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90_HB1168eng
815 ILCS 5/2.10 from Ch. 121 1/2, par. 137.2-10
Amends the Illinois Securities Law of 1953. Provides
that a registered salesperson also means a registered
limited Canadian salesperson.
LRB9004729SMdv
HB1168 Engrossed LRB9004729SMdv
1 AN ACT concerning financial transactions.
2 Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
4 Section 5. The Illinois Securities Law of 1953 is
5 amended by changing Sections 2.3, 2.9, 2.10, 2.11, 2.12b,
6 2.17b, 2.26, 3, 4, 5, 6, 7, 8, 9, 10, 11, 11a, 12, and 13,
7 and by adding Sections 2.12c, 2.17f, 2.29, 2.30, 2.31, 2.32,
8 and 2a as follows:
9 (815 ILCS 5/2.3) (from Ch. 121 1/2, par. 137.2-3)
10 Sec. 2.3 "Person" means an individual, a corporation, a
11 partnership, an association, a joint stock company, a limited
12 liability company, a limited liability partnership, a trust
13 or any unincorporated organization. As used in this Section,
14 "trust" includes only a trust where the interest or interests
15 of the beneficiary or beneficiaries is a security.
16 (Source: Laws 1961, p. 3663.)
17 (815 ILCS 5/2.9) (from Ch. 121 1/2, par. 137.2-9)
18 Sec. 2.9. "Salesperson" means an individual, other than
19 an issuer or a dealer, employed or appointed or authorized by
20 a dealer, issuer or controlling person to offer, purchase or
21 sell securities in this State. The partners or officers of a
22 dealer or issuer shall not be deemed to be salespersons
23 within the meaning of this definition if they are not or have
24 not been regularly engaged in securities offering, purchasing
25 or selling activities other than transactions for their own
26 respective accounts. No individual shall be deemed to be a
27 salesperson solely by reason of effecting transactions in a
28 covered security to qualified purchasers as described in
29 Section 18(b)(3) of the Federal 1933 Act, effecting
30 transactions in a covered security as described in Section
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1 18(b)(4)(D) of the Federal 1933 Act, or engaging in the fact
2 that such individual is engaged in making offers or effecting
3 sales of securities to employees of the issuer of such
4 securities or to employees of the parent or any wholly-owned
5 subsidiary of such issuer, provided that such individual is
6 an employee of such issuer, parent or subsidiary who has not
7 been employed primarily to make such offers or sales and who
8 receives no special compensation, directly or indirectly, for
9 or on account of any such offer or sale. "Salesperson" also
10 means a limited Canadian salesperson.
11 (Source: P.A. 84-869.)
12 (815 ILCS 5/2.10) (from Ch. 121 1/2, par. 137.2-10)
13 Sec. 2.10. "Registered salesperson" means a salesperson
14 registered under Section 8 of this Act. "Registered
15 salesperson" also means a registered limited Canadian
16 salesperson.
17 (Source: P.A. 80-556.)
18 (815 ILCS 5/2.11) (from Ch. 121 1/2, par. 137.2-11)
19 Sec. 2.11. Investment adviser. "Investment adviser"
20 means any person who, for compensation, engages in this State
21 in the business of advising others, either directly or
22 through publications or writings, as to the value of
23 securities or as to the advisability of investing in,
24 purchasing, or selling securities or who, in this State for
25 direct or indirect compensation and as part of a regular
26 advisory business, issues or promulgates analyses or reports
27 concerning securities or any financial planner or other
28 person who, as an integral component of other financially
29 related services, provides the foregoing investment advisory
30 services to others for compensation and as part of a business
31 or who holds himself or herself out as providing the
32 foregoing investment advisory services to others for
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1 compensation; but "investment adviser" does not include:
2 (1) a bank or trust company, or the regular employees of
3 a bank or trust company;
4 (2) any lawyer, accountant, engineer, geologist or
5 teacher (i) whose performance of such services is solely
6 incidental to the practice of his or her profession or (ii)
7 who:
8 (A) does not exercise investment discretion with
9 respect to the assets of clients or maintain custody of
10 the assets of clients for the purpose of investing those
11 assets, except when the person is acting as a bona fide
12 fiduciary in a capacity such as an executor, trustee,
13 personal representative, estate or trust agent, guardian,
14 conservator, or person serving in a similar fiduciary
15 capacity;
16 (B) does not accept or receive, directly or
17 indirectly, any commission, fee, or other remuneration
18 contingent upon the purchase or sale of any specific
19 security by a client of such person; and
20 (C) does not advise on the purchase or sale of
21 specific securities, except that this clause (C) shall
22 not apply when the advice about specific securities is
23 based on financial statement analyses or tax
24 considerations that are reasonably related to and in
25 connection with the person's profession;
26 (3) any registered dealer or partner, officer, director
27 or regular employee of a registered dealer, or registered
28 salesperson, whose performance of these services, in each
29 case, is solely incidental to the conduct of the business of
30 the registered dealer or registered salesperson, as the case
31 may be, and who receives no special compensation, directly or
32 indirectly, for such services;
33 (4) any publisher or regular employee of such publisher
34 of a bona fide newspaper, news magazine or business or
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1 financial publication of regular and established paid
2 circulation;
3 (5) any person whose advice, analyses or reports relate
4 only to securities which are direct obligations of, or
5 obligations guaranteed as to principal or interest by, the
6 United States, any state or any political subdivision of any
7 state, or any public agency or public instrumentality of any
8 one or more of the foregoing; or
9 (5.5) any person who is a federal covered investment
10 adviser; or
11 (6) any other persons who are not within the intent of
12 this Section as the Secretary of State may designate by rules
13 and regulations or order.
14 (Source: P.A. 87-463.)
15 (815 ILCS 5/2.12b) (from Ch. 121 1/2, par. 137.2-12b)
16 Sec. 2.12b. Investment adviser representative.
17 "Investment adviser representative" means any partner,
18 officer, director of (or a person occupying a similar status
19 or performing similar functions), or other natural person
20 employed by or associated with an investment adviser, except
21 clerical or ministerial personnel, who in this State:
22 (1) makes any recommendations or otherwise renders
23 advice regarding securities;
24 (2) manages accounts or portfolios of clients;
25 (3) determines what recommendation or advice regarding
26 securities should be given; or
27 (4) supervises any employee who performs any of the
28 foregoing.
29 "Investment adviser representative" does not mean a
30 federal covered investment adviser, a supervised person of a
31 federal covered investment adviser, or a person defined by
32 rule of the Securities and Exchange Commission under Section
33 203A of the Federal Investment Advisers Act as an investment
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1 adviser representative.
2 (Source: P.A. 87-463.)
3 (815 ILCS 5/2.12c new)
4 Sec. 2.12c. Registered investment adviser
5 representative. "Registered investment adviser
6 representative" means an investment adviser representative
7 registered under Section 8 of this Act.
8 (815 ILCS 5/2.17b) (from Ch. 121 1/2, par. 137.2-17b)
9 Sec. 2.17b. Federal 1974 Act. "Federal 1974 Act" means
10 the Act of Congress of the United States known as the
11 Commodity Exchange Futures Trading Commission Act of 1974, as
12 amended.
13 (Source: P.A. 89-209, eff. 1-1-96.)
14 (815 ILCS 5/2.17f new)
15 Sec. 2.17f. Federal 1996 Act. "Federal 1996 Act" means
16 the Act of Congress of the United States known as the
17 National Securities Markets Improvement Act of 1996.
18 (815 ILCS 5/2.26) (from Ch. 121 1/2, par. 137.2-26)
19 Sec. 2.26. Mineral investment contract. "Mineral
20 investment contract" means any investment, account,
21 agreement, or contract whereby the investor's profits are
22 dependent upon the transportation, mining, minting, milling,
23 flotation, refining, hallmarking, sale, resale, or repurchase
24 of a metal or mineral, even if there is any potential for
25 profit from fluctuation in the value of the metal or mineral,
26 except any contract or agreement for the sale or purchase of
27 a metal or mineral between merchants. Nothing herein shall
28 affect the jurisdiction or authority of the Commodity Futures
29 Trading Commission under the Federal 1974 1936 Act or the
30 application of any provision thereof or regulation thereunder
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1 to any person or transaction subject thereto. The Secretary
2 of State may, for the purposes of this Section by rules and
3 regulations, define the term "between merchants".
4 (Source: P.A. 87-463.)
5 (815 ILCS 5/2.29 new)
6 Sec. 2.29 Covered security. "Covered security" means
7 any security that is a covered security under Section 18(b)
8 of the Federal 1933 Act or rules or regulations promulgated
9 thereunder.
10 (815 ILCS 5/2.30 new)
11 Sec. 2.30. Federal covered investment adviser. "Federal
12 covered investment adviser" means a person who is (i)
13 registered under Section 203 of the Federal 1940 Investment
14 Advisers Act or (ii) is excluded from the definition of
15 "investment adviser" under Section 202(a)(11) of the Federal
16 1940 Investment Advisers Act.
17 (815 ILCS 5/2.31 new)
18 Sec. 2.31. Limited Canadian salesperson. "Limited
19 Canadian salesperson" means a salesperson who is a resident
20 of Canada, has no office or other physical presence in this
21 State, and complies with conditions specified by the
22 Secretary of State through rule or order.
23 (815 ILCS 5/2.32 new)
24 Sec. 2.32. Limited Canadian dealer. "Limited Canadian
25 dealer" means a dealer who is a resident of Canada, has no
26 office or other physical presence in this State, and complies
27 with conditions specified by the Secretary of State through
28 rule or order.
29 (815 ILCS 5/2a new)
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1 Sec. 2a. Notification filing requirements of issuers of
2 any covered security and payment of fees. All issuers of any
3 covered security (except any security listed or authorized
4 for listing on the New York Stock Exchange or American Stock
5 Exchange or listed on the National Market System of the
6 Nasdaq Stock Market (or any successor to such entities), or
7 listed or authorized for listing on a national securities
8 exchange (or tier or segment thereof) that has listing
9 standards that the federal Securities and Exchange Commission
10 by rule (on its own initiative or on the basis of petition)
11 has determined are substantially similar to the listing
12 standards applicable to any security described in this
13 Section, or is a security of the same issuer that is equal in
14 seniority or that is a senior security described in this
15 Section) shall annually file a notification with the
16 Secretary of State in such form and manner as prescribed by
17 rule or order and pay the notification filing fee established
18 under Section 11a of this Act which shall not be returnable
19 in any event.
20 Anything in this Act to the contrary notwithstanding,
21 until October 10, 1999 or other date as may be legally
22 permissible, the refusal to file the notification or pay the
23 fee by an issuer of any covered security (except issuers of
24 securities which are being sold under Regulation D, Section
25 506 of the Federal 1933 Act) after written notice by the
26 Secretary of State (which may be by United States Postal
27 Service, facsimile or electronic transmission or other
28 similar means), shall require the issuer or his, her, or its
29 designee to file an application for registration with the
30 Secretary of State under subsection A or B of Section 5, 6,
31 or 7 of this Act and pay the registration fee established
32 under Section 11a of this Act which shall not be returnable
33 in any event. The failure to file any such notification
34 shall constitute a violation of subsection D of Section 12 of
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1 this Act, subject to the penalties enumerated in Section 14
2 of this Act. The civil remedies provided for in subsection A
3 of Section 13 of this Act and the civil remedies of
4 rescission and appointment of a receiver, conservator,
5 ancillary receiver, or ancillary conservator provided for in
6 subsection F of Section 13 of this Act shall not be available
7 against any person by reason of the failure to file any such
8 notification or to pay the notification fee.
9 (815 ILCS 5/3) (from Ch. 121 1/2, par. 137.3)
10 Sec. 3. The provisions of Sections 2a, 5, 6 and 7 of
11 this Act shall not apply to any of the following securities:
12 A. Any security (including a revenue obligation) issued
13 or guaranteed by the United States, any state, any political
14 subdivision of a state, or any agency or corporation or other
15 instrumentality of any one or more of the foregoing, or any
16 certificate of deposit for any such security.
17 B. Any security issued or guaranteed by Canada, any
18 Canadian province, any political subdivision of any such
19 province, any agency or corporation or other instrumentality
20 of one or more of the foregoing, or any other foreign
21 government with which the United States then maintains
22 diplomatic relations, if the security is recognized as a
23 valid obligation by the issuer or guarantor.
24 C. (1) Any security issued by and representing an
25 interest in or a debt of, or guaranteed by, any bank or
26 savings bank organized under the laws of the United States,
27 or any bank, savings bank, savings institution or trust
28 company organized and supervised under the laws of any state,
29 or any interest or participation in any common trust fund or
30 similar fund maintained by any such bank, savings bank,
31 savings institution or trust company exclusively for the
32 collective investment and reinvestment of assets contributed
33 thereto by such bank, savings bank, savings institution or
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1 trust company or any affiliate thereof, in its capacity as
2 fiduciary, trustee, executor, administrator or guardian.
3 (2) Any security issued or guaranteed to both principal
4 and interest by an international bank of which the United
5 States is a member.
6 D. (1) Any security issued by and representing an
7 interest in or a debt of, or guaranteed by, any federal
8 savings and loan association, or any savings and loan
9 association or building and loan association organized and
10 supervised under the laws of any state.
11 (2) Any security issued or guaranteed by any federal
12 credit union or any credit union, industrial loan
13 association, or similar organization organized and supervised
14 under the laws of any state.
15 E. Any security issued or guaranteed by any railroad,
16 other common carrier, public utility or holding company where
17 such issuer or guarantor is subject to the jurisdiction of
18 the Interstate Commerce Commission or successor entity, or is
19 a registered holding company under the Public Utility Holding
20 Company Act of 1935 or a subsidiary of such a company within
21 the meaning of that Act, or is regulated in respect of its
22 rates and charges by a governmental authority of the United
23 States or any state, or is regulated in respect of the
24 issuance or guarantee of the security by a governmental
25 authority of the United States, any state, Canada, or any
26 Canadian province.
27 F. Equipment trust certificates in respect of equipment
28 leased or conditionally sold to a person, if securities
29 issued by such person would be exempt under subsection E of
30 this Section.
31 G. Any security which at the time of sale is listed or
32 approved for listing upon notice of issuance on the New York
33 Stock Exchange, Inc., the American Stock Exchange, Inc., the
34 Pacific Stock Exchange, Inc., the Chicago Stock Exchange,
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1 Inc., the Chicago Board of Trade, the Philadelphia Stock
2 Exchange, Inc., the Chicago Board Options Exchange,
3 Incorporated, the Nasdaq National Market System of the Nasdaq
4 Stock Market, or any other exchange, automated quotation
5 system or board of trade which the Secretary of State, by
6 rule or regulation, deems to have substantially equivalent
7 standards for listing or designation as required by any such
8 exchange, automated quotation system or board of trade; and
9 securities senior or of substantially equal rank, both as to
10 dividends or interest and upon liquidation, to securities so
11 listed or designated; and warrants and rights to purchase any
12 of the foregoing; provided, however, that this subsection G
13 shall not apply to investment fund shares or securities of
14 like character, which are being continually offered at a
15 price or prices determined in accordance with a prescribed
16 formula.
17 The Secretary of State may, after notice and opportunity
18 for hearing, revoke the exemption afforded by this
19 subparagraph with respect to any securities by issuing an
20 order if the Secretary of State finds that the further sale
21 of the securities in this State would work or tend to work a
22 fraud on purchasers of the securities.
23 H. Any security issued by a person organized and
24 operated not for pecuniary profit and exclusively for
25 religious, educational, benevolent, fraternal, agricultural,
26 charitable, athletic, professional, trade, social or
27 reformatory purposes, or as a chamber of commerce or local
28 industrial development corporation, or for more than one of
29 said purposes and no part of the net earnings of which inures
30 to the benefit of any private stockholder or member.
31 I. Instruments evidencing indebtedness under an
32 agreement for the acquisition of property under contract of
33 conditional sale.
34 J. A note secured by a first mortgage upon tangible
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1 personal or real property when such mortgage is made,
2 assigned, sold, transferred and delivered with such note or
3 other written obligation secured by such mortgage, either to
4 or for the benefit of the purchaser or lender; or bonds or
5 notes not more than 10 in number secured by a first mortgage
6 upon the title in fee simple to real property if the
7 aggregate principal amount secured by such mortgage does not
8 exceed $500,000 and also does not exceed 75% of the fair
9 market value of such real property.
10 K. A note or notes not more than 10 in number secured by
11 a junior mortgage lien if the aggregate principal amount of
12 the indebtedness represented thereby does not exceed 50% of
13 the amount of the then outstanding prior lien indebtedness
14 and provided that the total amount of the indebtedness
15 (including the indebtedness represented by the subject junior
16 mortgage note or notes) shall not exceed 90% of the fair
17 market value of the property securing such indebtedness; and
18 provided further that each such note or notes shall bear
19 across the face thereof the following legend in letters at
20 least as large as 12 point type: "THIS NOTE IS SECURED BY A
21 JUNIOR MORTGAGE".
22 L. Any negotiable promissory note or draft, bill of
23 exchange or bankers' acceptance which arises out of a current
24 transaction or the proceeds of which have been or are to be
25 used for current transactions, and which evidences an
26 obligation to pay cash within 9 months of the date of
27 issuance exclusive of days of grace, or any renewal of such
28 note, draft, bill or acceptance which is likewise limited, or
29 any guarantee of such note, draft, bill or acceptance or of
30 any such renewal, provided that the note, draft, bill, or
31 acceptance is a negotiable security eligible for discounting
32 by banks that are members of the Federal Reserve System. Any
33 instrument exempted under this subsection from the
34 requirement of Sections 5, 6, and 7 of this Act shall bear
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1 across the face thereof the following legend in letters at
2 least as large as 12 point type: "THIS INSTRUMENT IS NEITHER
3 GUARANTEED, NOR IS THE ISSUANCE THEREOF REGULATED BY ANY
4 AGENCY OR DEPARTMENT OF THE STATE OF ILLINOIS OR THE UNITED
5 STATES.". However, the foregoing legend shall not be
6 required with respect to any such instrument:
7 (i) sold to a person described in subsection C or H
8 of Section 4 of this Act;
9 (ii) sold to a "Qualified Institutional Buyer" as
10 that term is defined in Rule 144a adopted under the
11 Securities Act of 1933;
12 (iii) where the minimum initial subscription for
13 the purchase of such instrument is $100,000 or more; or
14 (iv) issued by an issuer that has any class of
15 securities registered under Section 12 of the Securities
16 Exchange Act of 1934 or has any outstanding class of
17 indebtedness rated in one of the 3 highest categories by
18 a rating agency designated by the Department;
19 M. Any security issued by and representing an interest
20 in or a debt of, or guaranteed by, any insurance company
21 organized under the laws of any state.
22 N. Any security issued pursuant to (i) a written
23 compensatory benefit plan (including without limitation, any
24 purchase, savings, option, bonus, stock appreciation, profit
25 sharing, thrift, incentive, pension, or similar plan) and
26 interests in such plans established by one or more of the
27 issuers thereof or its parents or majority-owned subsidiaries
28 for the participation of their employees, directors, general
29 partners, trustees (where the issuer is a business trust),
30 officers, or consultants or advisers of such issuers or its
31 parents or majority-owned subsidiaries, provided that bona
32 fide services are rendered by consultants or advisers and
33 those services are not in connection with the offer and sale
34 of securities in a capital-raising transaction or (ii) a
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1 written contract relating to the compensation of any such
2 person.
