or her
designee.
M. The Secretary of State shall provide to the Illinois
Student Assistance Commission annually or at mutually agreed
periodic intervals the names and social security numbers of
natural persons registered under subsections B, C, D, and D-5
of this Section. The Illinois Student Assistance Commission
shall determine if any student loan defaulter is registered
as a dealer, limited Canadian dealer, salesperson, or
investment adviser under this Act and report its
determination to the Secretary of State or his or her
designee.
(Source: P.A. 89-209, eff. 1-1-96; 89-626, eff. 8-9-96;
90-70, eff. 7-8-97; 90-507, eff. 8-22-97; 90-655, eff.
7-30-98.)
(815 ILCS 5/11) (from Ch. 121 1/2, par. 137.11)
Sec. 11. Duties and powers of the Secretary of State.
A. (1) The administration of this Act is vested in the
Secretary of State, who may from time to time make, amend and
rescind such rules and regulations as may be necessary to
carry out this Act, including rules and regulations governing
procedures of registration, statements, applications and
reports for various classes of securities, persons and
matters within his or her jurisdiction and defining any
terms, whether or not used in this Act, insofar as the
definitions are not inconsistent with this Act. The rules
and regulations adopted by the Secretary of State under this
Act shall be effective in the manner provided for in the
Illinois Administrative Procedure Act.
(2) Among other things, the Secretary of State shall
have authority, for the purposes of this Act, to prescribe
the form or forms in which required information shall be set
forth, accounting practices, the items or details to be shown
in balance sheets and earning statements, and the methods to
be followed in the preparation of accounts, in the appraisal
or valuation of assets and liabilities, in the determination
of depreciation and depletion, in the differentiation of
recurring and non-recurring income, in the differentiation of
investment and operating income, and in the preparation of
consolidated balance sheets or income accounts of any person,
directly or indirectly, controlling or controlled by the
issuer, or any person under direct or indirect common control
with the issuer.
(3) No provision of this Act imposing any liability
shall apply to any act done or omitted in good faith in
conformity with any rule or regulation of the Secretary of
State under this Act, notwithstanding that the rule or
regulation may, after the act or omission, be amended or
rescinded or be determined by judicial or other authority to
be invalid for any reason.
(4) The Securities Department of the Office of the
Secretary of State shall be deemed a criminal justice agency
for purposes of all federal and state laws and regulations
and, in that capacity, shall be entitled to access to any
information available to criminal justice agencies.
(5) The Secretary of State, by rule, may conditionally
or unconditionally exempt any person, security, or
transaction, or any class or classes of persons, securities,
or transactions from any provision of Section 5, 6, 7, 8, 8a,
or 9 of this Act or of any rule promulgated under these
Sections, to the extent that such exemption is necessary or
appropriate in the public interest, and is consistent with
the protection of investors.
B. The Secretary of State may, anything in this Act to
the contrary notwithstanding, require financial statements
and reports of the issuer, dealer, salesperson, or investment
adviser as often as circumstances may warrant. In addition,
the Secretary of State may secure information or books and
records from or through others and may make or cause to be
made investigations respecting the business, affairs, and
property of the issuer of securities, any person involved in
the sale or offer for sale, purchase or offer to purchase of
any mineral investment contract, mineral deferred delivery
contract, or security and of dealers, salespersons, and
investment advisers that are registered or are the subject of
an application for registration under this Act. The costs of
an investigation shall be borne by the registrant or the
applicant, provided that the registrant or applicant shall
not be obligated to pay the costs without his, her or its
consent in advance.
C. Whenever it shall appear to the Secretary of State,
either upon complaint or otherwise, that this Act, or any
rule or regulation prescribed under authority thereof, has
been or is about to be violated, he or she may, in his or her
discretion, do one or both of the following:
(1) require or permit the person to file with the
Secretary of State a statement in writing under oath, or
otherwise, as to all the facts and circumstances
concerning the subject matter which the Secretary of
State believes to be in the public interest to
investigate, audit, examine, or inspect; and
(2) conduct an investigation, audit, examination,
or inspection as necessary or advisable for the
protection of the interests of the public.
D. (1) For the purpose of all investigations, audits,
examinations, or inspections which in the opinion of the
Secretary of State are necessary and proper for the
enforcement of this Act, the Secretary of State or a person
designated by him or her is empowered to administer oaths and
affirmations, subpoena witnesses, take evidence, and require
the production of any books and records, papers, or other
documents which the Secretary of State or a person designated
by him or her deems relevant or material to the inquiry.
