Bill Text: IL SB3162 | 2009-2010 | 96th General Assembly | Engrossed

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Bill Title: Amends the Illinois Pension Code. Requires that a description of every contract for qualified fund-of-fund management services must be posted in a conspicuous manner on the web site of the retirement system, pension fund, or investment board and must include the name of the fund-of-funds, the name of its investment adviser, the total investment commitment of the retirement system, pension fund, or investment board to invest in such fund-of-funds, and a disclosure approved by the board describing the factors that contributed to the investment in such fund-of-funds. Effective immediately.

Spectrum: Bipartisan Bill

Status: (Engrossed - Dead) 2010-11-30 - House Floor Amendment No. 2 Recommends Be Adopted State Government Administration Committee; 016-001-000 [SB3162 Detail]

Download: Illinois-2009-SB3162-Engrossed.html

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AN ACT concerning public employee benefits.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Pension Code is amended by changing
Section 1-113.14 and by adding Section 1-113.15 as follows:
(40 ILCS 5/1-113.14)
Sec. 1-113.14. Investment services for retirement systems,
pension funds, and investment boards, except those funds
established under Articles 3 and 4.
(a) For the purposes of this Section, "investment services"
means services provided by an investment adviser or a
consultant other than qualified fund-of-fund management
services as defined in Section 1-113.15.
(b) The selection and appointment of an investment adviser
or consultant for investment services by the board of a
retirement system, pension fund, or investment board subject to
this Code, except those whose investments are restricted by
Section 1-113.2, shall be made and awarded in accordance with
this Section. All contracts for investment services shall be
awarded by the board using a competitive process that is
substantially similar to the process required for the
procurement of professional and artistic services under
Article 35 of the Illinois Procurement Code. Each board of

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trustees shall adopt a policy in accordance with this
subsection (b) within 60 days after the effective date of this
amendatory Act of the 96th General Assembly. The policy shall
be posted on its web site and filed with the Illinois
Procurement Policy Board. Exceptions to this Section are
allowed for (i) sole source procurements, (ii) emergency
procurements, and (iii) at the discretion of the pension fund,
retirement system, or board of investment, contracts that are
nonrenewable and one year or less in duration, so long as the
contract has a value of less than $20,000. All exceptions
granted under this Section must be published on the system's,
fund's, or board's web site, shall name the person authorizing
the procurement, and shall include a brief explanation of the
reason for the exception.
A person, other than a trustee or an employee of a
retirement system, pension fund, or investment board, may not
act as a consultant or investment adviser under this Section
unless that person is registered as an investment adviser under
the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1,
et seq.) or a bank, as defined in the federal Investment
Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.).
(c) Investment services provided by an investment adviser
or a consultant appointed under this Section shall be rendered
pursuant to a written contract between the investment adviser
or consultant and the board.
The contract shall include all of the following:

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(1) Acknowledgement in writing by the investment
adviser or consultant that he or she is a fiduciary with
respect to the pension fund or retirement system.
(2) The description of the board's investment policy
and notice that the policy is subject to change.
(3) (i) Full disclosure of direct and indirect fees,
commissions, penalties, and other compensation, including
reimbursement for expenses, that may be paid by or on
behalf of the consultant in connection with the provision
of services to the pension fund or retirement system and
(ii) a requirement that the consultant update the
disclosure promptly after a modification of those payments
or an additional payment.
(4) A requirement that the investment adviser or
consultant, in conjunction with the board's staff, submit
periodic written reports, on at least a quarterly basis,
for the board's review at its regularly scheduled meetings.
All returns on investment shall be reported as net returns
after payment of all fees, commissions, and any other
compensation.
(5) Disclosure of the names and addresses of (i) the
consultant or investment adviser; (ii) any entity that is a
parent of, or owns a controlling interest in, the
consultant or investment adviser; (iii) any entity that is
a subsidiary of, or in which a controlling interest is
owned by, the consultant or investment adviser; (iv) any

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persons who have an ownership or distributive income share
in the consultant or investment adviser that is in excess
of 7.5%; or (v) serves as an executive officer of the
consultant or investment adviser.
(6) A disclosure of the names and addresses of all
subcontractors, if applicable, and the expected amount of
money each will receive under the contract, including an
acknowledgment that the contractor must promptly make
notification, in writing, if at any time during the term of
the contract a contractor adds or changes any
subcontractors. For purposes of this subparagraph (6),
"subcontractor" does not include non-investment related
professionals or professionals offering services that are
not directly related to the investment of assets, such as
legal counsel, actuary, proxy-voting services, services
used to track compliance with legal standards, and
investment fund of funds where the board has no direct
contractual relationship with the investment advisers or
partnerships.
(7) A description of service to be performed.
(8) A description of the need for the service.
(9) A description of the plan for post-performance
review.
(10) A description of the qualifications necessary.
(11) The duration of the contract.
(12) The method for charging and measuring cost.