3 O. Any option, put, call, spread or straddle issued by a
4 clearing agency registered as such under the Federal 1934
5 Act, if the security, currency, commodity, or other interest
6 underlying the option, put, call, spread or straddle is not
7 required to be registered under Section 5.
8 P. Any security which meets all of the following
9 conditions:
10 (1) If the issuer is not organized under the laws
11 of the United States or a state, it has appointed a duly
12 authorized agent in the United States for service of
13 process and has set forth the name and address of the
14 agent in its prospectus.
15 (2) A class of the issuer's securities is required
16 to be and is registered under Section 12 of the Federal
17 1934 Act, and has been so registered for the three years
18 immediately preceding the offering date.
19 (3) Neither the issuer nor a significant subsidiary
20 has had a material default during the last seven years,
21 or for the period of the issuer's existence if less than
22 seven years, in the payment of (i) principal, interest,
23 dividend, or sinking fund installment on preferred stock
24 or indebtedness for borrowed money, or (ii) rentals under
25 leases with terms of three years or more.
26 (4) The issuer has had consolidated net income,
27 before extraordinary items and the cumulative effect of
28 accounting changes, of at least $1,000,000 in four of its
29 last five fiscal years including its last fiscal year;
30 and if the offering is of interest bearing securities,
31 has had for its last fiscal year, net income, before
32 deduction for income taxes and depreciation, of at least
33 1-1/2 times the issuer's annual interest expense, giving
34 effect to the proposed offering and the intended use of
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1 the proceeds. For the purposes of this clause "last
2 fiscal year" means the most recent year for which audited
3 financial statements are available, provided that such
4 statements cover a fiscal period ended not more than 15
5 months from the commencement of the offering.
6 (5) If the offering is of stock or shares other
7 than preferred stock or shares, the securities have
8 voting rights and the rights include (i) the right to
9 have at least as many votes per share, and (ii) the right
10 to vote on at least as many general corporate decisions,
11 as each of the issuer's outstanding classes of stock or
12 shares, except as otherwise required by law.
13 (6) If the offering is of stock or shares, other
14 than preferred stock or shares, the securities are owned
15 beneficially or of record, on any date within six months
16 prior to the commencement of the offering, by at least
17 1,200 persons, and on that date there are at least
18 750,000 such shares outstanding with an aggregate market
19 value, based on the average bid price for that day, of at
20 least $3,750,000. In connection with the determination
21 of the number of persons who are beneficial owners of the
22 stock or shares of an issuer, the issuer or dealer may
23 rely in good faith for the purposes of this clause upon
24 written information furnished by the record owners.
25 (7) The issuer meets the conditions specified in
26 paragraphs (2), (3) and (4) of this subsection P if
27 either the issuer or the issuer and the issuer's
28 predecessor, taken together, meet such conditions and if:
29 (a) the succession was primarily for the purpose of
30 changing the state of incorporation of the predecessor or
31 forming a holding company and the assets and liabilities
32 of the successor at the time of the succession were
33 substantially the same as those of the predecessor; or
34 (b) all predecessors met such conditions at the time of
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1 succession and the issuer has continued to do so since
2 the succession.
3 Q. Any security appearing on the List of OTC Margin
4 Stocks published by the Board of Governors of the Federal
5 Reserve System; any other securities of the same issuer which
6 are of senior or substantially equal rank; any securities
7 called for by subscription rights or warrants so listed or
8 approved; or any warrants or rights to purchase or subscribe
9 to any of the foregoing.
10 R. Any security issued by a bona fide agricultural
11 cooperative operating in this State that is organized under
12 the laws of this State or as a foreign cooperative
13 association organized under the law of another state that has
14 been duly qualified to transact business in this State.
15 (Source: P.A. 89-209, eff. 1-1-96.)
16 (815 ILCS 5/4) (from Ch. 121 1/2, par. 137.4)
17 Sec. 4. Exempt transactions. The provisions of Sections
18 2a, 5, 6 and 7 of this Act shall not apply to any of the
19 following transactions, except where otherwise specified in
20 this Section 4:
21 A. Any offer or sale, whether through a dealer or
22 otherwise, of securities by a person who is not an issuer,
23 underwriter, dealer or controlling person in respect of such
24 securities, and who, being the bona fide owner of such
25 securities, disposes thereof for his or her own account;
26 provided, that such offer or sale is not made directly or
27 indirectly for the benefit of the issuer or of an underwriter
28 or controlling person.
29 B. Any offer, sale, issuance or exchange of securities
30 of the issuer to or with security holders of the issuer
31 except to or with persons who are security holders solely by
32 reason of holding transferable warrants, transferable
33 options, or similar transferable rights of the issuer, if no
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1 commission or other remuneration is paid or given directly or
2 indirectly for or on account of the procuring or soliciting
3 of such sale or exchange (other than a fee paid to
4 underwriters based on their undertaking to purchase any
5 securities not purchased by security holders in connection
6 with such sale or exchange).
7 C. Any offer, sale or issuance of securities to any
8 corporation, bank, savings bank, savings institution, savings
9 and loan association, trust company, insurance company,
10 building and loan association, or dealer; to a pension fund,
11 pension trust, or employees' profit sharing trust, other
12 financial institution or institutional investor, any
13 government or political subdivision or instrumentality
14 thereof, whether the purchaser is acting for itself or in
15 some fiduciary capacity; to any partnership or other
16 association engaged as a substantial part of its business or
17 operations in purchasing or holding securities; to any trust
18 in respect of which a bank or trust company is trustee or
19 co-trustee; to any entity in which at least 90% of the equity
20 is owned by persons described under subsection C, H, or S of
21 this Section 4; to any employee benefit plan within the
22 meaning of Title I of the Federal ERISA Act if (i) the
23 investment decision is made by a plan fiduciary as defined in
24 Section 3(21) of the Federal ERISA Act and such plan
25 fiduciary is either a bank, savings and loan association,
26 insurance company, registered investment adviser or an
27 investment adviser registered under the Federal 1940
28 Investment Advisers Act, or (ii) the plan has total assets in
29 excess of $5,000,000, or (iii) in the case of a self-directed
30 plan, investment decisions are made solely by persons that
31 are described under subsection C, D, H or S of this Section
32 4; to any plan established and maintained by, and for the
33 benefit of the employees of, any state or political
34 subdivision or agency or instrumentality thereof if such plan
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1 has total assets in excess of $5,000,000; or to any
2 organization described in Section 501(c)(3) of the Internal
3 Revenue Code of 1986, any Massachusetts or similar business
4 trust, or any partnership, if such organization, trust, or
5 partnership has total assets in excess of $5,000,000.
6 D. The Secretary of State is granted authority to create
7 by rule or regulation a limited offering transactional
8 exemption that furthers the objectives of compatibility with
9 federal exemptions and uniformity among the states. The
10 Secretary of State shall prescribe by rule or regulation the
11 amount of the fee for filing any report required under this
12 subsection, but the fee shall not be less than the minimum
13 amount nor more than the maximum amount established under
14 Section 11a of this Act and shall not be returnable in any
15 event.
16 E. Any offer or sale of securities by an executor,
17 administrator, guardian, receiver or trustee in insolvency or
18 bankruptcy, or at any judicial sale, or at a public sale by
19 auction held at an advertised time and place, or the offer or
20 sale of securities in good faith and not for the purpose of
21 avoiding the provisions of this Act by a pledgee of
22 securities pledged for a bona fide debt.
23 F. Any offer or sale by a registered dealer, either as
24 principal or agent, of any securities (except face amount
25 certificate contracts and investment fund shares) at a price
26 reasonably related to the current market price of such
27 securities, provided:
28 (1)(a) the securities are issued and outstanding;
29 (b) the issuer is required to file reports pursuant
30 to Section 13 or Section 15(d) of the Federal 1934 Act
31 and has been subject to such requirements during the 90
32 day period immediately preceding the date of the offer or
33 sale, or is an issuer of a security covered by Section
34 12(g)(2)(B) or (G) of the Federal 1934 Act;
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1 (c) the dealer has a reasonable basis for believing
2 that the issuer is current in filing the reports required
3 to be filed at regular intervals pursuant to the
4 provisions of Section 13 or Section 15(d), as the case
5 may be, of the Federal 1934 Act, or in the case of
6 insurance companies exempted from Section 12(g) of the
7 Federal 1934 Act by subparagraph 12(g)(2)(G) thereof, the
8 annual statement referred to in Section 12(g)(2)(G)(i) of
9 the Federal 1934 Act; and
10 (d) the dealer has in its records, and makes
11 reasonably available upon request to any person
12 expressing an interest in a proposed transaction in the
13 securities, the issuer's most recent annual report filed
14 pursuant to Section 13 or 15(d), as the case may be, of
15 the Federal 1934 Act or the annual statement in the case
16 of an insurance company exempted from Section 12(g) of
17 the Federal 1934 Act by subparagraph 12(g)(2)(G) thereof,
18 together with any other reports required to be filed at
19 regular intervals under the Federal 1934 Act by the
20 issuer after such annual report or annual statement;
21 provided that the making available of such reports
22 pursuant to this subparagraph, unless otherwise
23 represented, shall not constitute a representation by the
24 dealer that the information is true and correct, but
25 shall constitute a representation by the dealer that the
26 information is reasonably current; or
27 (2)(a) prior to any offer or sale, an application
28 for the authorization thereof and a report as set forth
29 under sub-paragraph (d) of this paragraph (2) has been
30 filed by any registered dealer with and approved by the
31 Secretary of State pursuant to such rules and regulations
32 as the Secretary of State may prescribe;
33 (b) the Secretary of State shall have the power by
34 order to refuse to approve any application or report
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1 filed pursuant to this paragraph (2) if
2 (i) the application or report does not comply
3 with the provisions of this paragraph (2), or
4 (ii) the offer or sale of such securities
5 would work or tend to work a fraud or deceit, or
6 (iii) the issuer or the applicant has violated
7 any of the provisions of this Act;
8 (c) each application and report filed pursuant to
9 this paragraph (2) shall be accompanied by a filing fee
10 and an examination fee in the amount established pursuant
11 to Section 11a of this Act, which shall not be returnable
12 in any event;
13 (d) there shall be submitted to the Secretary of
14 State no later than 120 days following the end of the
15 issuer's fiscal year, each year during the period of the
16 authorization, one copy of a report which shall contain a
17 balance sheet and income statement prepared as of the
18 issuer's most recent fiscal year end certified by an
19 independent certified public accountant, together with
20 such current information concerning the securities and
21 the issuer thereof as the Secretary of State may
22 prescribe by rule or regulation or order;
23 (e) prior to any offer or sale of securities under
24 the provisions of this paragraph (2), each registered
25 dealer participating in the offer or sale of such
26 securities shall provide upon request of prospective
27 purchasers of such securities a copy of the most recent
28 report required under the provisions of sub-paragraph (d)
29 of this paragraph (2);
30 (f) approval of an application filed pursuant to
31 this paragraph (2) of subsection F shall expire 5 years
32 after the date of the granting of the approval, unless
33 said approval is sooner terminated by (1) suspension or
34 revocation by the Secretary of State in the same manner
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1 as is provided for in subsections E, F and G of Section
2 11 of this Act, or (2) the applicant filing with the
3 Secretary of State an affidavit to the effect that (i)
4 the subject securities have become exempt under Section 3
5 of this Act or (ii) the applicant no longer is capable of
6 acting as the applicant and stating the reasons therefor
7 or (iii) the applicant no longer desires to act as the
8 applicant. In the event of the filing of an affidavit
9 under either preceding sub-division (ii) or (iii) the
10 Secretary of State may authorize a substitution of
11 applicant upon the new applicant executing the
12 application as originally filed. However, the
13 aforementioned substituted execution shall have no effect
14 upon the previously determined date of expiration of
15 approval of the application. Notwithstanding the
16 provisions of this subparagraph (f), approvals granted
17 under this paragraph (2) of subsection F prior to the
18 effective date of this Act shall be governed by the
19 provisions of this Act in effect on such date of
20 approval; and
21 (g) no person shall be considered to have violated
22 Section 5 of this Act by reason of any offer or sale
23 effected in reliance upon an approval granted under this
24 paragraph (2) after a termination thereof under the
25 foregoing subparagraph (f) if official notice of such
26 termination has not been circulated generally to dealers
27 by the Secretary of State and if such person sustains the
28 burden of proof that he or she did not know, and in the
29 exercise of reasonable care, could not have known, of the
30 termination; or
31 (3) the securities, or securities of the same
32 class, are the subject of an existing registration under
33 Section 5 of this Act.
34 The exemption provided in this subsection F shall apply
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1 only if the offer or sale is made in good faith and not for
2 the purpose of avoiding any of the provisions of this Act,
3 and only if the offer or sale is not made for the direct or
4 indirect benefit of the issuer of the securities, or the
5 controlling person in respect of such issuer.
6 G. (1) Any offer, sale or issuance of a security,
7 whether to residents or to non-residents of this State,
8 where:
9 (a) all sales of such security to residents of this
10 State (including the most recent such sale) within the
11 immediately preceding 12-month period have been made to
12 not more than 35 persons or have involved an aggregate
13 sales price of not more than $1,000,000 $500,000;
14 (b) such security is not offered or sold by means
15 of any general advertising or general solicitation in
16 this State; and
17 (c) no commission, discount, or other remuneration
18 exceeding 20% of the sale price of such security, if sold
19 to a resident of this State, is paid or given directly or
20 indirectly for or on account of such sales.
21 (2) In computing the number of resident purchasers or
22 the aggregate sales price under paragraph (1) (a) above,
23 there shall be excluded any purchaser or dollar amount of
24 sales price, as the case may be, with respect to any security
25 which at the time of its sale was exempt under Section 3 or
26 was registered under Section 5, 6 or 7 or was sold in a
27 transaction exempt under other subsections of this Section 4.
28 (3) A prospectus or preliminary prospectus with respect
29 to a security for which a registration statement is pending
30 or effective under the Federal 1933 Act shall not be deemed
31 to constitute general advertising or general solicitation in
32 this State as such terms are used in paragraph (1) (b) above,
33 provided that such prospectus or preliminary prospectus has
34 not been sent or otherwise delivered to more than 150
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1 residents of this State.
2 (4) The Secretary of State shall by rule or regulation
3 require the filing of a report or reports of sales made to
4 residents of this State in reliance upon the exemption
5 provided by this subsection G and prescribe the form of such
6 report and the time within which such report shall be filed.
7 Such report shall set forth the name and address of the
8 issuer and of the controlling person, if the sale was for the
9 direct or indirect benefit of such person, the total amount
10 of the securities sold under this subsection G to residents
11 of this State, the names and addresses of the resident
12 purchasers, a representation that sales of such securities
13 were not made to residents of this State in excess of those
14 permitted by this subsection G, and any other information
15 deemed necessary by the Secretary of State to enforce
16 compliance with this subsection G. The Secretary of State
17 shall prescribe by rule or regulation the amount of the fee
18 for filing any such report, but such fee shall not be less
19 than the minimum amount nor more than the maximum amount
20 established pursuant to Section 11a of this Act, which and
21 shall not be returnable in any event. The Secretary of State
22 may impose, in such cases as he or she may deem appropriate,
23 a penalty for failure to file any such report in a timely
24 manner, but no such penalty shall exceed an amount equal to
25 five times the filing fee. The contents of any such report
26 or portion thereof may shall be deemed confidential by the
27 Secretary of State by rule or order and if so deemed shall
28 not be disclosed to the public except by order of court or in
29 court proceedings. The failure to file any such report shall
30 not affect the availability of such exemption, but such
31 failure to file any such report shall constitute a violation
32 of subsection D of Section 12 of this Act, subject to the
33 penalties enumerated in Section 14 of this Act. The civil
34 remedies provided for in subsection A of Section 13 of this
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1 Act and the civil remedies of rescission and appointment of a
2 receiver, conservator, ancillary receiver or ancillary
3 conservator provided for in subsection F of Section 13 of
4 this Act shall not be available against any person by reason
5 of the failure to file any such report or on account of the
6 contents of any such report.
7 H. Any offer, sale or issuance of a security to (1) any
8 natural person who has, or is reasonably believed by the
9 person relying upon this subsection H to have, a net worth or
10 joint net worth with that person's spouse, at the time of the
11 offer, sale or issuance, in excess of $1,000,000, or (2) any
12 natural person who had, or is reasonably believed by the
13 person relying upon this subsection H to have had, an income
14 or joint income with that person's spouse, in excess of
15 $200,000 in each of the two most recent years and who
16 reasonably expects, or is reasonably expected to have, an
17 income in excess of $200,000 in the current year, or (3) any
18 person that is not a natural person and in which at least 90%
19 of the equity interest is owned by persons who meet either of
20 the tests set forth in clauses (1) or (2) of this subsection
21 H; provided that such security is not offered or sold by
22 means of any general advertising or general solicitation in
23 this State.
24 I. Any offer, sale or issuance of securities to or for
25 the benefit of security holders of any person incident to a
26 vote by such security holders pursuant to such person's
27 organizational document or any applicable statute of the
28 jurisdiction of such person's organization, on a merger,
29 consolidation, reclassification of securities, or sale or
30 transfer of assets in consideration of or exchange for
31 securities of the same or another person.
32 J. Any offer, sale or issuance of securities in exchange
33 for one or more outstanding securities, claims or property
34 interests, or partly in such exchange and partly for cash,
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1 where such offer, sale or issuance is incident to a
2 reorganization, recapitalization, readjustment, composition
3 or settlement of a claim, as approved by a court of competent
4 jurisdiction of the United States, or any state.
5 K. Any offer, sale or issuance of securities for
6 patronage, or as patronage refunds, or in connection with
7 marketing agreements by cooperative associations organized
8 exclusively for agricultural, producer, marketing,
9 purchasing, or consumer purposes; and the sale of
10 subscriptions for or shares of stock of cooperative
11 associations organized exclusively for agricultural,
12 producer, marketing, purchasing, or consumer purposes, if no
13 commission or other remuneration is paid or given directly or
14 indirectly for or on account of such subscription, sale or
15 resale, and if any person does not own beneficially more than
16 5% of the aggregate amount of issued and outstanding capital
17 stock of such cooperative association.
18 L. Offers for sale or solicitations of offers to buy
19 (but not the acceptance thereof), of securities which are the
20 subject of a pending registration statement filed under the
21 Federal 1933 Act and which are the subject of a pending
22 application for registration under this Act.
23 M. Any offer or sale of preorganization subscriptions
24 for any securities prior to the incorporation, organization
25 or formation of any issuer under the laws of the United
26 States, or any state, or the issuance by such issuer, after
27 its incorporation, organization or formation, of securities
28 pursuant to such preorganization subscriptions, provided the
29 number of subscribers does not exceed 25 and either (1) no
30 commission or other remuneration is paid or given directly or
31 indirectly for or on account of such sale or sales or
32 issuance, or (2) if any commission or other remuneration is
33 paid or given directly or indirectly for or on account of
34 such sale or sales or issuance, the securities are not
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1 offered or sold by any means of general advertising or
2 general solicitation in this State.
3 N. The execution of orders for purchase of securities by
4 a registered salesperson and dealer, provided such persons
5 act as agent for the purchaser, have made no solicitation of
6 the order to purchase the securities, have no direct interest
7 in the sale or distribution of the securities ordered,
8 receive no commission, profit, or other compensation other
9 than the commissions involved in the purchase and sale of the
10 securities and deliver to the purchaser written confirmation
11 of the order which clearly identifies the commissions paid to
12 the registered dealer.