(2) The Secretary of State or a person designated by him
or her is further empowered to administer oaths and
affirmations, subpoena witnesses, take evidence, and require
the production of any books and records, papers, or other
documents in this State at the request of a securities agency
of another state, if the activities constituting the alleged
violation for which the information is sought would be in
violation of Section 12 of this Act if the activities had
occurred in this State.
(3) The Circuit Court of any County of this State, upon
application of the Secretary of State or a person designated
by him or her may order the attendance of witnesses, the
production of books and records, papers, accounts and
documents and the giving of testimony before the Secretary of
State or a person designated by him or her; and any failure
to obey the order may be punished by the Circuit Court as a
contempt thereof.
(4) The fees of subpoenaed witnesses under this Act for
attendance and travel shall be the same as fees of witnesses
before the Circuit Courts of this State, to be paid when the
witness is excused from further attendance, provided, the
witness is subpoenaed at the instance of the Secretary of
State; and payment of the fees shall be made and audited in
the same manner as other expenses of the Secretary of State.
(5) Whenever a subpoena is issued at the request of a
complainant or respondent as the case may be, the Secretary
of State may require that the cost of service and the fee of
the witness shall be borne by the party at whose instance the
witness is summoned.
(6) The Secretary of State shall have power at his or
her discretion, to require a deposit to cover the cost of the
service and witness fees and the payment of the legal witness
fee and mileage to the witness served with subpoena.
(7) A subpoena issued under this Act shall be served in
the same manner as a subpoena issued out of a circuit court.
(8) The Secretary of State may in any investigation,
audits, examinations, or inspections cause the taking of
depositions of persons residing within or without this State
in the manner provided in civil actions under the laws of
this State.
E. Anything in this Act to the contrary notwithstanding:
(1) If the Secretary of State shall find that the
offer or sale or proposed offer or sale or method of
offer or sale of any securities by any person, whether
exempt or not, in this State, is fraudulent, or would
work or tend to work a fraud or deceit, or is being
offered or sold in violation of Section 12, or there has
been a failure or refusal to submit any notification
filing or fee required under this Act, the Secretary of
State may by written order prohibit or suspend the offer
or sale of securities by that person or deny or revoke
the registration of the securities or the exemption from
registration for the securities.
(2) If the Secretary of State shall find that any
person has violated subsection C, D, E, F, G, H, I, J, or
K of Section 12 of this Act, the Secretary of State may
by written order temporarily or permanently prohibit or
suspend the person from offering or selling any
securities, any mineral investment contract, or any
mineral deferred delivery contract in this State,
provided that any person who is the subject of an order
of permanent prohibition may petition the Secretary of
State for a hearing to present evidence of rehabilitation
or change in circumstances justifying the amendment or
termination of the order of permanent prohibition.
(3) If the Secretary of State shall find that any
person is engaging or has engaged in the business of
selling or offering for sale securities as a dealer or
salesperson or is acting or has acted as an investment
adviser, investment adviser representative, or federal
covered investment adviser, without prior thereto and at
the time thereof having complied with the registration or
notice filing requirements of this Act, the Secretary of
State may by written order prohibit or suspend the person
from engaging in the business of selling or offering for
sale securities, or acting as an investment adviser,
investment adviser representative, or federal covered
investment adviser, in this State.
(4) In addition to any other sanction or remedy
contained in this subsection E, the Secretary of State,
after finding that any provision of this Act has been
violated, may impose a fine as provided by rule,
regulation or order not to exceed $10,000 for each
violation of this Act, and may issue an order of public
censure against the violator.
F. (1) The Secretary of State shall not deny, suspend or
revoke the registration of securities, suspend or revoke the
registration of a dealer, salesperson or investment adviser,
prohibit or suspend the offer or sale of any securities,
prohibit or suspend any person from offering or selling any
securities in this State, prohibit or suspend a dealer or
salesperson from engaging in the business of selling or
offering for sale securities, prohibit or suspend a person
from acting as an investment adviser or federal covered
investment adviser, impose any fine for violation of this
Act, issue an order of public censure, or enter into an
agreed settlement except after an opportunity for hearing
upon not less than 10 days notice given by personal service
or registered mail or certified mail, return receipt
requested, to the person or persons concerned. Such notice
shall state the date and time and place of the hearing and
shall contain a brief statement of the proposed action of the
Secretary of State and the grounds for the proposed action.
A failure to appear at the hearing or otherwise respond to
the allegations set forth in the notice of hearing shall
constitute an admission of any facts alleged therein and
shall constitute sufficient basis to enter an order.