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(d) Notwithstanding any other provision of law, a
retirement system, pension fund, or investment board subject to
this Code, except those whose investments are restricted by
Section 1-113.2 of this Code, shall not enter into a contract
with a consultant that exceeds 5 years in duration. No contract
to provide consulting services may be renewed or extended. At
the end of the term of a contract, however, the consultant is
eligible to compete for a new contract as provided in this
Section. No retirement system, pension fund, or investment
board shall attempt to avoid or contravene the restrictions of
this subsection (d) by any means.
(e) Within 60 days after the effective date of this
amendatory Act of the 96th General Assembly, each investment
adviser or consultant currently providing services or subject
to an existing contract for the provision of services must
disclose to the board of trustees all direct and indirect fees,
commissions, penalties, and other compensation paid by or on
behalf of the investment adviser or consultant in connection
with the provision of those services and shall update that
disclosure promptly after a modification of those payments or
an additional payment. The person shall update the disclosure
promptly after a modification of those payments or an
additional payment. The disclosures required by this
subsection (e) shall be in writing and shall include the date
and amount of each payment and the name and address of each
recipient of a payment.

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(f) The retirement system, pension fund, or board of
investment shall develop uniform documents that shall be used
for the solicitation, review, and acceptance of all investment
services. The form shall include the terms contained in
subsection (c) of this Section. All such uniform documents
shall be posted on the retirement system's, pension fund's, or
investment board's web site.
(g) A description of every contract for investment services
shall be posted in a conspicuous manner on the web site of the
retirement system, pension fund, or investment board. The
description must include the name of the person or entity
awarded a contract, the total amount applicable to the
contract, the total fees paid or to be paid, and a disclosure
approved by the board describing the factors that contributed
to the selection of an investment adviser or consultant.
(Source: P.A. 96-6, eff. 4-3-09.)
(40 ILCS 5/1-113.15 new)
Sec. 1-113.15. Qualified fund-of-fund management services.
(a) As used in this Section:
"Qualified fund-of-fund management services" means either
(i) the services of an investment adviser acting in its
capacity as an investment manager of a fund-of-funds or (ii) an
investment adviser acting in its capacity as an investment
manager of a separate account that is invested on a
side-by-side basis in a substantially identical manner to a

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fund-of-funds, in each case pursuant to qualified written
agreements.
"Qualified written agreements" means one or more written
contracts to which the investment adviser and the board are
parties and includes all of the following: (i) the matters
described in items (1), (4), (5), (7), (11) and (12) of
subsection (c) of Section 1-113.14; (ii) a description of any
fees, commissions, penalties, and other compensation payable,
if any, directly by the retirement system, pension fund, or
investment board (which shall not include any fees,
commissions, penalties, and other compensation payable from
the assets of the fund-of-funds or separate account); (iii) a
description (or method of calculation) of the fees and expenses
payable by the Fund to the investment adviser, and the timing
of the payment of the fees or expenses; and (iv) a description
(or method of calculation) of any carried interest or other
performance based interests, fees or payments allocable by the
Fund to the investment adviser or an affiliate of the
investment adviser, and the priority of distributions with
respect to such interest.
(b) A description of every contract for qualified
fund-of-fund management services must be posted in a
conspicuous manner on the web site of the retirement system,
pension fund, or investment board. The description must include
the name of the fund-of-funds, the name of its investment
adviser, the total investment commitment of the retirement

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system, pension fund, or investment board to invest in such
fund-of-funds, and a disclosure approved by the board
describing the factors that contributed to the investment in
such fund-of-funds. No information that is exempt from
inspection pursuant to Section 7 of the Freedom of Information
Act shall be disclosed under this Section.
Section 99. Effective date. This Act takes effect upon
becoming law.