13 O. Any offer, sale or issuance of securities, other than
14 fractional undivided interests in an oil, gas or other
15 mineral lease, right or royalty, for the direct or indirect
16 benefit of the issuer thereof, or of a controlling person,
17 whether through a dealer (acting either as principal or
18 agent) or otherwise, if the securities sold, immediately
19 following the sale or sales, together with securities already
20 owned by the purchaser, would constitute 50% or more of the
21 equity interest of any one issuer, provided that the number
22 of purchasers is not more than 5 and provided further that no
23 commission, discount or other remuneration exceeding 15% of
24 the aggregate sale price of the securities is paid or given
25 directly or indirectly for or on account of the sale or
26 sales.
27 P. Any offer, sale or issuance of securities (except
28 face amount certificate contracts and investment fund shares)
29 issued by and representing an interest in an issuer which is
30 a business corporation incorporated under the laws of this
31 State, the purposes of which are to provide capital and
32 supervision solely for the redevelopment of blighted urban
33 areas located in a municipality in this State and whose
34 assets are located entirely within that municipality,
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1 provided: (1) no commission, discount or other remuneration
2 is paid or given directly or indirectly for or on account of
3 the sale or sales of such securities; (2) the aggregate
4 amount of any securities of the issuer owned of record or
5 beneficially by any one person will not exceed the lesser of
6 $5,000 or 4% of the equity capitalization of the issuer; (3)
7 the officers and directors of the corporation have been bona
8 fide residents of the municipality not less than 3 years
9 immediately preceding the effectiveness of the offering sheet
10 for the securities under this subsection P; and (4) the
11 issuer files with the Secretary of State an offering sheet
12 descriptive of the securities setting forth:
13 (a) the name and address of the issuer;
14 (b) the title and total amount of securities to be
15 offered;
16 (c) the price at which the securities are to be
17 offered; and
18 (d) such additional information as the Secretary of
19 State may prescribe by rule and regulation.
20 The Secretary of State shall within a reasonable time
21 examine the offering sheet so filed and, unless the Secretary
22 of State shall make a determination that the offering sheet
23 so filed does not conform to the requirements of this
24 subsection P, shall declare the offering sheet to be
25 effective, which offering sheet shall continue effective for
26 a period of 12 months from the date it becomes effective.
27 The fee for examining the offering sheet shall be as
28 established pursuant to Section 11a of this Act, and shall
29 not be returnable in any event. The Secretary of State shall
30 by rule or regulation require the filing of a report or
31 reports of sales made to residents of this State in reliance
32 upon the exemption provided by this subsection P and
33 prescribe the form of such report and the time within which
34 such report shall be filed. The Secretary of State shall
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1 prescribe by rule or regulation the amount of the fee for
2 filing any such report, but such fee shall not be less than
3 the minimum amount nor more than the maximum amount
4 established pursuant to Section 11a of this Act, and shall
5 not be returnable in any event. The Secretary of State may
6 impose, in such cases as he or she may deem appropriate, a
7 penalty for failure to file any such report in a timely
8 manner, but no such penalty shall exceed an amount equal to
9 five times the filing fee. The contents of any such report
10 shall be deemed confidential and shall not be disclosed to
11 the public except by order of court or in court proceedings.
12 The failure to file any such report shall not affect the
13 availability of such exemption, but such failure to file any
14 such report shall constitute a violation of subsection D of
15 Section 12 of this Act, subject to the penalties enumerated
16 in Section 14 of this Act. The civil remedies provided for
17 in subsection A of Section 13 of this Act and the civil
18 remedies of rescission and appointment of a receiver,
19 conservator, ancillary receiver or ancillary conservator
20 provided for in subsection F of Section 13 of this Act shall
21 not be available against any person by reason of the failure
22 to file any such report or on account of the contents of any
23 such report.
24 Q. Any isolated transaction, whether effected by a
25 dealer or not.
26 R. Any offer, sale or issuance of a security to any
27 person who purchases at least $150,000 of the securities
28 being offered, where the purchaser's total purchase price
29 does not, or it is reasonably believed by the person relying
30 upon this subsection R that said purchase price does not,
31 exceed 20 percent of the purchaser's net worth at the time of
32 sale, or if a natural person a joint net worth with that
33 person's spouse, for one or any combination of the following:
34 (i) cash, (ii) securities for which market quotations are
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1 readily available, (iii) an unconditional obligation to pay
2 cash or securities for which quotations are readily
3 available, which obligation is to be discharged within five
4 years of the sale of the securities to the purchaser, or (iv)
5 the cancellation of any indebtedness owed by the issuer to
6 the purchaser; provided that such security is not offered or
7 sold by means of any general advertising or general
8 solicitation in this State.
9 S. Any offer, sale or issuance of a security to any
10 person who is, or who is reasonably believed by the person
11 relying upon this subsection S to be, a director, executive
12 officer, or general partner of the issuer of the securities
13 being offered or sold, or any director, executive officer, or
14 general partner of a general partner of that issuer. For
15 purposes of this subsection S, "executive officer" shall mean
16 the president, any vice president in charge of a principal
17 business unit, division or function (such as sales,
18 administration or finance), any other officer who performs a
19 policy making function, or any other person who performs
20 similar policy making functions for the issuer. Executive
21 officers of subsidiaries may be deemed executive officers of
22 the issuer if they perform such policy making functions for
23 the issuer.
24 A document being filed pursuant to this Section 4 shall
25 be deemed filed, and any fee paid pursuant to this Section 4
26 shall be deemed paid, upon the date of actual receipt thereof
27 by the Secretary of State.
28 (Source: P.A. 89-209, eff. 1-1-96; 89-626, eff. 8-9-96.)
29 (815 ILCS 5/5) (from Ch. 121 1/2, par. 137.5)
30 Sec. 5. Registration of Securities. All securities
31 except those set forth under Section 2a of this Act, or those
32 exempt under Section 3 of this Act, or those offered or sold
33 in transactions exempt under Section 4 of this Act, or face
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1 amount certificate contracts required to be registered under
2 Section 6 of this Act, or investment fund shares required to
3 be registered under Section 7 of this Act, shall be
4 registered either by coordination or by qualification, as
5 hereinafter in this Section provided, prior to their offer or
6 sale in this State.
7 A. Registration by Coordination.
8 (1) Securities which are being or have been
9 registered under the Federal 1933 Act may be registered
10 by coordination in the manner provided in this subsection
11 A, if the effective date of the registration under the
12 Federal 1933 Act is not more than 30 days before the
13 filing with the Secretary of State.
14 (2) Securities may be registered by coordination by
15 the filing with the Secretary of State by the issuer, by
16 a controlling person or by a registered dealer of:
17 (a) One copy of the registration statement
18 (without exhibits) descriptive of the securities on
19 file with the Securities and Exchange Commission in
20 its most recent form as of the date of the initial
21 filing under this subsection A.;
22 (b) An application, in such form and executed,
23 verified, or authenticated by such person as the
24 Secretary of State shall by rule or regulation
25 prescribe, setting forth the title and the total
26 amount of securities to be offered, the amount of
27 securities and the proposed maximum aggregate price
28 thereof to be offered in this State under this
29 subsection A and, if the applicant is electing the
30 date of effectiveness of a post-effective amendment
31 as its effective date as provided in Section 2.13 of
32 this Act, specifying such date as the effective date
33 for purposes of registration under this subsection
34 A;
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1 (c) An undertaking to forward to the Secretary
2 of State, in writing (which may be by electronic
3 telegraphic or facsimile transmission), any and all
4 subsequent amendments of and supplements to the
5 registration statement not later than the 7th day
6 after the forwarding thereof to the Securities and
7 Exchange Commission, or such longer period as the
8 Secretary of State may permit by rule, regulation or
9 order; and
10 (d) If the applicant is not a registered
11 dealer, the name of at least one registered dealer
12 for the securities being registered under this
13 subsection A (except that, in the case of securities
14 being offered and sold on a delayed or continuous
15 basis pursuant to Rule 415 under the Federal 1933
16 Act, 17 C.F.R. Section 230.415, or any similar or
17 successor rule thereto as may be designated by the
18 Secretary of State by rule or regulation, the name
19 of the registered dealer may be furnished no later
20 than the close of business on the second business
21 day following the commencement of sales of the
22 registered securities in this State) or a written
23 statement setting forth the method of offer and sale
24 in this State of the securities being registered in
25 compliance with Section 8 of this Act.
26 (3) Registration of securities by coordination
27 shall take effect automatically as of the effective date
28 of the registration statement (or post-effective
29 amendment) filed under the Federal 1933 Act, provided
30 that on the effective date, the information required by
31 sub-paragraphs (a), (b), and (d) and the undertaking
32 required by sub-paragraph (c) of paragraph (2) of this
33 subsection A have been on file with the Secretary of
34 State for at least 10 business days, or such shorter
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1 period as the Secretary of State may permit by rule,
2 regulation or order. If, however, the time period
3 referred to in the preceding sentence shall not have
4 expired on the effective date of the registration
5 statement (or post-effective amendment) filed under the
6 Federal 1933 Act, registration of such securities by
7 coordination shall, upon the expiration of such time
8 period, take effect automatically as of the effective
9 date of the registration statement (or post-effective
10 amendment) filed under the Federal 1933 Act.
11 (4) If the information required by sub-paragraphs
12 (a), (b), and (d) and the undertaking required by
13 sub-paragraph (c) of paragraph (2) of this subsection A
14 are not filed with the Secretary of State prior to the
15 effective date of the registration statement (or
16 post-effective amendment) filed under the Federal 1933
17 Act, any registration of securities by coordination under
18 this subsection A shall take effect automatically as soon
19 as all of the following conditions have been satisfied:
20 (a) the information required by sub-paragraphs
21 (a), (b), and (d) and the undertaking required by
22 sub-paragraph (c) of paragraph (2) of this
23 subsection A have been on file with the Secretary of
24 State for 10 business days, or for such shorter
25 period as the Secretary of State may permit by rule,
26 regulation or order;
27 (b) the registration statement or
28 post-effective amendment filed under the Federal
29 1933 Act is then in effect; and
30 (c) the prospectus then on file with the
31 Secretary of State satisfies the requirements of
32 Section 10(a)(3) of the Federal 1933 Act.
33 (5) The applicant shall furnish to the Secretary of
34 State written notice (which may be by electronic,
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1 telegraphic, or facsimile transmission) confirming the
2 date of effectiveness and the title of the securities
3 registered under the Federal 1933 Act, final pricing
4 information, the total amount of securities registered
5 under the Federal 1933 Act, and the amount registered in
6 this State if different than the amounts then on file
7 with the Secretary of State, no later than the close of
8 business on the second business day following the date on
9 which the registration statement becomes effective under
10 the Federal 1933 Act.
11 (6) No action by the Secretary of State shall be
12 necessary to evidence the effectiveness of the
13 registration by coordination under this subsection A.
14 The Secretary of State may, at his or her discretion,
15 provide a statement attesting to such registration, which
16 statement shall be in such form as the Secretary of State
17 may deem appropriate.
18 (7) Notwithstanding the foregoing, the issuer,
19 controlling person or registered dealer who filed the
20 application set forth in subparagraph (b) of paragraph
21 (2) of this subsection A may request, in writing (which
22 may be by electronic, telegraphic, or facsimile
23 transmission) prior to or upon notice of effectiveness
24 under the Federal 1933 Act, a waiver of automatic
25 effectiveness of the registration of securities and the
26 Secretary of State may, at his or her discretion, grant
27 such waiver of automatic effectiveness. Upon the grant
28 by the Secretary of State of the request of waiver of
29 automatic effectiveness, such registration of securities
30 shall become effective automatically on the date that the
31 issuer, controlling person or registered dealer who filed
32 the application set forth in subparagraph (b) of
33 paragraph (2) of this subsection A notifies the Secretary
34 of State in writing.
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1 B. Registration by Qualification. Securities may be
2 registered by qualification in the manner provided in this
3 subsection B.
4 (1) An application for registration by
5 qualification shall be made by the issuer, by a
6 controlling person or by a registered dealer together
7 with the examination fee established pursuant to Section
8 11a of this Act, which is not returnable in any event.
9 Such application shall be executed, verified, or
10 authenticated by the applicant and filed with the
11 Secretary of State. The application shall set forth:
12 (a) The name and address of the issuer;
13 (b) The title and total amount of the
14 securities to be offered;
15 (c) The amount of the securities to be offered
16 in this State;
17 (d) The price at which the securities are to
18 be offered, or the method by which such price is to
19 be determined, provided that such price or method
20 may be furnished by written notice (which may be by
21 electronic, telegraphic, or facsimile transmission)
22 to the Secretary of State subsequent to the filing
23 of the application but prior to registration of the
24 securities under this Law; and
25 (e) The aggregate underwriting commissions,
26 remuneration or discount.
27 (2) If the issuer, dealer, or controlling person
28 has not filed a registration statement that is then in
29 effect under the Federal 1933 Act, there shall be filed
30 with the application:
31 (a) (Blank); If the issuer is a corporation, a
32 copy of its charter or articles of incorporation as
33 then in effect, unless then on file with the
34 Secretary of State; if other than a corporation, a
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1 copy of all instruments, if any, by which the issuer
2 was created and all amendments thereto;
3 (b) (Blank); A copy of the by-laws, or other
4 code of regulations, if any, of the issuer;
5 (c) A copy of the indenture or other
6 instrument, if any, under which the securities are
7 to be or have been issued;
8 (d) A specimen copy of the securities or a
9 copy of the form of the instrument to evidence the
10 securities;
11 (e) An opinion of counsel as to the legality
12 of the securities;
13 (f) A copy of the underwriting and selling
14 agreements, if any;
15 (g) An undertaking to file promptly (no later
16 than 2 business days after the occurrence of any
17 event which requires a material change in the
18 prospectus) with the Secretary of State all
19 amendments of and supplements to the prospectus as
20 theretofore filed under this subsection B, together
21 with any additional information, document or
22 undertaking which the Secretary of State, at his or
23 her discretion, deems material, accompanied by the
24 amendment filing fee established pursuant to Section
25 11a of this Act or, in lieu thereof, a notification
26 in writing that all offers and sales of the
27 securities have been suspended pending the filing
28 with the Secretary of State of such amendment of or
29 supplement to the prospectus; and
30 (h) A written statement setting forth the name
31 of at least one registered dealer for the securities
32 being registered under this subsection B, or an
33 application for registration of a salesperson or a
34 written statement setting forth the method of offer
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1 and sale in this State of the securities being
2 registered in compliance with Section 8 of this Act.
3 (3) In addition, there shall be filed with the
4 application such additional information and material in
5 such form as the Secretary of State may by rule,
6 regulation or order prescribe and a prospectus which
7 contains but is not limited to the following:
8 (a) The date and form of organization of the
9 issuer;
10 (b) A brief description of the business
11 conducted and intended to be conducted by the issuer
12 and by its subsidiaries and the general development
13 of such business during the past 5 years or such
14 shorter period as the issuer and such subsidiaries
15 may have been in existence;
16 (c) The location and general character of the
17 physical properties of the issuer and of its
18 subsidiaries;
19 (d) The authorized and issued capitalization
20 of the issuer and a description of the securities
21 being registered and of all authorized securities;
22 (e) The proposed method of sale of the
23 securities, the price thereof to the public or the
24 method by which such price is to be computed, and
25 the underwriting and selling discounts and
26 commissions;
27 (f) The intended use by the issuer of the
28 proceeds of the securities;
29 (g) The names and addresses of all of the
30 issuer's officers and directors, or persons
31 performing similar functions, their business
32 experience during the preceding 5 years and the
33 remuneration paid to each by the issuer and its
34 subsidiaries during the fiscal year last past and
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1 proposed to be paid for the then current fiscal
2 year;
3 (h) The names and addresses of all persons
4 owning of record, and of all persons owning
5 beneficially, to the extent known to the applicant,
6 10% or more of any class of equity securities of the
7 issuer, and the percentage owned by each;
8 (i) A brief description of any pending
9 material legal proceeding, and of any material legal
10 proceeding known to be contemplated by governmental
11 authorities, involving the issuer or its
12 subsidiaries;
13 (j) The following financial statements of the
14 issuer:
15 (i) A balance sheet as of a date
16 within 135 days prior to the date of
17 submitting the application. If such
18 balance sheet is not certified by an
19 independent certified public accountant,
20 the prospectus shall also contain a
21 balance sheet certified by an independent
22 certified public accountant as of the
23 close of the issuer's last fiscal year,
24 unless such fiscal year ended within 135
25 days prior to the time of filing the
26 application, in which case the certified
27 balance sheet may be as of the end of the
28 preceding fiscal year.
29 (ii) An income statement for each of
30 the issuer's 3 fiscal years (or for the
31 period of existence of the issuer if less
32 than 3 years) next preceding the date of
33 the certified balance sheet and for the
34 period, if any, between the date of the
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1 certified balance sheet and the date of
2 the most recent balance sheet. Such
3 statement shall be certified by an
4 independent certified public accountant
5 for the periods ending with the date of
6 the certified balance sheet.
7 (iii) An analysis of each surplus
8 account of the issuer for each period for
9 which an income statement is filed,
10 certified by an independent certified
11 public accountant for the periods for
12 which certified income statements are
13 filed.
14 (iv) An analysis (which need not be
15 certified to by independent certified
16 public accountants and which may be in
17 narrative form if desired by the
18 applicant) of all surplus accounts of the
19 issuer for a period beginning on a date
20 not less than 8 years prior to the date of
21 the certified balance sheet required by
22 the above sub-division (i) of this
23 sub-paragraph (j), or from the date of the
24 organization of the issuer, whichever is
25 later, and ending on the day before the
26 first day of the earliest period covered
27 by the analysis of surplus accounts
28 furnished pursuant to the above
29 sub-division (iii) of this sub-paragraph
30 (j); and
31 (k) If the issuer owns more than 50% of the
32 voting securities of one or more entities, there
33 shall also be included in the prospectus either (i)
34 like financial statements for each such entity, or
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1 (ii) like consolidated financial statements for the
2 issuer and such entities;
3 (l) Anything in sub-paragraphs (j) and (k) of
4 this paragraph (3) to the contrary notwithstanding,
5 the financial statements contained in the prospectus
6 need not be certified by an independent certified
7 public accountant if the securities being registered
8 under this subsection B are covered by a
9 Notification under Regulation A or an Offering Sheet
10 under Regulation D adopted pursuant to the Federal
11 1933 Act or any other regulation so adopted which
12 the Secretary of State may by rule or regulation or
13 by order determine to have filing or disclosure
14 requirements substantially similar to such
15 Regulation A or Regulation D unless the financial
16 statements furnished pursuant to any such Federal
17 regulation are required to be or are certified by an
18 independent certified public accountant.
19 (4) If the securities being registered under this
20 subsection B are certificates of deposit, voting trust
21 certificates, collateral-trust certificates, certificates
22 of interest, fractional interests in oil, gas or other
23 mineral rights of unincorporated issuers or like
24 securities, the prospectus may omit such of the foregoing
25 items in sub-paragraphs (a) through (k) of paragraph (3)
26 of this subsection B, but shall include such pertinent
27 information, as the Secretary of State may by rule,
28 regulation or order prescribe; such prospectus shall
29 contain a description of the properties and businesses
30 from which such certificates, shares or interests derive
31 value.