(2) Anything herein contained to the contrary
notwithstanding, the Secretary of State may temporarily
prohibit or suspend, for a maximum period of 90 60 days, by
an order effective immediately, the offer or sale or
registration of securities, the registration of a dealer,
salesperson, or investment adviser, or investment adviser
representative, or the offer or sale of securities by any
person, or the business of rendering investment advice,
without the notice and prior hearing in this subsection
prescribed, if the Secretary of State shall in his or her
opinion, based on credible evidence, deem it necessary to
prevent an imminent violation of this Act or to prevent
losses to investors which the Secretary of State reasonably
believes will occur as a result of a prior violation of this
Act. Immediately after taking action without such notice and
hearing, the Secretary of State shall deliver a copy of the
temporary order to the respondent named therein by personal
service or registered mail or certified mail, return receipt
requested. The temporary order shall set forth the grounds
for the action and shall advise that the respondent may
request a hearing as soon as reasonably practicable, that the
request for a hearing will not stop the effectiveness of the
temporary order and that respondent's failure to request a
hearing within 30 days after the date of the entry of the
temporary order shall constitute an admission of any facts
alleged therein and shall constitute sufficient basis to make
the temporary order final. Any provision of this paragraph
(2) to the contrary notwithstanding, the Secretary of State
may not pursuant to the provisions of this paragraph (2)
suspend the registration of a dealer, limited Canadian
dealer, salesperson, investment adviser, or investment
adviser representative based upon sub-paragraph (n) of
paragraph (l) of subsection E of Section 8 of this Act or
revoke the registration of securities or revoke the
registration of any dealer, salesperson, investment adviser
representative, or investment adviser.
(3) The Secretary of State may issue a temporary order
suspending or delaying the effectiveness of any registration
of securities under subsection A or B of Section 5, 6 or 7 of
this Act subsequent to and upon the basis of the issuance of
any stop, suspension or similar order by the Securities and
Exchange Commission with respect to the securities which are
the subject of the registration under subsection A or B of
Section 5, 6 or 7 of this Act, and the order shall become
effective as of the date and time of effectiveness of the
Securities and Exchange Commission order and shall be vacated
automatically at such time as the order of the Securities and
Exchange Commission is no longer in effect.
(4) When the Secretary of State finds that an
application for registration as a dealer, salesperson or
investment adviser should be denied, the Secretary of State
may enter an order denying the registration. Immediately
after taking such action, the Secretary of State shall
deliver a copy of the order to the respondent named therein
by personal service or registered mail or certified mail,
return receipt requested. The order shall state the grounds
for the action and that the matter will be set for hearing
upon written request filed with the Secretary of State within
30 days after the receipt of the request by the respondent.
The respondent's failure to request a hearing within 30 days
after receipt of the order shall constitute an admission of
any facts alleged therein and shall make the order final. If
a hearing is held, the Secretary of State shall affirm,
vacate, or modify the order.
(5) The findings and decision of the Secretary of State
upon the conclusion of each final hearing held pursuant to
this subsection shall be set forth in a written order signed
on behalf of the Secretary of State by his or her designee
and shall be filed as a public record. All hearings shall be
held before a person designated by the Secretary of State,
and appropriate records thereof shall be kept.
(6) Notwithstanding the foregoing, the Secretary of
State, after notice and opportunity for hearing, may at his
or her discretion enter into an agreed settlement,
stipulation or consent order with a respondent in accordance
with the provisions of the Illinois Administrative Procedure
Act. The provisions of the agreed settlement, stipulation or
consent order shall have the full force and effect of an
order issued by the Secretary of State.
(7) Anything in this Act to the contrary
notwithstanding, whenever the Secretary of State finds that a
person is currently expelled from, refused membership in or
association with, or limited in any material capacity by a
self-regulatory organization registered under the Federal
1934 Act or the Federal 1974 Act because of a fraudulent or
deceptive act or a practice in violation of a rule,
regulation, or standard duly promulgated by the
self-regulatory organization, the Secretary of State may, at
his or her discretion, enter a Summary Order of Prohibition,
which shall prohibit the offer or sale of any securities,
mineral investment contract, or mineral deferred delivery
contract by the person in this State. The order shall take
effect immediately upon its entry. Immediately after taking
the action the Secretary of State shall deliver a copy of the
order to the named Respondent by personal service or
registered mail or certified mail, return receipt requested.
