SB0779 100TH GENERAL ASSEMBLY

LRB100 06789 RPS 16837 b

100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
SB0779

Introduced 2/1/2017, by Sen. Daniel Biss

SYNOPSIS AS INTRODUCED:

5 ILCS 140/7	from Ch. 116, par. 207
40 ILCS 5/1-113.17 new
40 ILCS 5/1-113.17a new
40 ILCS 5/1-113.17b new

Amends the General Provisions Article of the Illinois Pension Code in relation to investment transparency. Defines terms. Provides that within 90 days after entering into a new agreement to invest in an alternative investment fund, a public retirement system must disclose certain specified provisions of the agreement. Provides that a public retirement system shall require its alternative investment fund external managers and general partners to make certain annual disclosures concerning certain fees and expenses, in regard to each alternative investment fund. Provides that supplying a public retirement system with a completed reporting template developed by the Institutional Limited Partners Association constitutes compliance with certain reporting requirements. Declares the disclosures to be public records and requires their publication on the public retirement system's website. Amends the Freedom of Information Act to make a conforming change. Effective immediately.

FISCAL NOTE ACT MAY APPLY

PENSION IMPACT NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning public employee benefits.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 3. The Freedom of Information Act is amended by changing Section 7 as follows:

(5 ILCS 140/7) (from Ch. 116, par. 207)

Sec. 7. Exemptions.

(1) When a request is made to inspect or copy a public record that contains information that is exempt from disclosure under this Section, but also contains information that is not exempt from disclosure, the public body may elect to redact the information that is exempt. The public body shall make the remaining information available for inspection and copying. Subject to this requirement, the following shall be exempt from inspection and copying:

(a) Information specifically prohibited from disclosure by federal or State law or rules and regulations implementing federal or State law.

(b) Private information, unless disclosure is required by another provision of this Act, a State or federal law or a court order.

(b-5) Files, documents, and other data or databases maintained by one or more law enforcement agencies and specifically designed to provide information to one or more law enforcement agencies regarding the physical or mental status of one or more individual subjects.

(c) Personal information contained within public records, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy, unless the disclosure is consented to in writing by the individual subjects of the information. "Unwarranted invasion of personal privacy" means the disclosure of information that is highly personal or objectionable to a reasonable person and in which the subject's right to privacy outweighs any legitimate public interest in obtaining the information. The disclosure of information that bears on the public duties of public employees and officials shall not be considered an invasion of personal privacy.

(d) Records in the possession of any public body created in the course of administrative enforcement proceedings, and any law enforcement or correctional agency for law enforcement purposes, but only to the extent that disclosure would:

(i) interfere with pending or actually and reasonably contemplated law enforcement proceedings conducted by any law enforcement or correctional agency that is the recipient of the request;

(ii) interfere with active administrative enforcement proceedings conducted by the public body that is the recipient of the request;

(iii) create a substantial likelihood that a person will be deprived of a fair trial or an impartial hearing;

(iv) unavoidably disclose the identity of a confidential source, confidential information furnished only by the confidential source, or persons who file complaints with or provide information to administrative, investigative, law enforcement, or penal agencies; except that the identities of witnesses to traffic accidents, traffic accident reports, and rescue reports shall be provided by agencies of local government, except when disclosure would interfere with an active criminal investigation conducted by the agency that is the recipient of the request;

(v) disclose unique or specialized investigative techniques other than those generally used and known or disclose internal documents of correctional agencies related to detection, observation or investigation of incidents of crime or misconduct, and disclosure would result in demonstrable harm to the agency or public body that is the recipient of the request;

(vi) endanger the life or physical safety of law enforcement personnel or any other person; or

(vii) obstruct an ongoing criminal investigation by the agency that is the recipient of the request.

(d-5) A law enforcement record created for law enforcement purposes and contained in a shared electronic record management system if the law enforcement agency that is the recipient of the request did not create the record, did not participate in or have a role in any of the events which are the subject of the record, and only has access to the record through the shared electronic record management system.

(e) Records that relate to or affect the security of correctional institutions and detention facilities.

(e-5) Records requested by persons committed to the Department of Corrections if those materials are available in the library of the correctional facility where the inmate is confined.

(e-6) Records requested by persons committed to the Department of Corrections if those materials include records from staff members' personnel files, staff rosters, or other staffing assignment information.