32 (5) The Secretary of State may, upon written
33 request by the applicant and where consistent with the
34 protection of investors, permit the omission of one or
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1 more of the financial statements required by this
2 subsection B or the filing in substitution therefor of
3 appropriate financial statements of comparable character
4 or permit the omission of any of the information required
5 by this subsection B. The Secretary of State may also by
6 written notice require the filing of other financial
7 statements or information in addition to, or in
8 substitution for, the financial statements or information
9 required by this subsection B in any case where such
10 additional financial statements or information is
11 necessary or appropriate for an adequate presentation of
12 the financial condition of any issuer or otherwise
13 required for fair disclosure respecting the business and
14 property of any issuer.
15 (6) The Secretary of State shall within a
16 reasonable time examine the application and documents
17 filed with him or her, and unless the Secretary of State
18 makes a determination that the application and documents
19 so filed do not conform to the requirements of this
20 subsection B, or there is a proceeding pending under
21 Section 11 of this Act, shall register the securities for
22 offer and sale in this State under this subsection B. If
23 the securities registered shall not have been sold and
24 distributed at the expiration of a period of 6 months
25 following the date of registration, the Secretary of
26 State may require the filing of such current information
27 concerning the securities and the issuer thereof as he or
28 she may by rule, regulation or order prescribe.
29 (7) The Secretary of State is granted authority to
30 create by rule or regulation a limited offering
31 registration provision that furthers the objectives of
32 compatibility with federal exemptions and uniformity
33 among the states. The Secretary of State shall prescribe
34 by rule or regulation the amount of the fees for
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1 examining and filing any documents required under this
2 subparagraph, but each fee shall not be less than the
3 minimum amount nor more than the maximum amount
4 established under Section 11a of this Act and shall not
5 be returnable in any event.
6 C. Pending Application, Filing Fee and Oversales of
7 Securities.
8 (1) No application shall be deemed to be filed or
9 pending and no securities covered by such application
10 shall be deemed to be registered under subsection A of
11 this Section 5 unless a filing fee has been paid. No
12 application shall be deemed to be filed or pending and no
13 securities covered by such application shall be deemed to
14 be registered under subsection B of this Section 5 unless
15 the examination fee and filing fee have been paid. The
16 filing fee payable under the provisions of subsections A
17 and B of this Section 5 shall be established by rule or
18 regulation, but in no event shall the fee be less than
19 the minimum amount nor more than the maximum amount of
20 filing fee established pursuant to Section 11a of this
21 Act, and in no case shall such fee be returnable. The
22 "maximum aggregate price" as used in subsection A of this
23 Section 5 and in this subsection C shall be the
24 applicant's bona fide estimate thereof, determined in the
25 manner prescribed by the Secretary of State by rule or
26 regulation.
27 (2) If after an offering of securities is
28 registered under this Section 5 (except for securities
29 registered under subsection B of this Section 5 wherein
30 the entire offering of securities was registered), the
31 offeror sells or determines that it will sell, prior to
32 the expiration of the period during which the offeror
33 intends the registration of the securities together with
34 any renewals thereof to remain in effect in this State,
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1 an amount of that offering in excess of the amount
2 registered, the applicant may amend the registration and
3 register the excess securities by filing an amended
4 application and paying a filing fee equal to the
5 difference between the initial filing fee paid and the
6 filing fee which would have been paid under paragraph (1)
7 of this subsection C for the entire amount registered
8 together with an additional fee established pursuant to
9 Section 11a of this Act. The fees shall not be
10 returnable in any event. With respect to the excess
11 securities being registered, the "maximum aggregate
12 price" shall be the actual sales price of such
13 securities. Upon receipt of such amended application,
14 filing fee, and additional fee by the Secretary of
15 State, registration of the excess securities shall become
16 effective retroactively to the date of the initial
17 registration.
18 D. Effective Period and Sales Reports.
19 (1) A registration effected under Section 5 of this
20 Act shall continue effective for a period of one year
21 from the date of registration or renewal of registration
22 unless sooner terminated by (1) suspension or revocation
23 by the Secretary of State; or (2) the applicant filing
24 with the Secretary of State an affidavit evidencing
25 either that (a) the securities have been fully sold and
26 distributed to the public or (b) that it is no longer
27 desired to offer such securities in this State or (c)
28 that such securities have become exempt from the
29 registration requirements under Section 3 or paragraph
30 (1) of subsection F of Section 4 of this Act.
31 (2) The Secretary of State may, at his or her
32 discretion, require each issuer, controlling person or
33 registered dealer on whose behalf a registration of
34 securities is effected under this Section 5 to file a
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1 report, in such form and of such content and for such
2 time period as the Secretary of State may by rule or
3 regulation prescribe, stating the aggregate dollar amount
4 of securities sold to Illinois residents. The civil
5 remedies provided for in subsection A of Section 13 of
6 this Act and the civil remedies of rescission and
7 appointment of a receiver, conservator, ancillary
8 receiver or ancillary conservator provided for in
9 subsection I of Section 11 and in subsection F and G of
10 Section 13 of this Act and the civil remedies of
11 restitution, damages and disgorgement of profits provided
12 for in subsection I of Section 11 of this Act shall not
13 be available against any person by reason of the failure
14 to file any such report or on account of the contents of
15 any such report.
16 E. Renewal of Registration. A registration of securities
17 in effect under subsection A of this Section 5 or subsection
18 B of this Section 5 if a registration statement or
19 post-effective amendment is then in effect under the Federal
20 1933 Act may be renewed for the amount of securities which
21 remain unsold under such registration as then in effect, by
22 the issuer, by a controlling person or by a registered dealer
23 by filing an application for renewal with the Secretary of
24 State no later than 10 business days prior to the date (or
25 such lesser period as the Secretary of State may prescribe by
26 rule or regulation) upon which such registration would
27 otherwise expire, in such form and executed, verified, or
28 authenticated by such person as the Secretary of State shall
29 prescribe by rule or regulation. Such application shall be
30 accompanied by a prospectus in its most current form together
31 with a renewal fee equal in amount to a registration fee
32 calculated in accordance with paragraph (1) of subsection C
33 of this Section 5 and based upon the amount of securities
34 initially registered for sale in this State but which remain
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1 unsold; except that the "maximum aggregate price" of such
2 securities shall be the applicant's bona fide estimate
3 thereof at the time the application for renewal of
4 registration is filed with the Secretary of State pursuant to
5 this subsection E. A renewal of registration of securities
6 shall take effect as of the date and time that the prior
7 registration under subsection A of this Section 5 or prior
8 renewal under this subsection E would otherwise have expired
9 and thereafter shall be deemed to be a new registration of
10 the amount of unsold securities specified in the application
11 for renewal. The Secretary of State may by rule or
12 regulation prescribe an additional fee for the failure to
13 file timely an application for renewal and limit the number
14 of times that a registration may be renewed.
15 F. The applicant or registrant shall notify the
16 Secretary of State, by written notice (which may be by
17 electronic, telegraphic, or facsimile transmission), within 2
18 business days after its receipt of any stop order, denial,
19 order to show cause, suspension or revocation order,
20 injunction or restraining order, or similar order entered or
21 issued by any state, federal or other regulatory authority or
22 by any court, concerning the securities which are being or
23 have been registered in this State or any other securities of
24 the issuer currently being or proposed to be offered to the
25 public, if the matter which is the subject of, or the failure
26 to disclose the existence of, such order would in this State
27 constitute a violation of subsection E, F, G, H, I or J of
28 Section 12 of this Act. The obligation contained in this
29 subsection F shall continue until such time as offers and
30 sales of the securities registered under this Section 5 are
31 no longer being made in this State by the applicant or
32 registrant.
33 G. Any document being filed pursuant to this Section 5
34 shall be deemed filed, and any fee being paid pursuant to
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1 this Section 5 shall be deemed paid, upon the date of actual
2 receipt thereof by the Secretary of State.
3 H. The Secretary of State may require by rule or
4 regulation the payment of an additional fee for the filing of
5 information or documents required to be filed by this Section
6 5 which have not been filed in a timely manner. Such fees
7 shall be deposited into the Securities Investors Education
8 Fund, a special fund hereby created in the State treasury.
9 The amounts deposited into such Fund shall be used to promote
10 public awareness of the dangers of securities fraud.
11 (Source: P.A. 89-209, eff. 1-1-96; 89-626, eff. 8-9-96.)
12 (815 ILCS 5/6) (from Ch. 121 1/2, par. 137.6)
13 Sec. 6. Registration of Face Amount Certificate
14 Contracts. All face amount certificate contracts except
15 those set forth under Section 2a of this Act, or those exempt
16 under Section 3 of this Act, or those offered or sold in
17 transactions exempt under Section 4 of this Act, shall be
18 registered either by coordination or by qualification, as
19 hereinafter in this Section provided, prior to their offer or
20 sale in this State.
21 A. Registration of Face Amount Certificate Contracts by
22 Coordination.
23 (1) Face amount certificate contracts which are
24 being or have been registered under the Federal 1933 Act
25 may be registered by coordination in the manner provided
26 in this subsection A, if the effective date of the
27 registration under the Federal 1933 Act is not more than
28 30 days before the filing with the Secretary of State.
29 (2) Face amount certificate contracts may be
30 registered by coordination by the filing with the
31 Secretary of State by the issuer, by a controlling person
32 or by a registered dealer of:
33 (a) One copy of the registration statement
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1 (without exhibits) descriptive of the face amount
2 certificate contracts on file with the Securities
3 and Exchange Commission in its most recent form as
4 of the date of the initial filing under this
5 subsection A;
6 (b) An application, in such form and executed,
7 verified, or authenticated by such person as the
8 Secretary of State shall by rule or regulation
9 prescribe, setting forth the title of every series,
10 type or class of face amount certificate contracts
11 to be offered in this State under this subsection A
12 and, if the applicant is electing the date of
13 effectiveness of a post-effective amendment as its
14 effective date as provided in Section 2.13 of this
15 Act, specifying such date as the effective date for
16 purposes of registration under this subsection A;
17 (c) An undertaking to forward to the Secretary
18 of State, in writing (which may be by electronic
19 telegraphic or facsimile transmission), any and all
20 subsequent amendments of and supplements to the
21 registration statement not later than the 7th day
22 after the forwarding thereof to the Securities and
23 Exchange Commission, or such longer period as the
24 Secretary of State may permit by rule, regulation or
25 order; and
26 (d) If the applicant is not a registered
27 dealer, the name of at least one registered dealer
28 for the face amount certificate contracts being
29 registered under this subsection A or a written
30 statement setting forth the method of offer and sale
31 in this State of the face amount certificate
32 contracts being registered in compliance with
33 Section 8 of this Act.
34 (3) Registration of face amount certificate
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1 contracts by coordination shall take effect automatically
2 as of the effective date of the registration statement
3 (or post-effective amendment) filed under the Federal
4 1933 Act, provided that on the effective date, the
5 information required by sub-paragraphs (a), (b), and (d)
6 and the undertaking required by sub-paragraph (c) of
7 paragraph (2) of this subsection A have been on file with
8 the Secretary of State for at least 10 business days, or
9 such shorter period as the Secretary of State may permit
10 by rule, regulation or order. If, however, the time
11 period referred to in the preceding sentence shall not
12 have expired on the effective date of the registration
13 statement (or post-effective amendment) filed under the
14 Federal 1933 Act, registration of such face amount
15 certificate contracts by coordination shall, upon the
16 expiration of such time period, take effect automatically
17 as of the effective date of the registration statement
18 (or post-effective amendment) filed under the Federal
19 1933 Act.
20 (4) If the information required by sub-paragraphs
21 (a), (b), and (d) and the undertaking required by
22 sub-paragraph (c) of paragraph (2) of this subsection A
23 are not filed with the Secretary of State prior to the
24 effective date of the registration statement (or
25 post-effective amendment) filed under the Federal 1933
26 Act, any registration of face amount certificate
27 contracts by coordination under this subsection A shall
28 take effect automatically as soon as all of the following
29 conditions have been satisfied:
30 (a) the information required by sub-paragraphs
31 (a), (b), and (d) and the undertaking required by
32 sub-paragraph (c) of paragraph (2) of this
33 subsection A have been on file with the Secretary of
34 State for 10 business days, or for such shorter
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1 period as the Secretary of State may permit by rule,
2 regulation or order;
3 (b) the registration statement or
4 post-effective amendment filed under the Federal
5 1933 Act is then in effect; and
6 (c) the prospectus then on file with the
7 Secretary of State satisfies the requirements of
8 Section 10(a)(3) of the Federal 1933 Act.
9 (5) The applicant shall furnish to the Secretary of
10 State written notice (which may be by electronic,
11 telegraphic, or facsimile transmission) confirming the
12 date of effectiveness and the title of the face amount
13 certificate contracts registered under the Federal 1933
14 Act, no later than the close of business on the second
15 business day following the date on which registration
16 becomes effective under the Federal 1933 Act.
17 (6) No action by the Secretary of State shall be
18 necessary to evidence the effectiveness of the
19 registration by coordination under this subsection A.
20 The Secretary of State may, at his or her discretion,
21 provide a statement attesting to such registration, which
22 statement shall be in such form as the Secretary of State
23 may deem appropriate.
24 (7) Notwithstanding the foregoing, the issuer,
25 controlling person or registered dealer who filed the
26 application set forth in subparagraph (b) of paragraph
27 (2) of this subsection A may request, in writing (which
28 may be by electronic, telegraphic, or facsimile
29 transmission) prior to or upon notice of effectiveness
30 under the Federal 1933 Act, a waiver of automatic
31 effectiveness of the registration of the face amount
32 certificate contracts and the Secretary of State may, at
33 his or her discretion, grant such waiver of automatic
34 effectiveness. Upon the grant by the Secretary of State
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1 of the request of waiver of automatic effectiveness, such
2 registration of the face amount certificate contracts
3 shall become effective automatically on the date that the
4 issuer, controlling person or registered dealer who filed
5 the application set forth in subparagraph (b) of
6 paragraph (2) of this subsection A notifies the Secretary
7 of State in writing.
8 B. Registration of Face Amount Certificate Contracts by
9 Qualification. Face amount certificate contracts may be
10 registered by qualification in the manner provided in this
11 subsection B.
12 (1) An application for registration by
13 qualification shall be made by the issuer, by a
14 controlling person or by a registered dealer together
15 with the examination fee established pursuant to Section
16 11a of the Act, which shall not be returnable in any
17 event. Such application shall be executed, verified, or
18 authenticated by the applicant and filed with the
19 Secretary of State. The application shall set forth:
20 (a) The names and addresses of the persons
21 creating or sponsoring the face amount certificate
22 contracts; and
23 (b) The title of each series, type or class of
24 face amount certificate contracts to be offered.
25 (2) If the issuer, dealer, or controlling person
26 has not filed a registration statement or post-effective
27 amendment which is then in effect under the Federal 1933
28 Act, there shall be filed with the application:
29 (a) Specimen copies of each and every series,
30 type or class of face amount certificate contract
31 proposed to be offered in this State, and specimen
32 copies of each and every form of face amount
33 certificate contract or other security being issued
34 or proposed to be offered and issued elsewhere;
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1 (b) (Blank); If the issuer is a corporation, a
2 copy of its charter or articles of incorporation and
3 all amendments thereto, unless then on file with the
4 Secretary of State; or if other than a corporation,
5 a copy of all instruments, if any, by which the
6 issuer was created, and all amendments thereto;
7 (c) (Blank); A copy of the by-laws or other
8 code of regulations, if any, of the issuer;
9 (d) An opinion of counsel as to the legality
10 of the face amount certificate contracts;
11 (e) An undertaking to file promptly (no later
12 than 2 business days after the occurrence of any
13 event which requires a material change in the
14 prospectus) with the Secretary of State any and all
15 amendments of and supplements to the prospectus as
16 theretofore filed under this subsection B, together
17 with any additional information, document or
18 undertaking which the Secretary of State at his or
19 her discretion, deems material, accompanied by the
20 amendment filing fee established pursuant to Section
21 11a of this Act or, in lieu thereof, a notification
22 in writing that all offers and sales of the face
23 amount certificate contracts have been suspended
24 pending the filing with the Secretary of State of
25 such amendment of or supplement to the prospectus;
26 and
27 (3) In addition, there shall be filed with the
28 application such additional information and material in
29 such form as the Secretary of State may by rule,
30 regulation or order prescribe and a prospectus which
31 contains, but is not limited to the following:
32 (a) The date and form of organization of the
33 issuer;
34 (b) A brief description of the business
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1 conducted and intended to be conducted by the issuer
2 and by its subsidiaries and the general development
3 of such business during the past 5 years or such
4 shorter period as the issuer and such subsidiaries
5 may have been in existence;
6 (c) The location and general character of the
7 physical properties of the issuer and of its
8 subsidiaries;
9 (d) A complete description of the terms and
10 conditions of each and every series, type or class
11 of face amount certificate contracts being issued or
12 proposed to be offered in this State or elsewhere,
13 which description shall include appropriate tables
14 of initial or periodic installment payments required
15 of the purchaser, surrender or liquidation values,
16 maturity values, optional plans of extended contract
17 periods and schedules of annuity payments which may
18 be elected by a face amount certificate contract
19 holder;
20 (e) A schedule of all types of deductions
21 which may be made from plan payments or the income
22 therefrom or the avails thereof as charges prior to
23 distributions to holders of the face amount
24 certificate contracts;
25 (f) The names and addresses of all of the
26 issuer's officers and directors, or persons
27 performing similar functions, their business
28 experience during the preceding 5 years and the
29 remuneration paid to each by the issuer and its
30 subsidiaries during the fiscal year last past and
31 proposed to be paid for the then current fiscal
32 year;
33 (g) The names and addresses of all persons
34 owning of record, and of all persons owning
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1 beneficially, to the extent known to the applicant,
2 10% or more of any class of equity securities of the
3 issuer, and the percentage owned by each;
4 (h) A brief description of any pending
5 material legal proceeding, and of any material legal
6 proceeding known to be contemplated by governmental
7 authorities, involving the issuer or its
8 subsidiaries; and
9 (i) The following financial statements of the
10 issuer:
11 (i) a balance sheet as of a date within
12 135 days prior to the date application for
13 registration is received by the Secretary of
14 State, which balance sheet, if not certified by
15 an independent certified public accountant,
16 shall be accompanied by a certified balance
17 sheet of the issuer as of the close of the last
18 prior fiscal year;
19 (ii) a detailed statement of income and
20 expenses, including income from investments,
21 service fees, loading and other sources,
22 operating expenses and provisions for contract
23 reserves or any additional credits to contract
24 liabilities, profits realized and losses
25 sustained in transactions in investments, and
26 all other charges to operations, for a period
27 of not less than 3 fiscal years (or for the
28 period of existence of the issuer if less than
29 3 years) last preceding the date of the balance
30 sheet presented under subdivision (i) of this
31 subparagraph (i), which statement of income and
32 expenses, if not certified by an independent
33 certified public accountant, shall be
34 accompanied by a certified statement of income
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1 and expenses for a period of 3 years last
2 preceding the uncertified period or periods
3 presented as and for this subdivision (ii);
4 (iii) a detailed analysis of each surplus
5 and reserve account for the same period or
6 periods covered by subdivision (ii) of this
7 subparagraph (i), with like requirement for
8 independent certification; and
9 (iv) such other financial data as the
10 Secretary of State may reasonably require in
11 any specific case or by rule or regulation.