A person who is the subject of an Order of Prohibition may
petition the Secretary of State for a hearing to present
evidence of rehabilitation or change in circumstances
justifying the amendment or termination of the Order of
Prohibition.
G. No administrative action shall be brought by the
Secretary of State for relief under this Act or upon or
because of any of the matters for which relief is granted by
this Act after the earlier to occur of (i) 3 years from the
date upon which the Secretary of State had notice of facts
which in the exercise of reasonable diligence would lead to
actual knowledge of the alleged violation of the Act, or (ii)
5 years from the date on which the alleged violation
occurred.
H. The action of the Secretary of State in denying,
suspending, or revoking the registration of a dealer, limited
Canadian dealer, salesperson, investment adviser, or
investment adviser representative, in prohibiting any person
from engaging in the business of offering or selling
securities as a dealer, limited Canadian dealer, or
salesperson, in prohibiting or suspending the offer or sale
of securities by any person, in prohibiting a person from
acting as an investment adviser, federal covered investment
adviser, or investment adviser representative, in denying,
suspending, or revoking the registration of securities, in
prohibiting or suspending the offer or sale or proposed offer
or sale of securities, in imposing any fine for violation of
this Act, or in issuing any order shall be subject to
judicial review in the Circuit Court of any county in this
State. The Administrative Review Law shall apply to and
govern every action for the judicial review of final actions
or decisions of the Secretary of State under this Act.
I. Notwithstanding any other provisions of this Act to
the contrary, whenever it shall appear to the Secretary of
State that any person is engaged or about to engage in any
acts or practices which constitute or will constitute a
violation of this Act or of any rule or regulation prescribed
under authority of this Act, the Secretary of State may at
his or her discretion, through the Attorney General:
(1) file a complaint and apply for a temporary
restraining order without notice, and upon a proper
showing the court may enter a temporary restraining order
without bond, to enforce this Act; and
(2) file a complaint and apply for a preliminary or
permanent injunction, and, after notice and a hearing and
upon a proper showing, the court may grant a preliminary
or permanent injunction and may order the defendant to
make an offer of rescission with respect to any sales or
purchases of securities, mineral investment contracts, or
mineral deferred delivery contracts determined by the
court to be unlawful under this Act.
The court shall further have jurisdiction and authority,
in addition to the penalties and other remedies in this Act
provided, to enter an order for the appointment of the court
or a person as a receiver, conservator, ancillary receiver or
ancillary conservator for the defendant or the defendant's
assets located in this State, or to require restitution,
damages or disgorgement of profits on behalf of the person or
persons injured by the act or practice constituting the
subject matter of the action, and may assess costs against
the defendant for the use of the State; provided, however,
that the civil remedies of rescission and appointment of a
receiver, conservator, ancillary receiver or ancillary
conservator shall not be available against any person by
reason of the failure to file with the Secretary of State, or
on account of the contents of, any report of sale provided
for in subsection G or P of Section 4, paragraph (2) of
subsection D of Sections 5 and 6, or paragraph (2) of
subsection F of Section 7 of this Act. Appeals may be taken
as in other civil cases.
J. In no case shall the Secretary of State, or any of
his or her employees or agents, in the administration of this
Act, incur any official or personal liability by instituting
an injunction or other proceeding or by denying, suspending
or revoking the registration of a dealer or salesperson, or
by denying, suspending or revoking the registration of
securities or prohibiting the offer or sale of securities, or
by suspending or prohibiting any person from acting as a
dealer, limited Canadian dealer, salesperson, investment
adviser, or investment adviser representative or from
offering or selling securities.
K. No provision of this Act shall be construed to
require or to authorize the Secretary of State to require any
investment adviser or federal covered investment adviser
engaged in rendering investment supervisory services to
disclose the identity, investments, or affairs of any client
of the investment adviser or federal covered investment
adviser, except insofar as the disclosure may be necessary or
appropriate in a particular proceeding or investigation
having as its object the enforcement of this Act.
L. Whenever, after an examination, investigation or
hearing, the Secretary of State deems it of public interest
or advantage, he or she may certify a record to the State's
Attorney of the county in which the act complained of,
examined or investigated occurred. The State's Attorney of
that county within 90 days after receipt of the record shall
file a written statement at the Office of the Secretary of
State, which statement shall set forth the action taken upon
the record, or if no action has been taken upon the record
that fact, together with the reasons therefor, shall be
stated.
M. The Secretary of State may initiate, take, pursue, or
prosecute any action authorized or permitted under Section 6d
of the Federal 1974 Act.