(e-7) Records requested by persons committed to the Department of Corrections if those materials are available through an administrative request to the Department of Corrections.

(f) Preliminary drafts, notes, recommendations, memoranda and other records in which opinions are expressed, or policies or actions are formulated, except that a specific record or relevant portion of a record shall not be exempt when the record is publicly cited and identified by the head of the public body. The exemption provided in this paragraph (f) extends to all those records of officers and agencies of the General Assembly that pertain to the preparation of legislative documents.

(g) Trade secrets and commercial or financial information obtained from a person or business where the trade secrets or commercial or financial information are furnished under a claim that they are proprietary, privileged or confidential, and that disclosure of the trade secrets or commercial or financial information would cause competitive harm to the person or business, and only insofar as the claim directly applies to the records requested.

The information included under this exemption includes all trade secrets and commercial or financial information obtained by a public body, including a public pension fund, from a private equity fund or a privately held company within the investment portfolio of a private equity fund as a result of either investing or evaluating a potential investment of public funds in a private equity fund. The exemption contained in this item does not apply to the aggregate financial performance information of a private equity fund, nor to the identity of the fund's managers or general partners. The exemption contained in this item does not apply to the identity of a privately held company within the investment portfolio of a private equity fund, unless the disclosure of the identity of a privately held company may cause competitive harm. Neither the exemption contained in this item, nor any other exemption under this Act, applies to information that is required to be disclosed under Section 1-113.17a of the Illinois Pension Code or is declared in that Section to be a public record.

Nothing contained in this paragraph (g) shall be construed to prevent a person or business from consenting to disclosure.

(h) Proposals and bids for any contract, grant, or agreement, including information which if it were disclosed would frustrate procurement or give an advantage to any person proposing to enter into a contractor agreement with the body, until an award or final selection is made. Information prepared by or for the body in preparation of a bid solicitation shall be exempt until an award or final selection is made.

(i) Valuable formulae, computer geographic systems, designs, drawings and research data obtained or produced by any public body when disclosure could reasonably be expected to produce private gain or public loss. The exemption for "computer geographic systems" provided in this paragraph (i) does not extend to requests made by news media as defined in Section 2 of this Act when the requested information is not otherwise exempt and the only purpose of the request is to access and disseminate information regarding the health, safety, welfare, or legal rights of the general public.

(j) The following information pertaining to educational matters:

(i) test questions, scoring keys and other examination data used to administer an academic examination;

(ii) information received by a primary or secondary school, college, or university under its procedures for the evaluation of faculty members by their academic peers;

(iii) information concerning a school or university's adjudication of student disciplinary cases, but only to the extent that disclosure would unavoidably reveal the identity of the student; and

(iv) course materials or research materials used by faculty members.

(k) Architects' plans, engineers' technical submissions, and other construction related technical documents for projects not constructed or developed in whole or in part with public funds and the same for projects constructed or developed with public funds, including but not limited to power generating and distribution stations and other transmission and distribution facilities, water treatment facilities, airport facilities, sport stadiums, convention centers, and all government owned, operated, or occupied buildings, but only to the extent that disclosure would compromise security.

(l) Minutes of meetings of public bodies closed to the public as provided in the Open Meetings Act until the public body makes the minutes available to the public under Section 2.06 of the Open Meetings Act.

(m) Communications between a public body and an attorney or auditor representing the public body that would not be subject to discovery in litigation, and materials prepared or compiled by or for a public body in anticipation of a criminal, civil or administrative proceeding upon the request of an attorney advising the public body, and materials prepared or compiled with respect to internal audits of public bodies.

(n) Records relating to a public body's adjudication of employee grievances or disciplinary cases; however, this exemption shall not extend to the final outcome of cases in which discipline is imposed.

(o) Administrative or technical information associated with automated data processing operations, including but not limited to software, operating protocols, computer program abstracts, file layouts, source listings, object modules, load modules, user guides, documentation pertaining to all logical and physical design of computerized systems, employee manuals, and any other information that, if disclosed, would jeopardize the security of the system or its data or the security of materials exempt under this Section.

(p) Records relating to collective negotiating matters between public bodies and their employees or representatives, except that any final contract or agreement shall be subject to inspection and copying.

(q) Test questions, scoring keys, and other examination data used to determine the qualifications of an applicant for a license or employment.