12 (4) The Secretary of State shall within a
13 reasonable time examine the application and related
14 documents filed with him or her and, unless the Secretary
15 of State makes a determination that the application and
16 related documents so filed do not conform to the
17 requirements of this subsection B or there is a
18 proceeding pending under Section 11 of this Act, shall
19 upon receipt of the deposit required by subsection G of
20 this Section 6 and upon receipt of the registration fee
21 as hereinafter prescribed, register the face amount
22 certificate contracts, as described by series, type or
23 class within the application, for offer and sale in this
24 State under this subsection B.
25 C. Pending Application and Filing Fee. No application
26 for registration of face amount certificate contracts shall
27 be deemed to be filed or pending and no face amount
28 certificate contracts covered by such application shall be
29 deemed to be registered under subsection A of this Section 6
30 unless a filing fee in the amount established pursuant to
31 Section 11a of this Act has been paid, which shall not be
32 returnable in any event. No application for registration of
33 face amount certificate contracts shall be deemed to be filed
34 or pending and no face amount certificate contracts covered
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1 by such application shall be deemed to be registered under
2 subsection B of this Section 6 unless the examination fee and
3 filing fee established pursuant to Section 11a of this Act
4 have been paid, which fees shall not be returnable in any
5 event.
6 D. Effective Period and Sales Reports.
7 (1) A registration under subsection A or B of this
8 Section 6, unless sooner terminated by the voluntary
9 action of the issuer, or by suspension or revocation by
10 the Secretary of State, shall continue in force and
11 effect for a period of one year from the date of
12 registration or renewal of registration or such other
13 period of time as the Secretary of State may prescribe by
14 rule or regulation, and shall permit the offer and sale
15 of face amount certificate contracts so registered
16 without limitation as to number or aggregate amount
17 during such period of registration; provided, however,
18 that, in the case of face amount certificate contracts
19 registered under subsection B of this Section 6, the
20 issuer shall promptly file with the Secretary of State,
21 throughout such registration year, (i) one specimen copy
22 of each monthly, quarterly, semi-annual or other periodic
23 or special report and of each financial statement
24 distributed to contract holders; (ii) one certified copy
25 of all statements and reports filed with any regulatory
26 authority or agency of the Federal Government which
27 relate to the issuer or the issuance of the securities
28 registered pursuant to this Section 6 and (iii) one copy
29 of each independently certified audit report pertaining
30 to the financial affairs and position of the issuer
31 covering the issuer's fiscal year ending during the
32 registration year, to be supplied to the Secretary of
33 State as soon as available after the close of the
34 issuer's fiscal year.
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1 (2) The Secretary of State may, at his or her
2 discretion, require each issuer, controlling person or
3 registered dealer on whose behalf a registration of face
4 amount certificate contracts is effective under this
5 Section 6 to file a report, in such form and of such
6 content and for such time period as the Secretary of
7 State may by rule or regulation prescribe, stating the
8 aggregate dollar amount of face amount certificate
9 contracts sold to Illinois residents. The civil remedies
10 provided for in subsection A of Section 13 of this Act
11 and the civil remedies of rescission and appointment of a
12 receiver, conservator, ancillary receiver or ancillary
13 conservator provided for in subsection I of Section 11
14 and in subsections F and G of Section 13 of this Act and
15 the civil remedies of restitution, damages and
16 disgorgement of profits provided for in subsection I of
17 Section 11 of this Act shall not be available against any
18 person by reason of the failure to file any such report
19 or on account of the contents of any such report.
20 E. Amendatory statements and required fees. The
21 Secretary of State may by rule or regulation require the
22 filing of an amendatory statement and prescribe its form and
23 content. The fee for filing the statement shall be
24 established pursuant to Section 11a of this Act. The fee
25 shall not be returnable in any event.
26 F. Renewal of Registration. A registration of face
27 amount certificate contracts in effect under subsection A or
28 B of this Section 6 may be renewed by the issuer by filing an
29 application for renewal with the Secretary of State no later
30 than 10 business days prior to the date upon which such
31 registration would otherwise expire, (or such lesser period
32 as the Secretary of State may prescribe by rule or
33 regulation) in such form and executed, verified, or
34 authenticated by such person as the Secretary of State shall
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1 prescribe by rule or regulation. Such application shall be
2 accompanied by a prospectus in its most current form together
3 with a renewal fee established pursuant to Section 11a of
4 this Act, which shall not be returnable in any event. A
5 renewal of registration of face amount certificate contracts
6 shall take effect as of the date and time that the prior
7 registration under subsection A of this Section 6 or prior
8 renewal under this subsection F would otherwise have expired
9 and (or such alternative date as the Secretary of State may
10 prescribe by rule or regulation) thereafter shall be deemed
11 to be a new registration of the face amount certificate
12 contracts covered thereby. The Secretary of State may by
13 rule or regulation prescribe an additional fee for the
14 failure to file timely an application for renewal and limit
15 the number of times a registration may be renewed.
16 G. Deposit of Securities. No face amount certificate
17 contract shall be registered under subsection B of this
18 Section 6 unless the issuer shall establish and maintain with
19 the Secretary of State, for the benefit of the holders of
20 such contracts residing in this State, a deposit of
21 securities representing debt obligations of the kind in which
22 life insurance companies organized under the laws of this
23 State are permitted to invest their funds, in an amount
24 having a fair market value of not less than $100,000 and at
25 no time less than the current contract liability on all such
26 face amount certificate contracts held by persons residing in
27 this State, and provided further that deposited securities,
28 other than those secured by entire first mortgage or trust
29 deeds on improved unencumbered real estate, are issued by an
30 issuer required to file reports pursuant to Section 13 or
31 15(d) of the Federal 1934 Act or are covered by Section
32 12(g)(2)(B) or (G) of the Federal 1934 Act, or appear in
33 current quotations in transactions on exchanges recognized by
34 subsection G of Section 3 of this Act, and provided further,
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1 that bonds or notes secured by mortgages or trust deeds be
2 limited to those (i) constituting the entire indebtedness
3 secured thereby, (ii) establishing a first lien on improved
4 real estate held in fee simple, and (iii) insured by the
5 Federal Housing Administrator under an Act of Congress of the
6 United States entitled "National Housing Act". Debentures
7 issued by the Federal Housing Administrator under an Act of
8 Congress of the United States entitled the "National Housing
9 Act" may be included in the deposit prescribed by this
10 subsection in amounts related to, and in substitution for,
11 specific insured mortgage loans then included in the subject
12 deposit which are in default, but at no time shall the
13 aggregate principal amount of such debentures included in the
14 subject deposit exceed 5% of the fair market value of
15 securities comprising the subject deposit. The current
16 contract liability in respect of contracts held by persons
17 residing in this State shall be that as determined in such
18 contracts as computed by the issuer and regularly certified
19 to the Secretary of State, on or before the last day of each
20 calendar month as of the close of the month last prior to the
21 date of reporting.
22 Securities deposited as hereinabove required may be
23 withdrawn by the depositor at any time, and from time to
24 time, whenever other securities eligible for deposit and of a
25 fair market value not less than that withdrawn are deposited
26 in substitution for securities withdrawn.
27 The Secretary of State may, upon receipt of appropriate
28 certification in writing, deemed by the Secretary of State to
29 be competent and adequate, evidencing the reduction of
30 contract liability on contracts held by persons residing in
31 this State to an aggregate amount representing not more than
32 90% of the fair market value of the securities then on
33 deposit, permit an equivalent reduction in the deposited
34 securities.
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1 H. Minimum Deposit; Annual Fee; Transaction Charge. The
2 initial and continuing deposit required hereby shall, so long
3 as the face amount certificate contracts registered under
4 subsection B of this Section 6 are being offered and sold in
5 this State, and until all contract liability on all contracts
6 outstanding in this State has been discharged, include
7 obligations of the United States or the State of Illinois in
8 bearer form or fully registered, or registered as to
9 principal, in the title of Treasurer of the State of
10 Illinois, and his or her successors in office, in the minimum
11 principal amount of $50,000. An issuer of face amount
12 certificate contracts, in respect of which a deposit is
13 required to be established and maintained under this Section
14 6, and an issuer of face amount certificate contracts
15 heretofore qualified for issuance to persons residing in this
16 State under "An Act relating to the sale or other disposition
17 of securities and providing penalties for the violation
18 thereof and to repeal Acts in conflict therewith", approved
19 June 10, 1919, as amended, and in respect of which a deposit
20 of securities was established and has been maintained under
21 the Act approved June 10, 1919, as cited above, shall pay to
22 the Secretary of State an annual fee determined at the rate
23 of 1/30th of one percent on the average of quarterly
24 computations on the aggregate of principal amounts of
25 market-quoted or listed securities and the original loan
26 amounts of real estate loans insured by the Federal Housing
27 Administrator, and in addition each such issuer shall pay to
28 the Secretary of State, against quarterly billings therefor,
29 a transaction charge in the amount established pursuant to
30 Section 11a of this Act, which annual fee and transaction
31 charge shall not be returnable in any event, for each
32 separate issue or loan included in additions to and
33 withdrawals from such deposits, provided however that the
34 transaction charge established pursuant to Section 11a of
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1 this Act for each separate issue of market-quoted or listed
2 securities shall apply to all the items of that issue
3 included in a single transaction, regardless of the aggregate
4 principal amount, and in respect of real estate loans such
5 transaction charge shall apply to the group of documents
6 pertaining to each separate loan, and not to the separate
7 items and documents included in such group.
8 Nothing herein contained in respect of prescribed custody
9 of deposited securities with the State Treasurer and of
10 permissible procedures of liquidation of deposited securities
11 by the Secretary of State in the event of insolvency of an
12 issuer of face amount certificate contracts, or the
13 appointment of a trustee in bankruptcy, shall preclude the
14 surrender of deposited securities to a duly qualified trustee
15 under appointment by a Court having jurisdiction under the
16 Federal Bankruptcy Code under an appropriate order of such
17 Court.
18 I. Liquidation of Securities. Upon the insolvency of
19 the issuer of face amount certificate contracts or
20 appointment of a receiver or trustee in bankruptcy, the
21 Secretary of State, if not required otherwise under Federal
22 law or under an order of a Federal Court of competent
23 jurisdiction, may apply to the Circuit Court of Sangamon
24 County, or any other court of competent jurisdiction, for
25 authority to proceed for the liquidation of such securities
26 held for the benefit of the holders of such contracts who
27 reside in this State. The Secretary of State is hereby
28 authorized to deal with such securities on deposit in this
29 State for the benefit of the holders of such face amount
30 certificate contracts, in his or her name or, if the Court
31 shall so order, in the name of the issuer. The Secretary of
32 State may, subject to the approval of the Court, sell or
33 otherwise dispose of the securities so deposited or any part
34 thereof. The Secretary of State shall as soon as may be
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1 conveniently possible, give notice by publication as provided
2 by law, and as the Court may direct, to all contract holders
3 residing in this State who may have claims against the issuer
4 under such face amount certificate contracts and for whose
5 benefit such deposit is held, to file and prove their claims
6 in the manner and within the time the Court shall direct. In
7 order to preserve so far as possible the rights and interests
8 of the holders of outstanding contracts of such issuer who
9 reside in this State, the Secretary of State may liquidate
10 such securities on deposit in this State by entering into
11 contracts with any issuer or person able to buy such
12 securities in whole, or in part. Upon receiving an offer or
13 offers for the purchase of such securities in whole, or in
14 part, the Secretary of State shall submit such offer or
15 offers to the Court, and if, after a full hearing upon the
16 petition filed by the Secretary of State, the court shall
17 find that the Secretary of State endeavored to obtain the
18 best contract price for the benefit of the contract holders,
19 and if the court shall find that the best contract price in
20 the interests of the contract holders has been obtained, and
21 that it is for the best interests of the holders of such
22 contracts that such securities be sold, the court shall, by
23 written order approve the acts of the Secretary of State and
24 authorize him or her to dispose of such securities. Upon the
25 conversion of such securities to cash, the Secretary of State
26 may then proceed to dispose of the sum received for such
27 securities among the respective holders of such contracts as
28 their interests may appear. Upon the liquidation and
29 distribution of such funds, the Secretary of State may make
30 proper liquidation of such securities and the distribution or
31 disposition thereof or of the proceeds therefrom as herein
32 provided.
33 For the purpose of liquidation of such securities, the
34 Secretary of State shall have the power to appoint one or
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1 more special deputies as his or her agent or agents and to
2 employ such clerks, assistants or attorneys as may by him or
3 her be deemed necessary and to give each of such persons such
4 power to assist him or her as he or she may consider wise.
5 The compensation of every such special deputy, agent, clerk,
6 assistant or attorney shall be fixed, and all expenses of
7 taking possession of such securities of the issuer and the
8 administration thereof shall be approved, by the Secretary of
9 State subject to the approval of the court and shall be paid
10 out of the funds or assets received from the liquidation of
11 such securities.
12 J. The applicant or registrant shall notify the
13 Secretary of State, by written notice (which may be by
14 electronic, telegraphic, or facsimile transmission), within 2
15 business days after its receipt of any stop order, denial,
16 order to show cause, suspension or revocation order,
17 injunction or restraining order, or similar order entered or
18 issued by any state, federal or other regulatory authority or
19 by any court, concerning the face amount certificate
20 contracts which are being or have been registered in this
21 State or any other securities of the issuer currently being
22 or proposed to be offered to the public, if the matter which
23 is the subject of, or the failure to disclose the existence
24 of, such order would in this State constitute a violation of
25 subsection E, F, G, H, I or J of Section 12 of this Act. The
26 obligation contained in this subsection J shall continue
27 until such time as offers and sales of the face amount
28 certificate contracts registered under this Section 6 are no
29 longer being made in this State by the applicant or
30 registrant.
31 K. Any document being filed pursuant to this Section 6
32 shall be deemed filed, and any fee being paid pursuant to
33 this Section 6 shall be deemed paid, upon the date of actual
34 receipt thereof by the Secretary of State.
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1 L. The Secretary of State may require by rule or
2 regulation the payment of an additional fee for the filing of
3 information or documents required to be filed by this Section
4 6 which have not been filed in a timely manner. Such fees
5 shall be deposited into the Securities Investors Education
6 Fund and used to promote public awareness of the dangers of
7 securities fraud.
8 (Source: P.A. 89-209, eff. 1-1-96.)
9 (815 ILCS 5/7) (from Ch. 121 1/2, par. 137.7)
10 Sec. 7. Registration of Investment Fund Shares. All
11 investment fund shares except those set forth under Section
12 2a of this Act, or those exempt under Section 3 of this Act,
13 or those offered or sold in transactions exempt under Section
14 4 of this Act, or face amount certificate contracts required
15 to be registered under Section 6 of this Act, shall be
16 registered either by coordination or by qualification, as
17 hereinafter in this Section provided, prior to their offer or
18 sale in this State. Additional classes of shares that are of
19 the same rank, general description, and characteristics as
20 those currently registered may be added to a current
21 registration under this Section upon the filing of an
22 amendment and the payment of the additional fees as
23 prescribed by the Secretary of State by rule or regulation.
24 Any change in organization or plans of operation shall be
25 disclosed to the Secretary of State by filing an amendment to
26 a current registration and the payment of the additional fees
27 as prescribed by the Secretary of State by rule or
28 regulation.
29 A. Registration of Investment Fund Shares by
30 Coordination.
31 (1) Investment fund shares which are being or have
32 been registered under the Federal 1933 Act and the
33 Federal 1940 Investment Company Act may be registered by
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1 coordination in the manner provided in this subsection A,
2 if the effective date of the registration under the
3 Federal 1933 Act is not more than 30 days before the
4 filing with the Secretary of State.
5 (2) Investment fund shares may be registered by
6 coordination by the filing with the Secretary of State by
7 the issuer, by a controlling person or by a registered
8 dealer of:
9 (a) One copy of the registration statement
10 (without exhibits) descriptive of the investment
11 fund shares on file with the Securities and Exchange
12 Commission in its most recent form as of the date of
13 the initial filing under this subsection A;
14 (b) An application, in such form and executed,
15 verified, or authenticated by such person as the
16 Secretary of State shall by rule or regulation
17 prescribe, setting forth the title of the investment
18 fund shares to be offered in this State under this
19 subsection A and, if the applicant is electing the
20 date of effectiveness of a post-effective amendment
21 as its effective date as provided in Section 2.13 of
22 this Act, specifying such date as the effective date
23 for purposes of registration under this subsection
24 A; and
25 (c) An undertaking to forward to the Secretary
26 of State, in writing (which may be by electronic
27 telegraphic or facsimile transmission), any and all
28 subsequent amendments of and supplements to the
29 registration statement not later than the 7th day
30 after the forwarding thereof to the Securities and
31 Exchange Commission, or such longer period as the
32 Secretary of State may permit by rule, regulation or
33 order; and
34 (d) if the applicant is not a registered
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1 dealer, the name of at least one registered dealer
2 for the investment fund shares being registered
3 under this subsection A or a written statement
4 setting forth the method of offer and sale in this
5 State of the investment fund shares being registered
6 in compliance with Section 8 of this Act.
7 (3) Registration of investment fund shares by
8 coordination shall take effect automatically as of the
9 effective date of the registration statement (or
10 post-effective amendment) filed under the Federal 1933
11 Act, provided that on the effective date, the information
12 required by sub-paragraphs (a), (b), and (d) and the
13 undertaking required by sub-paragraph (c) of paragraph
14 (2) of this subsection A have been on file with the
15 Secretary of State for at least 10 business days, or such
16 shorter period as the Secretary of State may permit by
17 rule, regulation or order. If, however, the time period
18 referred to in the preceding sentence shall not have
19 expired on the effective date of the registration
20 statement (or post-effective amendment) filed under the
21 Federal 1933 Act, registration of such investment fund
22 shares by coordination shall, upon the expiration of such
23 time period, take effect automatically as of the
24 effective date of the registration statement (or
25 post-effective amendment) filed under the Federal 1933
26 Act.
27 (4) If the information required by sub-paragraphs
28 (a), (b), and (d) and the undertaking required by
29 sub-paragraph (c) of paragraph (2) of this subsection A
30 are not filed with the Secretary of State prior to the
31 effective date of the registration statement (or
32 post-effective amendment) filed under the Federal 1933
33 Act, any registration of investment fund shares by
34 coordination under this subsection A shall take effect
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1 automatically as soon as all of the following conditions
2 have been satisfied:
3 (a) the information required by sub-paragraphs
4 (a), (b), and (d) and the undertaking required by
5 sub-paragraph (c) of paragraph (2) of this
6 subsection A have been on file with the Secretary of
7 State for 10 business days, or for such shorter
8 period as the Secretary of State may permit by rule,
9 regulation or order;
10 (b) the registration statement or
11 post-effective amendment filed under the Federal
12 1933 Act is then in effect; and
13 (c) the prospectus then on file with the
14 Secretary of State satisfies the requirements of
15 Section 10(a)(3) of the Federal 1933 Act.
16 (5) The applicant shall furnish to the Secretary of
17 State written notice (which may be by electronic,
18 telegraphic, or facsimile transmission) confirming the
19 date of effectiveness and the title of the investment
20 fund shares registered under the Federal 1933 Act, no
21 later than the close of business on the second business
22 day following the date on which registration statement
23 becomes effective under the Federal 1933 Act.
24 (6) No action by the Secretary of State shall be
25 necessary to evidence the effectiveness of the
26 registration by coordination under this subsection A.
27 The Secretary of State may, at his or her discretion,
28 provide a statement attesting to such registration, which
29 statement shall be in such form as the Secretary of State
30 may deem appropriate.