N. (1) Notwithstanding any provision of this Act to the
contrary, to encourage uniform interpretation,
administration, and enforcement of the provisions of this
Act, the Secretary of State may cooperate with the securities
agencies or administrators of one or more states, Canadian
provinces or territories, or another country, the Securities
and Exchange Commission, the Commodity Futures Trading
Commission, the Securities Investor Protection Corporation,
any self-regulatory organization, and any governmental law
enforcement or regulatory agency.
(2) The cooperation authorized by paragraph (1) of this
subsection includes, but is not limited to, the following:
(a) establishing or participating in a central
depository or depositories for registration under this
Act and for documents or records required under this Act;
(b) making a joint audit, inspection, examination,
or investigation;
(c) holding a joint administrative hearing;
(d) filing and prosecuting a joint civil or
criminal proceeding;
(e) sharing and exchanging personnel;
(f) sharing and exchanging information and
documents; or
(g) issuing any joint statement or policy.
(Source: P.A. 89-209, eff. 1-1-96; 89-626, eff. 8-9-96;
90-70, eff. 7-8-97.)
(815 ILCS 5/12) (from Ch. 121 1/2, par. 137.12)
Sec. 12. Violation. It shall be a violation of the
provisions of this Act for any person:
A. To offer or sell any security except in accordance
with the provisions of this Act.
B. To deliver to a purchaser any security required to be
registered under Section 5, Section 6 or Section 7 hereof
unless accompanied or preceded by a prospectus that meets the
requirements of the pertinent subsection of Section 5 or of
Section 6 or of Section 7.
C. To act as a dealer, salesperson, or investment
adviser, or investment adviser representative, unless
registered as such, where such registration is required,
under the provisions of this Act.
D. To fail to file with the Secretary of State any
application, report or document required to be filed under
the provisions of this Act or any rule or regulation made by
the Secretary of State pursuant to this Act or to fail to
comply with the terms of any order of the Secretary of State
issued pursuant to Section 11 hereof.
E. To make, or cause to be made, (1) in any application,
report or document filed under this Act or any rule or
regulation made by the Secretary of State pursuant to this
Act, any statement which was false or misleading with respect
to any material fact or (2) any statement to the effect that
a security (other than a security issued by the State of
Illinois) has been in any way endorsed or approved by the
Secretary of State or the State of Illinois.
F. To engage in any transaction, practice or course of
business in connection with the sale or purchase of
securities which works or tends to work a fraud or deceit
upon the purchaser or seller thereof.
G. To obtain money or property through the sale of
securities by means of any untrue statement of a material
fact or any omission to state a material fact necessary in
order to make the statements made, in the light of the
circumstances under which they were made, not misleading.
H. To sign or circulate any statement, prospectus, or
other paper or document required by any provision of this Act
knowing or having reasonable grounds to know any material
representation therein contained to be false or untrue.
I. To employ any device, scheme or artifice to defraud
in connection with the sale or purchase of any security,
directly or indirectly.
J. When acting as an investment adviser, investment
adviser representative, or federal covered investment
adviser, by any means or instrumentality, directly or
indirectly:
(1) To employ any device, scheme or artifice to
defraud any client or prospective client;
(2) To engage in any transaction, practice, or
course of business which operates as a fraud or deceit
upon any client or prospective client; or
(3) To engage in any act, practice, or course of
business which is fraudulent, deceptive or manipulative.
The Secretary of State shall for the purposes of this
paragraph (3), by rules and regulations, define and
prescribe means reasonably designed to prevent such acts,
practices, and courses of business as are fraudulent,
deceptive, or manipulative.
K. When offering or selling any mineral investment
contract or mineral deferred delivery contract:
(1) To employ any device, scheme, or artifice to
defraud any customer, prospective customer, or offeree;
(2) To engage in any transaction, practice, or
course of business that operates as a fraud or deceit
upon any customer, prospective customer, or offeree; or
(3) To engage in any act, practice, or course of
business that is fraudulent, deceptive, or manipulative.
The Secretary of State shall for the purposes of this
paragraph (3), by rules and regulations, define and
prescribe means reasonably designed to prevent acts,
practices, and courses of business as are fraudulent,
deceptive, or manipulative.
(Source: P.A. 90-70, eff. 7-8-97.)
Section 15. The Illinois Business Brokers Act of 1995 is
amended by changing Sections 10-25 and 10-60 as follows:
(815 ILCS 307/10-25)
Sec. 10-25. Fees and funds. All fees and funds accruing
for the administration of this Act shall be accounted for by
the Secretary of State and shall be deposited with the State
Treasurer who shall deposit them in the Securities Audit and
Enforcement Fund.