(r) The records, documents, and information relating to real estate purchase negotiations until those negotiations have been completed or otherwise terminated. With regard to a parcel involved in a pending or actually and reasonably contemplated eminent domain proceeding under the Eminent Domain Act, records, documents and information relating to that parcel shall be exempt except as may be allowed under discovery rules adopted by the Illinois Supreme Court. The records, documents and information relating to a real estate sale shall be exempt until a sale is consummated.

(s) Any and all proprietary information and records related to the operation of an intergovernmental risk management association or self-insurance pool or jointly self-administered health and accident cooperative or pool. Insurance or self insurance (including any intergovernmental risk management association or self insurance pool) claims, loss or risk management information, records, data, advice or communications.

(t) Information contained in or related to examination, operating, or condition reports prepared by, on behalf of, or for the use of a public body responsible for the regulation or supervision of financial institutions or insurance companies, unless disclosure is otherwise required by State law.

(u) Information that would disclose or might lead to the disclosure of secret or confidential information, codes, algorithms, programs, or private keys intended to be used to create electronic or digital signatures under the Electronic Commerce Security Act.

(v) Vulnerability assessments, security measures, and response policies or plans that are designed to identify, prevent, or respond to potential attacks upon a community's population or systems, facilities, or installations, the destruction or contamination of which would constitute a clear and present danger to the health or safety of the community, but only to the extent that disclosure could reasonably be expected to jeopardize the effectiveness of the measures or the safety of the personnel who implement them or the public. Information exempt under this item may include such things as details pertaining to the mobilization or deployment of personnel or equipment, to the operation of communication systems or protocols, or to tactical operations.

(w) (Blank).

(x) Maps and other records regarding the location or security of generation, transmission, distribution, storage, gathering, treatment, or switching facilities owned by a utility, by a power generator, or by the Illinois Power Agency.

(y) Information contained in or related to proposals, bids, or negotiations related to electric power procurement under Section 1-75 of the Illinois Power Agency Act and Section 16-111.5 of the Public Utilities Act that is determined to be confidential and proprietary by the Illinois Power Agency or by the Illinois Commerce Commission.

(z) Information about students exempted from disclosure under Sections 10-20.38 or 34-18.29 of the School Code, and information about undergraduate students enrolled at an institution of higher education exempted from disclosure under Section 25 of the Illinois Credit Card Marketing Act of 2009.

(aa) Information the disclosure of which is exempted under the Viatical Settlements Act of 2009.

(bb) Records and information provided to a mortality review team and records maintained by a mortality review team appointed under the Department of Juvenile Justice Mortality Review Team Act.

(cc) Information regarding interments, entombments, or inurnments of human remains that are submitted to the Cemetery Oversight Database under the Cemetery Care Act or the Cemetery Oversight Act, whichever is applicable.

(dd) Correspondence and records (i) that may not be disclosed under Section 11-9 of the Illinois Public Aid Code or (ii) that pertain to appeals under Section 11-8 of the Illinois Public Aid Code.

(ee) The names, addresses, or other personal information of persons who are minors and are also participants and registrants in programs of park districts, forest preserve districts, conservation districts, recreation agencies, and special recreation associations.

(ff) The names, addresses, or other personal information of participants and registrants in programs of park districts, forest preserve districts, conservation districts, recreation agencies, and special recreation associations where such programs are targeted primarily to minors.

(gg) Confidential information described in Section 1-100 of the Illinois Independent Tax Tribunal Act of 2012.

(hh) The report submitted to the State Board of Education by the School Security and Standards Task Force under item (8) of subsection (d) of Section 2-3.160 of the School Code and any information contained in that report.

(ii) Records requested by persons committed to or detained by the Department of Human Services under the Sexually Violent Persons Commitment Act or committed to the Department of Corrections under the Sexually Dangerous Persons Act if those materials: (i) are available in the library of the facility where the individual is confined; (ii) include records from staff members' personnel files, staff rosters, or other staffing assignment information; or (iii) are available through an administrative request to the Department of Human Services or the Department of Corrections.

(jj) Confidential information described in Section 5-535 of the Civil Administrative Code of Illinois.

(1.5) Any information exempt from disclosure under the Judicial Privacy Act shall be redacted from public records prior to disclosure under this Act.