31 (7) Notwithstanding the foregoing, the issuer,
32 controlling person or registered dealer who filed the
33 application set forth in subparagraph (b) of paragraph
34 (2) of this subsection A may request, in writing (which
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1 may be by electronic, telegraphic, or facsimile
2 transmission) prior to or upon notice of effectiveness
3 under the Federal 1933 Act, a waiver of automatic
4 effectiveness of the registration of investment fund
5 shares and the Secretary of State may, at his or her
6 discretion, grant such waiver of automatic effectiveness.
7 Upon the grant by the Secretary of State of the request
8 of waiver of automatic effectiveness, such registration
9 of investment fund shares shall become effective
10 automatically on the date that the issuer, controlling
11 person or registered dealer who filed the application set
12 forth in subparagraph (b) of paragraph (2) of this
13 subsection A notifies the Secretary of State in writing.
14 B. Registration of Investment Fund Shares by
15 Qualification. Investment fund shares may be registered by
16 qualification in the manner provided in this subsection B.
17 (1) An application for registration by
18 qualification shall be made by the issuer, by a
19 controlling person or by a registered dealer together
20 with the examination fee established pursuant to Section
21 11a of the Act, which shall not be returnable in any
22 event. Such application shall be signed, verified, or
23 authenticated by the applicant and filed with the
24 Secretary of State. The application shall set forth:
25 (a) The name and address of the issuer;
26 (b) The title of the investment fund shares;
27 and
28 (c) The names and addresses of the persons
29 creating or sponsoring the investment fund shares.
30 (2) If the issuer, dealer, or controlling person
31 has not filed a registration statement or post-effective
32 amendment which is then in effect under the Federal 1933
33 Act, there shall be filed with the application:
34 (a) A specimen copy of the investment fund
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1 shares, if any, or a copy of the form of the
2 instrument to evidence the investment fund shares,
3 if any;
4 (b) (Blank); If the issuer is a corporation, a
5 copy of its charter or articles of incorporation and
6 all amendments thereto, unless then on file in the
7 office of the Secretary of State; or, if other than
8 a corporation, a copy of all instruments, if any, by
9 which the investment trust or fund was created and
10 all amendments thereto;
11 (c) (Blank); A copy of the by-laws or other
12 code of regulations, if any, of the issuer;
13 (d) An opinion of counsel as to the legality
14 of the investment fund shares;
15 (e) An undertaking to file promptly (not later
16 than 2 business days after the occurrence of any
17 event which requires a material change in the
18 prospectus) with the Secretary of State any and all
19 amendments of and supplements to the prospectus as
20 theretofore filed under this subsection B, together
21 with any additional information, document or
22 undertaking which the Secretary of State, at his or
23 her discretion, deems material, accompanied by the
24 amendment filing fee established pursuant to Section
25 11a of this Act or, in lieu thereof, a notification
26 in writing that all offers and sales of the
27 investment fund shares have been suspended pending
28 the filing with the Secretary of State of the
29 amendment of or supplement to the prospectus;
30 (f) A written statement setting forth the name
31 of at least one registered dealer for the investment
32 fund shares being registered under this subsection B
33 or an application for registration of a salesperson
34 or a written statement setting forth the method of
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1 offer and sale in this State of the investment fund
2 shares being registered in compliance with Section 8
3 of this Act.
4 (3) In addition, there shall be filed with the
5 application such additional information and material in
6 such form as the Secretary of State may by rule,
7 regulation or order prescribe and a prospectus which
8 contains, but is not limited to the following:
9 (a) The date and form of organization of the
10 fund or trust;
11 (b) The authorized and issued capitalization
12 of the fund or trust and a description of the
13 investment fund shares being registered and of all
14 authorized securities;
15 (c) A schedule of the types of deductions
16 which may be made from the trust or corporate or
17 fund assets and the income therefrom or the avails
18 thereof as charges prior to distribution to holders
19 of the investment fund shares;
20 (d) The names and addresses of all of the
21 fund's or trust's officers and directors, or persons
22 performing similar functions, their business
23 experience during the preceding 5 years and the
24 remuneration paid to each by the fund or trust or
25 any affiliate thereof during the fiscal year last
26 past and proposed to be paid for the then current
27 fiscal year;
28 (e) A brief description of any pending
29 material legal proceeding, and of any material legal
30 proceeding known to be contemplated by governmental
31 authorities involving the fund or trust;
32 (f) A statement of the plan of operation,
33 management policies and provisions and restrictions
34 in respect of investment and reinvestment of
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1 principal funds and undistributed income therefrom;
2 (g) A statement of the plan and intention in
3 respect of distributions of ordinary income and
4 capital gains, which statement shall disclose the
5 taking of adequate measures for specific separation
6 and identification of distributions arising from
7 ordinary income and those arising from profits
8 realized from the disposition of securities;
9 (h) Specimen computations illustrating typical
10 applications of the formulae to be used in
11 determining asset value, offering price and
12 liquidating price of the investment fund shares; and
13 (i) The following financial statements in
14 respect of the issuer if the investment fund shares
15 represent shares of an issuing corporation, or in
16 respect of the trust fund, if the investment fund
17 shares represent beneficial interests in a trust
18 fund:
19 (i) a balance sheet as of a date within
20 135 days prior to the date of submitting the
21 application. If such balance sheet is not
22 certified by an independent certified public
23 accountant, the prospectus shall also contain a
24 balance sheet certified by an independent
25 certified public accountant as of the close of
26 the fund's last fiscal year, unless such fiscal
27 year ended within 135 days prior to the time of
28 filing the application, in which case the
29 certified balance sheet may be as of the end of
30 the preceding fiscal year;
31 (ii) a detailed statement of income and
32 expenses and of profits realized and losses
33 sustained from the sale of securities for each
34 of the three fiscal years (or for the period of
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1 existence of the issuer if less than 3 years)
2 next preceding the date of the certified
3 balance sheet and for the period, if any,
4 between the date of the certified balance sheet
5 and the date of the most recent balance sheet.
6 Such statements shall be certified by an
7 independent certified public accountant for the
8 periods ending with the date of the certified
9 balance sheet;
10 (iii) an analysis of each surplus account
11 (or, in lieu thereof, a statement of changes in
12 net assets) for each period for which a
13 statement of income and expenses is filed,
14 certified by an independent certified public
15 accountant for the periods for which certified
16 statements of income and expenses are
17 submitted; and
18 (iv) such other financial statements and
19 supporting schedules as the Secretary of State
20 may by rule or regulation prescribe.
21 (4) The Secretary of State may make or cause to be
22 made an examination of matters pertaining to the
23 investment fund shares as to which registration is sought
24 under this subsection B and the persons creating,
25 sponsoring or having general charge of the distribution
26 of the investment fund shares, or any of them, and may
27 require the applicant to advance sufficient funds to
28 defray all actual expenses of such examination. An
29 itemized statement of such expenses shall be furnished to
30 the applicant.
31 (5) No investment fund shares shall be registered
32 under this subsection B unless the underlying securities
33 or cash are and are to be deposited and held under an
34 appropriate agreement for the benefit of the holders of
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1 the investment fund shares with and by a trustee or
2 custodian which is a clearing corporation, bank, trust
3 company or member of a national securities exchange
4 registered under the Federal 1934 Act, provided that any
5 such bank or trust company shall have an aggregate
6 capital, surplus and undivided profits of at least
7 $2,000,000 and any such member of a national securities
8 exchange shall have capital stock, additional paid-in
9 capital and retained earnings of at least $2,000,000 if a
10 corporation or partnership capital of at least $2,000,000
11 if a partnership and further provided that any such
12 member of a national securities exchange shall comply
13 with the provisions of the Federal 1940 Investment
14 Company Act and the rules and regulations of the
15 Securities and Exchange Commission promulgated under that
16 Act relating to the custody of the underlying securities
17 of investment funds.
18 (6) The Secretary of State shall within a
19 reasonable time examine the application and documents
20 filed with him or her and may make such additional
21 examination pursuant to paragraph (4) of this subsection
22 B as he or she may deem appropriate, and unless the
23 Secretary of State makes a determination that the
24 application and documents so filed do not conform to the
25 requirements of this subsection B, or there is a
26 proceeding pending under Section 11 of this Act, the
27 Secretary of State shall register the investment fund
28 shares for offer and sale in this State under this
29 subsection B.
30 C. Pending Application and Filing Fee. No application
31 for registration of investment fund shares shall be deemed to
32 be filed or pending and no investment fund shares covered by
33 such application shall be deemed to be registered under
34 subsection A of this Section 7 unless a filing fee in the
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1 amount established pursuant to Section 11a of this Act has
2 been paid, which fee shall not be returnable in any event. No
3 application shall be deemed to be filed or pending and no
4 investment fund shares covered by such application shall be
5 deemed to be registered under subsection B of this Section 7
6 unless the examination fee and filing fee established
7 pursuant to Section 11a of this Act have been paid, which
8 fees shall not be returnable in any event.
9 D. Amendatory statements and required fees. The
10 Secretary of State may by rule or regulation require the
11 filing of an amendatory statement and prescribe its form and
12 content. The fee for filing the statement shall be
13 established pursuant to Section 11a of this Act. The fee
14 shall not be returnable in any event.
15 E. Discontinuance of Registration. An amendatory
16 statement or statements may be submitted by the applicant at
17 any time, and from time to time, when it is desired to
18 discontinue registration in respect of one or more classes,
19 series, or portfolios and if the Secretary of State shall
20 find that such discontinuance is not against the public
21 interest, such amendatory statement or statements shall be
22 filed by the Secretary of State without charge, but such
23 discontinuance of registration shall not entitle the
24 applicant to any refund of any fees previously paid in
25 respect of such discontinued class or classes, series, or
26 portfolios.
27 F. Effective Period and Sales Reports.
28 (1) A registration of investment fund shares under
29 this Section 7, unless sooner terminated by the voluntary
30 action of the applicant or by action of the Secretary of
31 State under Section 11 hereof, shall continue in force
32 and effect for a period of one year from the date of
33 registration or renewal of registration (or such other
34 period of time as the Secretary of State may prescribe by
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1 rule or regulation or order), without limitation as to
2 number of shares or aggregate amount; provided, however,
3 that in the case of investment fund shares registered
4 under subsection B of this Section 7, the issuer which
5 has no registration statement then in effect under the
6 Federal 1933 Act and the Federal 1940 Investment Company
7 Act shall promptly file with the Secretary of State
8 throughout such registration period, one copy of each
9 monthly, quarterly, semi-annual, annual or other periodic
10 report and financial statement sent to holders of its
11 outstanding investment fund shares, and one copy of each
12 statement and report relating to such investment fund
13 shares filed with any regulatory authority or agency of
14 the Federal Government.
15 (2) The Secretary of State may, at his or her
16 discretion, require each issuer, controlling person or
17 registered dealer on whose behalf a registration of
18 investment fund shares is effected under this Section 7
19 to file a report, in such form and of such content and
20 for such time period as the Secretary of State may by
21 rule or regulation prescribe, stating the aggregate
22 dollar amount of investment fund shares sold to Illinois
23 residents. The civil remedies provided for in subsection
24 A of Section 13 of this Act and the civil remedies of
25 rescission and appointment of a receiver, conservator,
26 ancillary receiver or ancillary conservator provided for
27 in subsection I of Section 11 and in subsections F and G
28 of Section 13 of this Act and the civil remedies of
29 restitution, damages and disgorgement of profits provided
30 for in subsection I of Section 11 of this Act shall not
31 be available against any person by reason of the failure
32 to file any such report or on account of the contents of
33 any such report.
34 G. Renewal of Registration. A registration of
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1 investment fund shares in effect under subsection A or B of
2 this Section 7 may be renewed by the issuer by filing an
3 application for renewal of registration with the Secretary of
4 State no later than 10 business days prior to the date upon
5 which such registration would otherwise expire or such lesser
6 period as the Secretary of State may prescribe by rule or
7 regulation, in such form and executed, verified, or
8 authenticated by such person as the Secretary of State shall
9 prescribe by rule or regulation. Such application shall be
10 accompanied by a prospectus in its most current form together
11 with a renewal fee established pursuant to Section 11a of
12 this Act, which shall not be returnable in any event. A
13 renewal of registration of securities shall take effect as of
14 the date and time that the prior registration under
15 subsection A of this Section 7 or prior renewal under this
16 paragraph (1) would otherwise have expired (or such
17 alternative date as the Secretary of State may prescribe by
18 rule or regulation) and thereafter shall be deemed to be a
19 new registration of the investment fund shares covered
20 thereby. The Secretary of State may by rule or regulation
21 prescribe an additional fee for the failure to file timely an
22 application for renewal and limit the number of times a
23 registration may be renewed.
24 H. The applicant or registrant shall notify the
25 Secretary of State, by written notice (which may be by
26 electronic, telegraphic, or facsimile transmission), within 2
27 business days after its receipt of any stop order, denial,
28 order to show cause, suspension or revocation order,
29 injunction or restraining order, or similar order entered or
30 issued by any state, federal or other regulatory authority or
31 by any court, concerning the investment fund shares which are
32 being or have been registered in this State or any other
33 securities of the issuer currently being or proposed to be
34 offered to the public, if the matter which is the subject of,
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1 or the failure to disclose the existence of, such order would
2 in this State constitute a violation of subsection E, F, G,
3 H, I or J of Section 12 of this Act. The obligation
4 contained in this subsection H shall continue until such time
5 as offers and sales of the investment fund shares registered
6 under this Section 7 are no longer being made in this State
7 by the applicant or registrant.
8 I. Any document being filed pursuant to this Section 7
9 shall be deemed filed, and any fee being paid pursuant to
10 this Section 7 shall be deemed paid, upon the date of actual
11 receipt thereof by the Secretary of State.
12 J. The Secretary of State may require by rule or
13 regulation the payment of an additional fee for the filing of
14 information or documents required to be filed by this Section
15 7 which have not been filed in a timely manner. Such fees
16 shall be deposited into the Securities Investors Education
17 Fund and use to promote public awareness of the dangers of
18 securities fraud.
19 (Source: P.A. 89-209, eff. 1-1-96; 89-626, eff. 8-9-96.)
20 (815 ILCS 5/8) (from Ch. 121 1/2, par. 137.8)
21 Sec. 8. Registration of dealers, limited Canadian
22 dealers, salespersons, and investment advisers, and
23 investment adviser representatives.
24 A. Except as otherwise provided in this subsection A,
25 every dealer, limited Canadian dealer, salesperson, and
26 investment adviser, and investment adviser representative
27 shall be registered as such with the Secretary of State. No
28 dealer or salesperson need be registered as such when
29 offering or selling securities in transactions believed in
30 good faith to be exempted by subsection A, B, C, D, E, G, H,
31 I, J, K, M, O, P, Q, R or S of Section 4 of this Act,
32 provided that such dealer or salesperson is not regularly
33 engaged in the business of offering or selling securities in
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1 reliance upon the exemption set forth in subsection G or M of
2 Section 4 of this Act. No dealer, issuer or controlling
3 person shall employ a salesperson unless such salesperson is
4 registered as such with the Secretary of State or is employed
5 for the purpose of offering or selling securities solely in
6 transactions believed in good faith to be exempted by
7 subsection A, B, C, D, E, G, H, I, J, K, L, M, O, P, Q, R or
8 S of Section 4 of this Act; provided that such salesperson
9 need not be registered when effecting transactions in this
10 State limited to those transactions described in Section
11 15(h)(2) of the Federal 1934 Act or engaging engaged in the
12 offer or sale of securities in respect of which he or she has
13 beneficial ownership and is a controlling person. The
14 Secretary of State may, by rule, regulation or order and
15 subject to such terms, conditions as fees as may be
16 prescribed in such rule, regulation or order, exempt from the
17 registration requirements of this Section 8 any investment
18 adviser, if the Secretary of State shall find that such
19 registration is not necessary in the public interest by
20 reason of the small number of clients or otherwise limited
21 character of operation of such investment adviser.
22 B. An application for registration as a dealer or
23 limited Canadian dealer, executed, verified, or authenticated
24 by or on behalf of the applicant, shall be filed with the
25 Secretary of State, in such form as the Secretary of State
26 may by rule, regulation or order prescribe, setting forth or
27 accompanied by:
28 (1) The name and address of the applicant, the
29 location of its principal business office and all branch
30 offices, if any, and the date of its organization;
31 (2) A statement of any other Federal or state
32 licenses or registrations which have been granted the
33 applicant and whether any such licenses or registrations
34 have ever been refused, cancelled, suspended, revoked or
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1 withdrawn;
2 (3) The assets and all liabilities, including
3 contingent liabilities of the applicant, as of a date not
4 more than 60 days prior to the filing of the application;
5 (4) (a) A brief description of any civil or
6 criminal proceeding of which fraud is an essential
7 element pending against the applicant and whether the
8 applicant has ever been convicted of a felony, or of any
9 misdemeanor of which fraud is an essential element;
10 (b) A list setting forth the name, residence and
11 business address and a 10 year occupational statement of
12 each principal of the applicant and a statement
13 describing briefly any civil or criminal proceedings of
14 which fraud is an essential element pending against any
15 such principal and the facts concerning any conviction of
16 any such principal of a felony, or of any misdemeanor of
17 which fraud is an essential element;
18 (5) If the applicant is a corporation: a copy of
19 its articles of incorporation in their most current form,
20 unless they are already on file in the office of the
21 Secretary of State; a list of its officers and directors
22 setting forth the residence and business address of each;
23 a 10-year occupational statement of each such officer or
24 director; and a statement describing briefly any civil or
25 criminal proceedings of which fraud is an essential
26 element pending against each such officer or director and
27 the facts concerning any conviction of any officer or
28 director of a felony, or of any misdemeanor of which
29 fraud is an essential element;
30 (6) If the applicant is a sole proprietorship, a
31 partnership, limited liability company, an unincorporated
32 association or any similar form of business organization:
33 the name, residence and business address of the
34 proprietor or of each partner, member, officer, director,
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1 trustee or manager; the limitations, if any, of the
2 liability of each such individual; a 10-year occupational
3 statement of each such individual; a statement describing
4 briefly any civil or criminal proceedings of which fraud
5 is an essential element pending against each such
6 individual and the facts concerning any conviction of any
7 such individual of a felony, or of any misdemeanor of
8 which fraud is an essential element;
9 (7) Such additional information as the Secretary of
10 State may by rule or regulation prescribe as necessary to
11 determine the applicant's financial responsibility,
12 business repute and qualification to act as a dealer.
13 (8) (a) No applicant shall be registered or
14 re-registered as a dealer or limited Canadian dealer
15 under this Section unless and until each principal of the
16 dealer has passed an examination conducted by the
17 Secretary of State or a self-regulatory organization of
18 securities dealers or similar person, which examination
19 has been designated by the Secretary of State by rule,
20 regulation or order to be satisfactory for purposes of
21 determining whether the applicant has sufficient
22 knowledge of the securities business and laws relating
23 thereto to act as a registered dealer. Any dealer who was
24 registered on September 30, 1963, and has continued to be
25 so registered; and any principal of any registered
26 dealer, who was acting in such capacity on and
27 continuously since September 30, 1963; and any individual
28 who has previously passed a securities dealer examination
29 administered by the Secretary of State or any examination
30 designated by the Secretary of State to be satisfactory
31 for purposes of determining whether the applicant has
32 sufficient knowledge of the securities business and laws
33 relating thereto to act as a registered dealer by rule,
34 regulation or order, shall not be required to pass an
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1 examination in order to continue to act in such capacity.