(a) The Secretary of State shall, by rule or regulation,
impose and collect fees necessary for the administration of
this Act, including but not limited to, fees for the
following purposes:
(1) Filing an application pursuant to Section 10-10
of this Act;
(2) Examining an application pursuant to Sections
10-10 and 10-20 of this Act;
(3) Registering a business broker under Section
10-10 of this Act;
(4) Renewing registration of a business broker
pursuant to Section 10-20 of this Act;
(5) Failure to file or file timely any document or
information required under this Act;
(6) (Blank). Filing a notice of lien with the
Secretary of State pursuant to Section 10-115 of this
Act.
(b) The Secretary of State may, by rule or regulation,
raise or lower any fee imposed by, and which he or she is
authorized by law to collect under, this Act.
(Source: P.A. 90-70, eff. 7-8-97; 91-194, eff. 7-20-99;
91-534, eff. 1-1-00.)
(815 ILCS 307/10-60)
Sec. 10-60. Violations; liability of business broker to
damaged parties; rights of prospective client. A person who
commits a material violation of this Act, in connection with
a contract for the services of a business broker, is liable
to any client damaged by the violation, for the amount of the
actual damages suffered, but not more than the fees actually
paid by the client seeking relief, together with interest at
the legal rate, and attorney fees. If a business broker
commits a material violation of Section Sections 10-10,
10-20, or and 10-30 of this Act, in connection with a
contract for business brokering services, the contract is
void, and the prospective client is entitled to receive from
the business broker all sums paid to the business broker,
with interest and any attorney's fee required to enforce this
Section.
(Source: P.A. 89-209, eff. 1-1-96; 90-70, eff. 7-8-97.)
Section 20. The Business Opportunity Sales Law of 1995 is
amended by changing Sections 5-5.10, 5-10, and 5-45 as
follows:
(815 ILCS 602/5-5.10)
Sec. 5-5.10. Business opportunity.
(a) "Business opportunity" means a contract or
agreement, between a seller and purchaser, express or
implied, orally or in writing, wherein it is agreed that the
seller or a person recommended by the seller shall provide to
the purchaser any product, equipment, supplies or services
enabling the purchaser to start a business when the purchaser
is required to make a payment to the seller or a person
recommended by the seller of more than $500 and the seller
represents directly or indirectly, orally or in writing,
that:
(1) the seller or a person recommended by the
seller will provide or assist the purchaser in finding
locations for the use or operation of vending machines,
racks, display cases or other similar devices, on
premises neither owned nor leased by the purchaser or
seller;
(2) the seller or a person recommended by the
seller will provide or assist the purchaser in finding
outlets or accounts for the purchaser's products or
services;
(3) the seller or a person specified by the seller
will purchase any or all products made, produced,
fabricated, grown, bred or modified by the purchaser;
(4) the seller guarantees that the purchaser will
derive income from the business which exceeds the price
paid to the seller;
(5) the seller will refund all or part of the price
paid to the seller, or repurchase any of the products,
equipment or supplies provided by the seller or a person
recommended by the seller, if the purchaser is
dissatisfied with the business; or
(6) the seller will provide a marketing plan,
provided that this Law shall not apply to the sale of a
marketing plan made in conjunction with the licensing of
a federally registered trademark or federally registered
service mark.
(b) "Business opportunity" does not include:
(1) any offer or sale of an ongoing business
operated by the seller and to be sold in its entirety;
(2) any offer or sale of a business opportunity to
an ongoing business where the seller will provide
products, equipment, supplies or services which are
substantially similar to the products, equipment,
supplies or services sold by the purchaser in connection
with the purchaser's ongoing business;
(3) any offer or sale of a business opportunity
which is a franchise as defined by the Franchise
Disclosure Act of 1987;
(4) any offer or sale of a business opportunity
which is registered pursuant to the Illinois Securities
Law of 1953;
(5) (blank); any offer or sale of a business
opportunity which involves a marketing plan made in
conjunction with the licensing of a federally registered
trademark or federally registered service mark provided
that the seller had a minimum net worth of $1,000,000 as
determined on the basis of the seller's most recent
audited financial statement prepared within 13 months of
the first offer in this State. Net worth may be
determined on a consolidated basis where the seller is at
least 80% owned by one person and that person expressly
guarantees the obligations of the seller with regard to
the offer or sale of any business opportunity claimed to
be excluded under this item;
(6) any offer or sale of a business opportunity by
an executor, administrator, sheriff, marshal, receiver,
trustee in bankruptcy, guardian or conservator or a
judicial offer or sale, of a business opportunity; or
(7) cash payments made by a purchaser not exceeding
$500 and the payment is made for the not-for-profit sale
of sales demonstration equipment, material or samples, or
the payment is made for product inventory sold to the
purchaser at a bona fide wholesale price.