(2) A public record that is not in the possession of a public body but is in the possession of a party with whom the agency has contracted to perform a governmental function on behalf of the public body, and that directly relates to the governmental function and is not otherwise exempt under this Act, shall be considered a public record of the public body, for purposes of this Act.

(3) This Section does not authorize withholding of information or limit the availability of records to the public, except as stated in this Section or otherwise provided in this Act.

(Source: P.A. 98-463, eff. 8-16-13; 98-578, eff. 8-27-13; 98-695, eff. 7-3-14; 99-298, eff. 8-6-15; 99-346, eff. 1-1-16; 99-642, eff. 7-28-16; revised 10-25-16.)

Section 5. The Illinois Pension Code is amended by adding Sections 1-113.17, 1-113.17a, and 1-113.17b as follows:

(40 ILCS 5/1-113.17 new)

Sec. 1-113.17. Investment transparency; definitions. As used in this Section and Sections 1-113.17a and 1-113.17b:

(a) "Affiliate" means any person directly or indirectly controlling or controlled by, or under direct or indirect common control with, another person.

(a-5) "Alternative investment fund" means a private equity fund, hedge fund, or absolute return fund.

(b) "Board" or "public retirement system board" means the board of trustees of a public retirement system and includes the Illinois State Board of Investment established under Article 22A of this Code.

(c) "External manager" means either of the following:

(1) A person who manages an alternative investment fund and who offers or sells, or has offered or sold, an ownership interest in the alternative investment fund to a board.

(2) A general partner, managing member entity, fund manager, fund adviser, or other similar person or entity with decision-making authority over an alternative investment fund.

(d) "External manager group" means (1) the external manager, (2) its affiliates, (3) any other parties described in the external manager's marketing materials for the relevant alternative investment fund as providing services to or on behalf of portfolio holdings, and (4) any other parties described in the external manager's affiliated adviser's SEC Form ADV filing as receiving portfolio holding fees or portfolio holding other compensation. "External manager group" does not include the affiliated alternative investment fund in which the public retirement system is an investor, nor does it include an alternative investment fund used to effectuate investments of the affiliated fund in which the public retirement system is an investor.

(e) "Marketing materials" means (1) a prospectus, (2) a private placement memorandum, (3) a prospective investor presentation, (4) a due diligence questionnaire, but only if the questions are authored by an external manager, or (5) any other written material provided by an external manager for the purpose of soliciting a commitment to an alternative investment fund.

(f) "New agreement" means an agreement that is proposed or executed after January 1, 2018, and includes any modification to or amendment of such an agreement that modifies or alters any of the provisions required to be disclosed under Section 1-113.17a or 1-113.17b. "New agreement" also means any subsequent agreement that implements, memorializes, or provides detail about such an agreement.

(g) "Person" means an individual, corporation, partnership, limited partnership, limited liability company, or association, either domestic or foreign.

(h) "Portfolio holding" means any business, partnership, real property, or other business entity or asset in which an alternative investment fund has, at any time, held either an interest in the securities thereof or a real property interest in, or has acted as a lender to, the entity or asset.

(i) "Portfolio holding fee" means the total payment obligation of a portfolio holding, regardless of whether it is actually paid or accrued, and regardless of whether the payment obligation is satisfied in cash, securities, or other consideration, and regardless of whether it is incurred as compensation for services provided or as reimbursement for expenses incurred.

(j) "Private equity fund" means a pooled investment entity that is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in investment strategies involving equity or debt financings that are provided for purchasing or expanding private or public companies, or for related purposes such as financing for capital, research and development, introduction of a product or process into the marketplace, or similar needs requiring risk capital. This includes, but is not limited to, financing classified as venture capital, mezzanine, buyout, or growth funds.

(k) "Public retirement system" means a pension fund or retirement system subject to this Code, and includes the Illinois State Board of Investment established under Article 22A of this Code.

(40 ILCS 5/1-113.17a new)

Sec. 1-113.17a. Investment transparency; disclosure of alternative investment fund agreements.

(a) The definitions in Section 1-113.17 of this Code apply to this Section.

(b) Within 90 days after entering into a new agreement to invest in an alternative investment fund, a public retirement system must disclose, in the manner provided under this Section, the existence of the agreement and all of the following parts and provisions of the agreement:

(1) All management fee waiver provisions, including, but not limited to, provisions that permit the external manager or general partner to waive fees, or that specify the mechanics of the fee waiver or its repayment, or that specify the magnitude of the fee waiver, or that are necessary to understand how the fee waiver works, and all defined terms related to or affecting the fee waiver.