2 The Secretary of State may by order waive the examination
3 requirement for any principal of an applicant for
4 registration under this subsection B who has had such
5 experience or education relating to the securities
6 business as may be determined by the Secretary of State
7 to be the equivalent of such examination. Any request
8 for such a waiver shall be filed with the Secretary of
9 State in such form as may be prescribed by rule or
10 regulation.
11 (b) Unless an applicant is a member of the body
12 corporate known as the Securities Investor Protection
13 Corporation established pursuant to the Act of Congress
14 of the United States known as the Securities Investor
15 Protection Act of 1970, as amended, or a member of an
16 association of dealers registered as a national
17 securities association pursuant to Section 15A of the
18 Federal 1934 Act, or a member of a self-regulatory
19 organization or stock exchange in Canada which the
20 Secretary of State has designated by rule or order, an
21 applicant shall not be registered or re-registered unless
22 and until there is filed with the Secretary of State
23 evidence that such applicant has in effect insurance or
24 other equivalent protection for each client's cash or
25 securities held by such applicant, and an undertaking
26 that such applicant will continually maintain such
27 insurance or other protection during the period of
28 registration or re-registration. Such insurance or other
29 protection shall be in a form and amount reasonably
30 prescribed by the Secretary of State by rule or
31 regulation.
32 (9) The application for the registration of a
33 dealer or limited Canadian dealer shall be accompanied
34 by a filing fee and a fee for each branch office in this
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1 State, in each case in the amount established pursuant to
2 Section 11a of this Act, which fees shall not be
3 returnable in any event.
4 (10) The Secretary of State shall notify the dealer
5 or limited Canadian dealer by written notice (which may
6 be by electronic, telegraphic, or facsimile transmission)
7 of the effectiveness of the registration as a dealer in
8 this State.
9 (11) Any change which renders no longer accurate
10 any information contained in any application for
11 registration or re-registration of a dealer or limited
12 Canadian dealer shall be reported to the Secretary of
13 State within 10 business days after the occurrence of
14 such change; but in respect to assets and liabilities
15 only materially adverse changes need be reported.
16 C. Any registered dealer, limited Canadian dealer,
17 issuer, or controlling person desiring to register a
18 salesperson shall file an application with the Secretary of
19 State, in such form as the Secretary of State may by rule or
20 regulation prescribe, which the salesperson is required by
21 this Section to provide to the dealer, issuer, or controlling
22 person, executed, verified, or authenticated by the
23 salesperson setting forth or accompanied by:
24 (1) The name, residence and business address of the
25 salesperson;
26 (2) Whether any federal or State license or
27 registration as dealer, limited Canadian dealer, or
28 salesperson has ever been refused the salesperson or
29 cancelled, suspended, revoked, or withdrawn;
30 (3) The nature of employment with, and names and
31 addresses of, employers of the salesperson for the 10
32 years immediately preceding the date of application;
33 (4) A brief description of any civil or criminal
34 proceedings of which fraud is an essential element
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1 pending against the salesperson, and whether the
2 salesperson has ever been convicted of a felony, or of
3 any misdemeanor of which fraud is an essential element;
4 (5) Such additional information as the Secretary of
5 State may by rule, regulation or order prescribe as
6 necessary to determine the salesperson's business repute
7 and qualification to act as a salesperson; and
8 (6) No individual shall be registered or
9 re-registered as a salesperson under this Section unless
10 and until such individual has passed an examination
11 conducted by the Secretary of State or a self-regulatory
12 organization of securities dealers or similar person,
13 which examination has been designated by the Secretary of
14 State by rule, regulation or order to be satisfactory for
15 purposes of determining whether the applicant has
16 sufficient knowledge of the securities business and laws
17 relating thereto to act as a registered salesperson.
18 Any salesperson who was registered prior to
19 September 30, 1963, and has continued to be so
20 registered, and any individual who has passed a
21 securities salesperson examination administered by the
22 Secretary of State or an examination designated by the
23 Secretary of State by rule, regulation or order to be
24 satisfactory for purposes of determining whether the
25 applicant has sufficient knowledge of the securities
26 business and laws relating thereto to act as a registered
27 salesperson, shall not be required to pass an examination
28 in order to continue to act as a salesperson. The
29 Secretary of State may by order waive the examination
30 requirement for any applicant for registration under this
31 subsection C who has had such experience or education
32 relating to the securities business as may be determined
33 by the Secretary of State to be the equivalent of such
34 examination. Any request for such a waiver shall be
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1 filed with the Secretary of State in such form as may be
2 prescribed by rule, regulation or order.
3 (7) The application for registration of a
4 salesperson shall be accompanied by a filing fee and a
5 Securities Audit and Enforcement Fund fee, each in the
6 amount established pursuant to Section 11a of this Act,
7 which shall not be returnable in any event.
8 (8) Any change which renders no longer accurate any
9 information contained in any application for registration
10 or re-registration as a salesperson shall be reported to
11 the Secretary of State within 10 business days after the
12 occurrence of such change. If the activities are
13 terminated which rendered an individual a salesperson for
14 the dealer, issuer or controlling person, the dealer,
15 issuer or controlling person, as the case may be, shall
16 notify the Secretary of State, in writing, within 30 days
17 of the salesperson's cessation of activities, using the
18 appropriate termination notice form.
19 (9) A registered salesperson may transfer his or
20 her registration under this Section 8 for the unexpired
21 term thereof from one registered dealer or limited
22 Canadian dealer to another by the giving of notice of the
23 transfer by the new registered dealer or limited Canadian
24 dealer to the Secretary of State in such form and subject
25 to such conditions as the Secretary of State shall by
26 rule or regulation prescribe. The new registered dealer
27 or limited Canadian dealer shall promptly file an
28 application for registration of such salesperson as
29 provided in this subsection C, accompanied by the filing
30 fee prescribed by paragraph (7) of this subsection C.
31 C-5. Except with respect to federal covered investment
32 advisers whose only clients are investment companies as
33 defined in the Federal 1940 Act, other investment advisers,
34 federal covered investment advisers, or any similar person
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1 which the Secretary of State may prescribe by rule or order,
2 a federal covered investment adviser shall file with the
3 Secretary of State, prior to acting as a federal covered
4 investment adviser in this State, such documents as have been
5 filed with the Securities and Exchange Commission as the
6 Secretary of State by rule or order may prescribe. The
7 notification of a federal covered investment adviser shall be
8 accompanied by a notification filing fee established pursuant
9 to Section 11a of this Act, which shall not be returnable in
10 any event. Every person acting as a federal covered
11 investment adviser in this State shall file a notification
12 filing and pay an annual notification filing fee established
13 pursuant to Section 11a of this Act, which is not returnable
14 in any event. The failure to file any such notification
15 shall constitute a violation of subsection D of Section 12 of
16 this Act, subject to the penalties enumerated in Section 14
17 of this Act. Until October 10, 1999 or other date as may be
18 legally permissible, a federal covered investment adviser who
19 fails to file the notification or refuses to pay the fees as
20 required by this subsection shall register as an investment
21 adviser with the Secretary of State under Section 8 of this
22 Act. The civil remedies provided for in subsection A of
23 Section 13 of this Act and the civil remedies of rescission
24 and appointment of receiver, conservator, ancillary receiver,
25 or ancillary conservator provided for in subsection F of
26 Section 13 of this Act shall not be available against any
27 person by reason of the failure to file any such notification
28 or to pay the notification fee or on account of the contents
29 of any such notification.
30 D. An application for registration as an investment
31 adviser, executed, verified, or authenticated by or on behalf
32 of the applicant, shall be filed with the Secretary of State,
33 in such form as the Secretary of State may by rule or
34 regulation prescribe, setting forth or accompanied by:
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1 (1) The name and form of organization under which
2 the investment adviser engages or intends to engage in
3 business; the state or country and date of its
4 organization; the location of the adviser's principal
5 business office and branch offices, if any; the names and
6 addresses of the adviser's principal, partners, officers,
7 directors, and persons performing similar functions or,
8 if the investment adviser is an individual, of the
9 individual; and the number of the adviser's employees who
10 perform investment advisory functions;
11 (2) The education, the business affiliations for
12 the past 10 years, and the present business affiliations
13 of the investment adviser and of the adviser's principal,
14 partners, officers, directors, and persons performing
15 similar functions and of any person controlling the
16 investment adviser;
17 (3) The nature of the business of the investment
18 adviser, including the manner of giving advice and
19 rendering analyses or reports;
20 (4) The nature and scope of the authority of the
21 investment adviser with respect to clients' funds and
22 accounts;
23 (5) The basis or bases upon which the investment
24 adviser is compensated;
25 (6) Whether the investment adviser or any
26 principal, partner, officer, director, person performing
27 similar functions or person controlling the investment
28 adviser (i) within 10 years of the filing of the
29 application has been convicted of a felony, or of any
30 misdemeanor of which fraud is an essential element, or
31 (ii) is permanently or temporarily enjoined by order or
32 judgment from acting as an investment adviser,
33 underwriter, dealer, principal or salesperson, or from
34 engaging in or continuing any conduct or practice in
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1 connection with any such activity or in connection with
2 the purchase or sale of any security, and in each case
3 the facts relating to the conviction, order or judgment;
4 (7) (a) A statement as to whether the investment
5 adviser is engaged or is to engage primarily in the
6 business of rendering investment supervisory services;
7 and
8 (b) A statement that the investment adviser will
9 furnish his, her, or its clients with such information as
10 the Secretary of State deems necessary in the form
11 prescribed by the Secretary of State by rule or
12 regulation;
13 (8) Such additional information as the Secretary of
14 State may, by rule, regulation or order prescribe as
15 necessary to determine the applicant's financial
16 responsibility, business repute and qualification to act
17 as an investment adviser.
18 (9) No applicant shall be registered or
19 re-registered as an investment adviser under this Section
20 unless and until each principal of the applicant who is
21 actively engaged in the conduct and management of the
22 applicant's advisory business in this State has passed an
23 examination or completed an educational program conducted
24 by the Secretary of State or an association of investment
25 advisers or similar person, which examination or
26 educational program has been designated by the Secretary
27 of State by rule, regulation or order to be satisfactory
28 for purposes of determining whether the applicant has
29 sufficient knowledge of the securities business and laws
30 relating thereto to conduct the business of a registered
31 investment adviser.
32 Any person who was a registered investment adviser
33 prior to September 30, 1963, and has continued to be so
34 registered, and any individual who has passed an
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1 investment adviser examination administered by the
2 Secretary of State, or passed an examination or completed
3 an educational program designated by the Secretary of
4 State by rule, regulation or order to be satisfactory for
5 purposes of determining whether the applicant has
6 sufficient knowledge of the securities business and laws
7 relating thereto to conduct the business of a registered
8 investment adviser, shall not be required to pass an
9 examination or complete an educational program in order
10 to continue to act as an investment adviser. The
11 Secretary of State may by order waive the examination or
12 educational program requirement for any applicant for
13 registration under this subsection D if the principal of
14 the applicant who is actively engaged in the conduct and
15 management of the applicant's advisory business in this
16 State has had such experience or education relating to
17 the securities business as may be determined by the
18 Secretary of State to be the equivalent of the
19 examination or educational program. Any request for a
20 waiver shall be filed with the Secretary of State in such
21 form as may be prescribed by rule or regulation.
22 (10) No applicant shall be registered or
23 re-registered as an investment adviser under this Section
24 8 unless (i) the application for registration or
25 re-registration is accompanied by an application for
26 registration or re-registration for each person a list of
27 all persons acting as an investment adviser
28 representative representatives on behalf of the adviser
29 and (ii) a Securities Audit and Enforcement Fund fee that
30 shall not be returnable in any event is paid with respect
31 to each investment adviser representative. No fee,
32 however, shall be required under this paragraph if the
33 investment adviser representative is also registered as a
34 salesperson and the Securities Audit and Enforcement Fund
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1 fee required under subsection C or subsection H of this
2 Section has been paid to the Secretary of State.
3 (11) The application for registration of an
4 investment adviser shall be accompanied by a filing fee
5 and a fee for each branch office in this State, in each
6 case in the amount established pursuant to Section 11a of
7 this Act, which fees shall not be returnable in any
8 event.
9 (12) The Secretary of State shall notify the
10 investment adviser by written notice (which may be by
11 electronic, telegraphic, or facsimile transmission) of
12 the effectiveness of the registration as an investment
13 adviser in this State.
14 (13) Any change which renders no longer accurate
15 any information contained in any application for
16 registration or re-registration of an investment adviser
17 shall be reported to the Secretary of State within 10
18 business days after the occurrence of the change. In
19 respect to assets and liabilities of an investment
20 adviser that retains custody of clients' cash or
21 securities or accepts pre-payment of fees in excess of
22 $500 per client and 6 or more months in advance only
23 materially adverse changes need be reported by written
24 notice (which may be by electronic telegraphic or
25 facsimile transmission) no later than the close of
26 business on the second business day following the
27 discovery thereof.
28 (14) Each application for registration as an
29 investment adviser shall become effective automatically
30 on the 45th day following the filing of the application,
31 required documents or information, and payment of the
32 required fee unless (i) the Secretary of State has
33 registered the investment adviser prior to that date or
34 (ii) an action with respect to the applicant is pending
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1 under Section 11 of this Act.
2 D-5. A registered investment adviser or federal covered
3 investment adviser desiring to register an investment
4 adviser representative shall file an application with the
5 Secretary of State, in the form as the Secretary of State may
6 by rule or order prescribe, which the investment adviser
7 representative is required by this Section to provide to the
8 investment adviser, executed, verified, or authenticated by
9 the investment adviser representative and setting forth or
10 accompanied by:
11 (1) The name, residence, and business address of
12 the investment adviser representative;
13 (2) A statement whether any federal or state
14 license or registration as a dealer, salesperson,
15 investment adviser, or investment adviser representative
16 has ever been refused, canceled, suspended, revoked or
17 withdrawn;
18 (3) The nature of employment with, and names and
19 addresses of, employers of the investment adviser
20 representative for the 10 years immediately preceding the
21 date of application;
22 (4) A brief description of any civil or criminal
23 proceedings, of which fraud is an essential element,
24 pending against the investment adviser representative and
25 whether the investment adviser representative has ever
26 been convicted of a felony or of any misdemeanor of which
27 fraud is an essential element;
28 (5) Such additional information as the Secretary of
29 State may by rule or order prescribe as necessary to
30 determine the investment adviser representative's
31 business repute or qualification to act as an investment
32 adviser representative;
33 (6) Documentation that the individual has passed an
34 examination conducted by the Secretary of State, an
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1 organization of investment advisers, or similar person,
2 which examination has been designated by the Secretary of
3 State by rule or order to be satisfactory for purposes of
4 determining whether the applicant has sufficient
5 knowledge of the investment advisory or securities
6 business and laws relating to that business to act as a
7 registered investment adviser representative; and
8 (7) A Securities Audit and Enforcement Fund fee
9 established under Section 11a of this Act, which shall
10 not be returnable in any event.
11 The Secretary of State may by order waive the examination
12 requirement for an applicant for registration under this
13 subsection D-5 who has had the experience or education
14 relating to the investment advisory or securities business as
15 may be determined by the Secretary of State to be the
16 equivalent of the examination. A request for a waiver shall
17 be filed with the Secretary of State in the form as may be
18 prescribed by rule or order.
19 A change that renders no longer accurate any information
20 contained in any application for registration or
21 re-registration as an investment adviser representative must
22 be reported to the Secretary of State within 10 business days
23 after the occurrence of the change. If the activities that
24 rendered an individual an investment adviser representative
25 for the investment adviser are terminated, the investment
26 adviser shall notify the Secretary of State in writing (which
27 may be by electronic or facsimile transmission), within 30
28 days of the investment adviser representative's termination,
29 using the appropriate termination notice form as the
30 Secretary of State may prescribe by rule or order.
31 A registered investment adviser representative may
32 transfer his or her registration under this Section 8 for the
33 unexpired term of the registration from one registered
34 investment adviser to another by the giving of notice of the
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1 transfer by the new investment adviser to the Secretary of
2 State in the form and subject to the conditions as the
3 Secretary of State shall prescribe. The new registered
4 investment adviser shall promptly file an application for
5 registration of the investment adviser representative as
6 provided in this subsection, accompanied by the Securities
7 Audit and Enforcement Fund fee prescribed by paragraph (7) of
8 this subsection D-5.
9 E. (1) Subject to the provisions of subsection F of
10 Section 11 of this Act, the registration of a dealer, limited
11 Canadian dealer, salesperson, or investment adviser, or
12 investment adviser representative may be denied, suspended or
13 revoked if the Secretary of State finds that the dealer,
14 limited Canadian dealer, salesperson, or investment adviser,
15 or investment adviser representative or any principal
16 officer, director, partner, member, trustee, manager or any
17 person who performs a similar function of the dealer, limited
18 Canadian dealer, or investment adviser:
19 (a) Has been convicted of any felony during the 10
20 year period preceding the date of filing of any
21 application for registration or at any time thereafter,
22 or of any misdemeanor of which fraud is an essential
23 element;
24 (b) Has engaged in any inequitable practice in the
25 offer or sale of securities or in any fraudulent business
26 practice;
27 (c) Has failed to account for any money or
28 property, or has failed to deliver any security, to any
29 person entitled thereto when due or within a reasonable
30 time thereafter;
31 (d) In the case of a dealer, limited Canadian
32 dealer, or investment adviser, is insolvent;
33 (e) In the case of a dealer or limited Canadian
34 dealer, (i) has failed reasonably to supervise the
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1 securities activities of any of its salespersons and the
2 failure has permitted or facilitated a violation of
3 Section 12 of this Act or (ii) is offering or selling or
4 has offered or sold securities in this State through a
5 salesperson other than a registered salesperson, or, in
6 the case of a salesperson, is selling or has sold
7 securities in this State for a dealer, limited Canadian
8 dealer, issuer or controlling person with knowledge that
9 the dealer, limited Canadian dealer, issuer or
10 controlling person has not complied with the provisions
11 of this Act;
12 (f) In the case of an investment adviser, has
13 failed reasonably to supervise the advisory activities of
14 any of its investment adviser representatives or
15 employees and the failure has permitted or facilitated a
16 violation of Section 12 of this Act;
17 (g) Has violated any of the provisions of this Act;
18 (h) Has made any material misrepresentation to the
19 Secretary of State in connection with any information
20 deemed necessary by the Secretary of State to determine a
21 dealer's, limited Canadian dealer's, or investment
22 adviser's financial responsibility or a dealer's, limited
23 Canadian dealer's, investment adviser's, or
24 salesperson's, or investment adviser representative's
25 business repute or qualifications, or has refused to
26 furnish any such information requested by the Secretary
27 of State;
28 (i) Has had a license or registration under any
29 Federal or State law regulating the offer or sale of
30 securities or commodity futures contracts, refused,
31 cancelled, suspended or withdrawn;
32 (j) Has been suspended or expelled from or refused
33 membership in or association with or limited in any
34 capacity by any self-regulatory organization registered
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1 under the Federal 1934 Act or the Federal 1974 Act
2 arising from any fraudulent or deceptive act or a
3 practice in violation of any rule, regulation or standard
4 duly promulgated by the self-regulatory organization;
5 (k) Has had any order entered against it after
6 notice and opportunity for hearing by a securities agency
7 of any state, any foreign government or agency thereof,
8 the Securities and Exchange Commission, or the Federal
9 Commodities Futures Trading Commission arising from any
10 fraudulent or deceptive act or a practice in violation of
11 any statute, rule or regulation administered or
12 promulgated by the agency or commission;
13 (l) In the case of a dealer or limited Canadian
14 dealer, fails to maintain a minimum net capital in an
15 amount which the Secretary of State may by rule or
16 regulation require;
17 (m) Has conducted a continuing course of dealing of
18 such nature as to demonstrate an inability to properly
19 conduct the business of the dealer, limited Canadian
20 dealer, salesperson, or investment adviser, or investment
21 adviser representative;
22 (n) Has had, after notice and opportunity for
23 hearing, any injunction or order entered against it or
24 license or registration refused, cancelled, suspended,
25 revoked, withdrawn or limited by any state or federal
26 body, agency or commission regulating banking, insurance,
27 finance or small loan companies, real estate or mortgage
28 brokers or companies, if the action resulted from any act
29 found by the body, agency or commission to be a
30 fraudulent or deceptive act or practice in violation of
31 any statute, rule or regulation registration administered
32 or promulgated by the body, agency or commission;
33 (o) Has failed to file a return, or to pay the tax,
34 penalty or interest shown in a filed return, or to pay
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1 any final assessment of tax, penalty or interest, as
2 required by any tax Act administered by the Illinois
3 Department of Revenue, until such time as the
4 requirements of that tax Act are satisfied;
5 (p) In the case of a natural person who is a
6 dealer, limited Canadian dealer, salesperson, or
7 investment adviser, or investment adviser representative,
8 has defaulted on an educational loan guaranteed by the
9 Illinois Student Assistance Commission, until the natural
10 person has established a satisfactory repayment record as
11 determined by the Illinois Student Assistance Commission;
12 (q) Has failed to maintain the books and records
13 required under this Act or rules or regulations
14 promulgated under this Act within a reasonable time after
15 receiving notice of any deficiency;
16 (r) Has refused to allow or otherwise impeded
17 designees of the Secretary of State from conducting an
18 audit, examination, inspection, or investigation provided
19 for under Section 8 or 11 of this Act;
20 (s) Has failed to maintain any minimum net capital
21 or bond requirement set forth in this Act or any rule or
22 regulation promulgated under this Act;
23 (t) Has refused the Secretary of State or his or
24 her designee access to any office or location within an
25 office to conduct an investigation, audit, examination,
26 or inspection.