(Source: P.A. 90-70, eff. 7-8-97; 91-357, eff. 7-29-99.)
(815 ILCS 602/5-10)
Sec. 5-10. Exemptions. Registration pursuant to Section
5-30 This Law shall not apply to any of the following:
(a) Any offer or sale of a business opportunity for
which the immediate cash payment made by the purchaser for
any business opportunity is at least $25,000 if the immediate
cash payment does not exceed 20% of the purchaser's net
worth as determined exclusive of principal residence,
furnishings therein, and automobiles; provided, however, the
Secretary of State may by rule or regulation withdraw or
further condition the availability of this exemption.
(b) Any offer or sale of a business opportunity for
which the seller does not advertise, solicit, or sell for
purchaser is not required to make an initial payment to the
seller or a person recommended by the seller exceeding $500.
(c) Any offer or sale of a business opportunity where
the seller has a net worth of not less than $1,000,000 as
determined on the basis of the seller's most recent audited
financial statement, prepared within 13 months of the first
offer in this State. Net worth may be determined on a
consolidated basis where the seller is at least 80% owned by
one person and that person expressly guarantees the
obligations of the seller with regard to the offer or sale of
any business opportunity claimed to be exempt under this
subsection. The Secretary of State may by rule or regulation
withdraw or further condition the availability of this
exemption.
(d) Any offer or sale of a business opportunity where
the purchaser has a net worth of not less than $250,000. Net
worth shall be determined exclusive of principal residence,
furnishings therein, and automobiles. The Secretary of State
may by rule or regulation withdraw or further condition the
availability of this exemption.
(e) Any offer or sale of a business opportunity where
the purchaser is a bank, savings and loan association, trust
company, insurance company, credit union, or investment
company as defined by the federal Investment Company Act of
1940, pension or profit sharing trust, or other financial
institution or institutional buyer, or a dealer registered
under the Illinois Securities Law of 1953, where the
purchaser is acting for itself or in a fiduciary capacity.
(f) Any offer or sale of a business opportunity which is
defined as a franchise under the Franchise Disclosure Act of
1987 provided that the seller delivers to each purchaser at
the earlier of the first personal meeting, or 10 business
days prior to the earlier of the execution by a purchaser of
any contract or agreement imposing a binding legal obligation
on the purchaser or the payment by a purchaser of any
consideration in connection with the offer or sale of the
business opportunity, one of the following disclosure
documents:
(1) The Franchise Offering Circular provided for
under the Franchise Disclosure Act of 1987 which the
Secretary of State may adopt by rule or regulation; or
(2) A disclosure document prepared pursuant to the
Federal Trade Commission rule entitled Disclosure
Requirements and Prohibitions Concerning Franchising and
Business Opportunity Ventures, 16 C.F.R. Sec. 436 (1979).
For the purposes of this subsection, a personal meeting
shall mean a face-to-face meeting between the purchaser
and the seller or their representatives, which is held
for the purpose of discussing the offer or sale of a
business opportunity.
(g) Any offer or sale of a business opportunity for
which the cash payment required to be made by a purchaser for
any business opportunity does not exceed $500 and the payment
is made for the not-for-profit sale of sales demonstration
equipment, material, or samples or the payment is made for
product inventory sold to the purchaser at a bona fide
wholesale price.
(h) Any offer or sale of a business opportunity which
the Secretary of State exempts by order or a class of
business opportunities which the Secretary of State exempts
by rule or regulation upon the finding that such exemption
would not be contrary to public interest and that
registration would not be necessary or appropriate for the
protection of purchasers.
(Source: P.A. 89-209, eff. 1-1-96.)
(815 ILCS 602/5-45)
Sec. 5-45. Denial, suspension, or revocation of
registration.
(a) The Secretary of State may issue an order denying
effectiveness to, or suspending or revoking the effectiveness
of, a registration if the Secretary of State finds that the
order is in the public interest and that any of the following
exist:
(1) The registration as of its effective date or as
of any earlier date in the case of an order denying
effectiveness, or any amendment as of its effective date,
or any report is incomplete in any material respect or
contains any statement which was, in the light of the
circumstances under which it was made, false or
misleading with respect to any material fact.