(2) All indemnification provisions, including, but not limited to, provisions that require the alternative investment fund or its investors to indemnify the external manager or general partner, or any of its affiliates, for settlements or judgments paid, and including all provisions necessary to understand how the indemnification works and all defined terms related to or affecting indemnification.

(3) All clawback provisions, including, but not limited to, provisions that allow the external manager or general partner to pay back an amount less than the full cost of the overpayment received by the manager, and including all provisions necessary to understand how the clawback works and all defined terms related to or affecting clawbacks.

(4) The cover page and signature block of the agreement.

However, in the case of a new agreement that consists of a modification of or amendment to a previous new agreement for which the disclosures required under this subsection have already been made, it is sufficient for the public retirement system (i) to identify the previous disclosures and disclose only the parts and provisions of the modification of or amendment to the agreement that modify, alter, or affect any of the provisions previously disclosed under this subsection or (ii) to make and disclose a finding that the modification or amendment does not modify, alter, or affect any of the provisions previously disclosed under this subsection, whichever is applicable.

(c) The public retirement system shall make the disclosures required under subsection (b) by doing all of the following:

(1) filing a copy of the required material with the Public Pension Division of the Illinois Department of Insurance;

(2) filing a copy of the required material with the Illinois Secretary of State; and

(3) posting and maintaining the required material on the public retirement system's website.

(d) A new agreement shall not be deemed to be violated or made invalid by the public retirement system's good faith effort to make the disclosures required under subsection (b) of this Section, nor due to harmless or inadvertent failure by the public retirement system to correctly include or identify a component of a required disclosure.

(e) The following are public records and are subject to disclosure under the Freedom of Information Act:

(1) All of the material required to be disclosed under subsection (b) of this Section.

(2) Any amounts paid in indemnification and any amounts deducted from payments owed by the general partner or external manager under an agreement establishing or providing for participation in an alternative investment fund by a public retirement system, and any documents submitted to a public retirement system justifying the demand for payment relating to the indemnification.

(3) The cover page and a legible copy of the executed signature block of any new agreement to establish or participate in an alternative investment fund by a public retirement system.

(40 ILCS 5/1-113.17b new)

Sec. 1-113.17b. Investment transparency; disclosure of certain investment fees.

(a) The definitions in Section 1-113.17 of this Code apply to this Section. For the purposes of this Section, "carried interest" means a share of the profits of an alternative investment fund that is paid, accrued, or due to the general partner or the external manager or their affiliates.

(b) This Section applies to any new agreement that a public retirement system enters into in order to establish or participate in an alternative investment fund. A public retirement system shall not enter into such new agreement without a written undertaking by the alternative investment fund external managers and general partners that they will comply with this Section and the requirements of the public retirement system under subsection (c).

(c) Every public retirement system shall require its alternative investment fund external managers and general partners to make the following disclosures annually, in a manner and form prescribed by the system, in regard to each alternative investment fund:

(1) The fees and expenses that the public retirement system pays directly to the alternative investment fund, or to the alternative investment fund external manager or general partner.

(2) The public retirement system's share of all fees and expenses not included in paragraph (1), including carried interest, that are paid or allocated from the alternative investment fund to the external manager or general partners, or that are deducted from payments owed from the external manager or general partners to the alternative investment fund.

(3) The amount of all management fee waivers made by the alternative investment fund external managers or general partners.

(4) The total amount of portfolio holding fees incurred by each portfolio holding of the alternative investment fund as payment to any person who is a member of the external manager group.

An alternative investment fund external manager or general partner may provide the public retirement system with a completed reporting template developed by the Institutional Limited Partners Association for the relevant category of investment; doing so constitutes compliance with that external manager or general partner's annual disclosure requirements under this subsection for the year covered in the completed template.

(d) A public retirement system shall make the information received under subsection (c) available by:

(1) filing a copy of the received material with the Public Pension Division of the Illinois Department of Insurance; and

(2) posting and maintaining the received information on the public retirement system's website, together with sufficient identifying and explanatory material to facilitate access and understanding by the public.

Section 99. Effective date. This Act takes effect upon becoming law.