(2) Any provision of this Law or any rule,
regulation, order, or condition lawfully imposed under
this Law has been willfully violated, in connection with
the business opportunity:
(A) by the person filing the registration; or
(B) by the seller, any partner, officer, or
director of the seller, any person occupying a
similar status or performing similar functions, or
any person directly or indirectly controlling or
controlled by the seller, but only if the person
filing the registration is directly or indirectly
controlled by or acting for the seller.
(3) The business opportunity registered or sought
to be registered is the subject of an administrative
order denying, suspending or revoking a registration or a
permanent or temporary injunction or final order of any
court of competent jurisdiction; but the Secretary of
State:
(A) may not institute a proceeding against an
effective registration under this paragraph more
than one year from the date of the order or
injunction relied on; and
(B) may not enter an order under this
paragraph on the basis of an order or injunction
entered under any other State Act unless that order
or injunction was based on facts which would
currently constitute a ground for an order under
this Section.
(4) The seller's enterprise or method of business,
or that of the business opportunity, includes or would
include activities which are illegal where performed.
(5) The business opportunity or the offering of a
business opportunity has worked or tended to work a fraud
upon purchasers or would so operate.
(6) There has been a failure to file any documents
or information required by Section 5-30 of this Law.
(7) The seller has failed to pay the proper filing
fee but the Secretary of State may enter only a denial
order under this paragraph and the Secretary of State
shall vacate any such order when the deficiency has been
corrected.
(8) The seller's literature or advertising is
misleading, incorrect, incomplete or deceptive.
(b) The Secretary of State may not institute a
proceeding under this Section against an effective
registration on the basis of a fact or transaction known to
the Secretary of State when the registration became effective
unless the proceeding is instituted within the next 30 days.
(c) The Secretary of State may by summary order postpone
or suspend the effectiveness of the registration pending
final determination of any proceeding under this Section.
Upon the entry of the order, the Secretary of State shall
promptly notify the seller that the order has been entered
and of the reasons therefor and that within 15 days after the
receipt of a written request the matter will be set down for
hearing. The written request must be made within 30 days of
the entry of the order. If no hearing is requested and none
is ordered by the Secretary of State, the order will remain
in effect until it is modified or vacated by the Secretary of
State. If a hearing is requested or ordered, the Secretary of
State, after notice of an opportunity for hearing to the
seller, may modify or vacate the order or extend it until
final determination.
(d) No summary order may be entered under any part of
this Section, except the first sentence of subsection (c) of
this Section, without appropriate prior notice to the seller,
opportunity for hearing, and written findings of fact and
conclusions of law.
(e) The Secretary of State may vacate or modify an order
issued under this Section if the Secretary of State finds
that the conditions which prompted its entry have changed or
that it is otherwise in the public interest to do so.
(f) Notwithstanding anything in this Act to the
contrary, the Secretary of State, after notice and
opportunity for hearing, may, at the Secretary of State's
discretion, enter into an agreed settlement, stipulation, or
consent order with a respondent in accordance with the
provisions of the Illinois Administrative Procedure Act. The
provisions of the agreed settlement, stipulation, or consent
order shall have the full force and effect of an order issued
by the Secretary of State.
(g) The action of the Secretary of State in issuing any
order under this Section shall be subject to judicial review
under the Administrative Review Law.
(Source: P.A. 90-70, eff. 7-8-97; 91-357, eff. 7-29-99.)
INDEX
Statutes amended in order of appearance
815 ILCS 5/2.5a from Ch. 121 1/2, par. 137.2-5a
815 ILCS 5/2.9 from Ch. 121 1/2, par. 137.2-9
815 ILCS 5/2.12b from Ch. 121 1/2, par. 137.2-12b
815 ILCS 5/3 from Ch. 121 1/2, par. 137.3
815 ILCS 5/4 from Ch. 121 1/2, par. 137.4
815 ILCS 5/8 from Ch. 121 1/2, par. 137.8
815 ILCS 5/11 from Ch. 121 1/2, par. 137.11
815 ILCS 5/12 from Ch. 121 1/2, par. 137.12
815 ILCS 175/15-15
815 ILCS 175/15-40
815 ILCS 175/15-80
815 ILCS 307/10-25
815 ILCS 307/10-60
815 ILCS 602/5-5.10
815 ILCS 602/5-10
815 ILCS 602/5-45
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