27 (2) If the Secretary of State finds that any registrant
28 or applicant for registration is no longer in existence or
29 has ceased to do business as a dealer, limited Canadian
30 dealer, salesperson, or investment adviser, or investment
31 adviser representative, or is subject to an adjudication as a
32 person under legal disability or to the control of a
33 guardian, or cannot be located after reasonable search, or
34 has failed after written notice to pay to the Secretary of
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1 State any additional fee prescribed by this Section or
2 specified by rule or regulation, or if a natural person, has
3 defaulted on an educational loan guaranteed by the Illinois
4 Student Assistance Commission, the Secretary of State may by
5 order cancel the registration or application.
6 (3) Withdrawal of an application for registration or
7 withdrawal from registration as a dealer, limited Canadian
8 dealer, salesperson, or investment adviser, or investment
9 adviser representative becomes effective 30 days after
10 receipt of an application to withdraw or within such shorter
11 period of time as the Secretary of State may determine,
12 unless any proceeding is pending under Section 11 of this Act
13 when the application is filed or a proceeding is instituted
14 within 30 days after the application is filed. If a
15 proceeding is pending or instituted, withdrawal becomes
16 effective at such time and upon such conditions as the
17 Secretary of State by order determines. If no proceeding is
18 pending or instituted and withdrawal automatically becomes
19 effective, the Secretary of State may nevertheless institute
20 a revocation or suspension proceeding within one year after
21 withdrawal became effective and enter a revocation or
22 suspension order as of the last date on which registration
23 was effective.
24 F. The Secretary of State shall make available upon
25 request the date that each dealer, investment adviser, or
26 salesperson, or investment adviser representative was granted
27 registration, together with the name and address of the
28 dealer, limited Canadian dealer, or issuer on whose behalf
29 the salesperson is registered, and all orders of the
30 Secretary of State denying or abandoning an application, or
31 suspending or revoking registration, or censuring the
32 persons. The Secretary of State may designate by rule,
33 regulation or order the statements, information or reports
34 submitted to or filed with him or her pursuant to this
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1 Section 8 which the Secretary of State determines are of a
2 sensitive nature and therefore should be exempt from public
3 disclosure. Any such statement, information or report shall
4 be deemed confidential and shall not be disclosed to the
5 public except upon the consent of the person filing or
6 submitting the statement, information or report or by order
7 of court or in court proceedings.
8 G. The registration or re-registration of a dealer or
9 limited Canadian dealer and of all salespersons registered
10 upon application of the dealer or limited Canadian dealer
11 shall expire on the next succeeding anniversary date of the
12 registration or re-registration of the dealer; and the
13 registration or re-registration of an investment adviser and
14 of all investment adviser representatives registered upon
15 application of the investment adviser shall expire on the
16 next succeeding anniversary date of the registration of the
17 investment adviser; provided, that the Secretary of State may
18 by rule or regulation prescribe an alternate date which any
19 dealer registered under the Federal 1934 Act or a member of
20 any self-regulatory association approved pursuant thereto, a
21 member of a self-regulatory organization or stock exchange in
22 Canada, or any investment adviser registered under the
23 Federal 1940 Investment Advisers Act may elect as the
24 expiration date of its dealer or limited Canadian dealer and
25 salesperson registrations, or the expiration date of its
26 investment adviser registration, as the case may be. A
27 registration of a salesperson registered upon application of
28 an issuer or controlling person shall expire on the next
29 succeeding anniversary date of the registration, or upon
30 termination or expiration of the registration of the
31 securities, if any, designated in the application for his or
32 her registration or the alternative date as the Secretary may
33 prescribe by rule or regulation. Subject to paragraph (9) of
34 subsection C of this Section 8, a salesperson's registration
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1 also shall terminate upon cessation of his or her employment,
2 or termination of his or her appointment or authorization, in
3 each case by the person who applied for the salesperson's
4 registration, provided that the Secretary of State may by
5 rule or regulation prescribe an alternate date for the
6 expiration of the registration.
7 H. Applications for re-registration of dealers, limited
8 Canadian dealers, salespersons, and investment advisers, and
9 investment adviser representatives shall be filed with the
10 Secretary of State prior to not less than 7 days preceding
11 the expiration of the then current registration and shall
12 contain such information as may be required by the Secretary
13 of State upon initial application with such omission
14 therefrom or addition thereto as the Secretary of State may
15 authorize or prescribe. Each application for re-registration
16 of a dealer, limited Canadian dealer, or investment adviser
17 shall be accompanied by a filing fee, and each application
18 for re-registration as a salesperson shall be accompanied by
19 a filing fee and a Securities Audit and Enforcement Fund fee
20 established pursuant to Section 11a of this Act, and each
21 application for re-registration as an investment adviser
22 representative shall be accompanied by a Securities Audit and
23 Enforcement Fund fee established under Section 11a of this
24 Act, which shall not be returnable in any event.
25 Notwithstanding the foregoing, (1) applications for
26 re-registration of dealers and investment advisers may be
27 filed within the 6 days next preceding the expiration of the
28 then current registration provided that the applicant pays
29 the annual registration fee for the year with respect to
30 which the re-registration is applicable together with an
31 additional amount equal to the annual registration fee; and
32 (2) applications for re-registration of dealers, limited
33 Canadian dealers, and investment advisers may be filed within
34 30 days following the expiration of the registration provided
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1 that the applicant pays the annual registration fee together
2 with an additional amount equal to 2 times the annual
3 registration fee and files any other information or documents
4 that the Secretary of State may prescribe by rule or
5 regulation or order. Any application filed within 30 days
6 following the expiration of the registration shall be
7 automatically effective as of the time of the earlier
8 expiration provided that the proper fee has been paid to the
9 Secretary of State.
10 Each registered dealer, limited Canadian dealer, or
11 investment adviser shall continue to be registered if the
12 registrant changes his, her, or its form of organization
13 provided that the dealer or investment adviser files an
14 amendment to his, her, or its application not later than 30
15 days following the occurrence of the change and pays the
16 Secretary of State a fee in the amount established under
17 Section 11a of this Act.
18 I. (1) Every registered dealer, limited Canadian dealer,
19 and investment adviser shall make and keep for such periods,
20 such accounts, correspondence, memoranda, papers, books and
21 records as the Secretary of State may by rule or regulation
22 prescribe. All records so required shall be preserved for 3
23 years unless the Secretary of State by rule, regulation or
24 order prescribes otherwise for particular types of records.
25 (2) Every registered dealer, limited Canadian dealer,
26 and investment adviser shall file such financial reports as
27 the Secretary of State may by rule or regulation prescribe.
28 (3) All the books and records referred to in paragraph
29 (1) of this subsection I are subject at any time or from time
30 to time to such reasonable periodic, special or other audits,
31 examinations, or inspections by representatives of the
32 Secretary of State, within or without this State, as the
33 Secretary of State deems necessary or appropriate in the
34 public interest or for the protection of investors.
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1 (4) At the time of an audit, examination, or inspection,
2 the Secretary of State, by his or her designees, may conduct
3 an interview of any person employed or appointed by or
4 affiliated with a registered dealer, limited Canadian dealer,
5 or investment advisor, provided that the dealer, limited
6 Canadian dealer, or investment advisor shall be given
7 reasonable notice of the time and place for the interview.
8 At the option of the dealer, limited Canadian dealer, or
9 investment advisor, a representative of the dealer or
10 investment advisor with supervisory responsibility over the
11 individual being interviewed may be present at the interview.
12 J. The Secretary of State may require by rule or
13 regulation the payment of an additional fee for the filing of
14 information or documents required to be filed by this Section
15 which have not been filed in a timely manner. The Secretary
16 of State may also require by rule or regulation the payment
17 of an examination fee for administering any examination which
18 it may conduct pursuant to subsection B, C, or D, or D-5 of
19 this Section 8.
20 K. The Secretary of State may declare any application
21 for registration or limited registration under this Section 8
22 abandoned by order if the applicant fails to pay any fee or
23 file any information or document required under this Section
24 8 or by rule or regulation for more than 30 days after the
25 required payment or filing date. The applicant may petition
26 the Secretary of State for a hearing within 15 days after the
27 applicant's receipt of the order of abandonment, provided
28 that the petition sets forth the grounds upon which the
29 applicant seeks a hearing.
30 L. Any document being filed pursuant to this Section 8
31 shall be deemed filed, and any fee being paid pursuant to
32 this Section 8 shall be deemed paid, upon the date of actual
33 receipt thereof by the Secretary of State or his or her
34 designee.
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1 M. The Secretary of State shall provide to the Illinois
2 Student Assistance Commission annually or at mutually agreed
3 periodic intervals the names and social security numbers of
4 natural persons registered under subsections B, C, D, and D-5
5 E of this Section. The Illinois Student Assistance
6 Commission shall determine if any student loan defaulter is
7 registered as a dealer, limited Canadian dealer, salesperson,
8 or investment adviser under this Act and report its
9 determination to the Secretary of State or his or her
10 designee.
11 (Source: P.A. 88-494; 89-209, eff. 1-1-96; 89-626, eff.
12 8-9-96.)
13 (815 ILCS 5/9) (from Ch. 121 1/2, par. 137.9)
14 Sec. 9. Advertising. The Secretary of State may by rule
15 or regulation require the filing with him or her of any
16 prospectus, pamphlet, circular, form letter, advertisement or
17 other sales literature or advertising communication addressed
18 or intended for distribution or dissemination in this State
19 to prospective investors, including clients or prospective
20 clients of an investment adviser; provided, that no such
21 filing may be required with respect to:
22 (1) securities exempt from registration pursuant to the
23 provisions of Section 3 of this Act or sold solely in
24 transactions of the nature set forth in Section 4 of this
25 Act;
26 (2) securities registered under both the Federal 1933
27 Act and subsection A or B of Section 5, 6 or 7 of this Act;
28 or
29 (2.5) federal covered securities; or
30 (3) advertisements appearing in newspapers, magazines or
31 periodicals of regular publication and established paid
32 circulation, other than an advertisement which constitutes an
33 offer of securities which is not covered by any of the
HB1168 Engrossed -99- LRB9004729SMdv
1 exemptions set forth in Section 4 of this Act, and which
2 securities are not exempt from registration pursuant to the
3 provisions of Section 3 of this Act.
4 (Source: P.A. 89-209, eff. 1-1-96; 89-626, eff. 8-9-96.)
5 (815 ILCS 5/10) (from Ch. 121 1/2, par. 137.10)
6 Sec. 10. Service of process.
7 A. A consent to service of process shall be in the form
8 prescribed by the Secretary of State, shall be irrevocable,
9 and shall provide that actions arising out of or founded upon
10 the offer or sale of any securities in alleged violation of
11 this Act may be commenced against the person executing the
12 consent in any circuit court within this State, by the
13 service of process upon the Secretary of State.
14 Service of any process or pleading in any action against
15 a person who has filed under this Act a consent to service of
16 process upon the Secretary of State shall, if made on the
17 Secretary of State, be by duplicate copies, one of which
18 shall be filed in the office of the Secretary of State and
19 the other immediately forwarded by the Secretary of State by
20 registered mail or certified mail, return receipt requested,
21 to the person at his or her latest address on file in the
22 office of the Secretary of State. The filing fee for service
23 of process under this subsection A shall be as established
24 pursuant to Section 11a of this Act, and shall not be
25 returnable in any event.
26 B. (1) The filing of a notice filing under Section 2a of
27 this Act or of an application for registration under Section
28 5, 6, 7, or 8 of this Act, or the offer, sale or delivery of
29 securities in this State, whether effected by mail or
30 otherwise, by any person (unless the securities are exempt
31 from registration under subsection A or B of Section 3 of
32 this Act) shall be equivalent to and shall constitute an
33 appointment of the Secretary of State, or his or her
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1 successors in office, by the person and the issuer of the
2 securities to be the true and lawful attorney for the person
3 upon whom may be served all lawful process in any action or
4 proceeding against the person, arising out of the offer or
5 sale of the securities.
6 (2) Service of process under this subsection B shall be
7 made by serving a copy upon the Secretary of State or any
8 employee in his or her office designated by the Secretary of
9 State to accept such service for him or her, provided notice
10 of such and a copy of the process are, within 10 days
11 thereafter, sent by registered mail or certified mail, return
12 receipt requested, by the plaintiff to the defendant, at the
13 last known address of the defendant. The filing fee for
14 service of process under this subsection B shall be as
15 established pursuant to Section 11a of this Act, and shall
16 not be returnable in any event. The Secretary of State shall
17 keep a record of all such processes which shall show the day
18 of the service.
19 C. Notwithstanding the foregoing, the filing of an
20 application by an issuer, controlling person, or registered
21 dealer, or limited Canadian dealer for the registration of a
22 salesperson shall also constitute the appointment by the
23 salesperson of the issuer, controlling person, or registered
24 dealer, or limited Canadian dealer to be the true and lawful
25 attorney for the person upon whom may be served all lawful
26 process against the person, arising under subsection J of
27 Section 8 or Section 11 of this Act. Following any service
28 in the foregoing manner, the Secretary of State shall, as
29 soon thereafter as reasonably practical, serve a copy of the
30 lawful process to the person by registered mail or certified
31 mail, return receipt requested, at his, or her, or its last
32 known address.
33 (Source: P.A. 89-209, eff. 1-1-96; 89-626, eff. 8-9-96.)
HB1168 Engrossed -101- LRB9004729SMdv
1 (815 ILCS 5/11) (from Ch. 121 1/2, par. 137.11)
2 Sec. 11. Duties and powers of the Secretary of State.
3 A. (1) The administration of this Act is vested in the
4 Secretary of State, who may from time to time make, amend and
5 rescind such rules and regulations as may be necessary to
6 carry out this Act, including rules and regulations governing
7 procedures of registration, statements, applications and
8 reports for various classes of securities, persons and
9 matters within his or her jurisdiction and defining any
10 terms, whether or not used in this Act, insofar as the
11 definitions are not inconsistent with this Act. The rules
12 and regulations adopted by the Secretary of State under this
13 Act shall be effective in the manner provided for in the
14 Illinois Administrative Procedure Act.
15 (2) Among other things, the Secretary of State shall
16 have authority, for the purposes of this Act, to prescribe
17 the form or forms in which required information shall be set
18 forth, accounting practices, the items or details to be shown
19 in balance sheets and earning statements, and the methods to
20 be followed in the preparation of accounts, in the appraisal
21 or valuation of assets and liabilities, in the determination
22 of depreciation and depletion, in the differentiation of
23 recurring and non-recurring income, in the differentiation of
24 investment and operating income, and in the preparation of
25 consolidated balance sheets or income accounts of any person,
26 directly or indirectly, controlling or controlled by the
27 issuer, or any person under direct or indirect common control
28 with the issuer.
29 (3) No provision of this Act imposing any liability
30 shall apply to any act done or omitted in good faith in
31 conformity with any rule or regulation of the Secretary of
32 State under this Act, notwithstanding that the rule or
33 regulation may, after the act or omission, be amended or
34 rescinded or be determined by judicial or other authority to
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1 be invalid for any reason.
2 (4) The Securities Department of the Office of the
3 Secretary of State shall be deemed a criminal justice agency
4 for purposes of all federal and state laws and regulations
5 and, in that capacity, shall be entitled to access to any
6 information available to criminal justice agencies.
7 (5) The Secretary of State, by rule, may conditionally
8 or unconditionally exempt any person, security, or
9 transaction, or any class or classes of persons, securities,
10 or transactions from any provision of Section 5, 6, 7, 8, 8a,
11 or 9 of this Act or of any rule promulgated under these
12 Sections, to the extent that such exemption is necessary or
13 appropriate in the public interest, and is consistent with
14 the protection of investors.
15 B. The Secretary of State may, anything in this Act to
16 the contrary notwithstanding, require financial statements
17 and reports of the issuer, dealer, salesperson, or investment
18 adviser as often as circumstances may warrant. In addition,
19 the Secretary of State may secure information or books and
20 records from or through others and may make or cause to be
21 made investigations respecting the business, affairs, and
22 property of the issuer of securities, any person involved in
23 the sale or offer for sale, purchase or offer to purchase of
24 any mineral investment contract, mineral deferred delivery
25 contract, or security and of dealers, salespersons, and
26 investment advisers that are registered or are the subject of
27 an application for registration under this Act. The costs of
28 an investigation shall be borne by the registrant or the
29 applicant, provided that the registrant or applicant shall
30 not be obligated to pay the costs without his, her or its
31 consent in advance.
32 C. Whenever it shall appear to the Secretary of State,
33 either upon complaint or otherwise, that this Act, or any
34 rule or regulation prescribed under authority thereof, has
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1 been or is about to be violated, he or she may, in his or her
2 discretion, do one or both of the following:
3 (1) require or permit the person to file with the
4 Secretary of State a statement in writing under oath, or
5 otherwise, as to all the facts and circumstances
6 concerning the subject matter which the Secretary of
7 State believes to be in the public interest to
8 investigate, audit, examine, or inspect; and
9 (2) conduct an investigation, audit, examination,
10 or inspection as necessary or advisable for the
11 protection of the interests of the public.
12 D. (1) For the purpose of all investigations, audits,
13 examinations, or inspections which in the opinion of the
14 Secretary of State are necessary and proper for the
15 enforcement of this Act, the Secretary of State or a person
16 designated by him or her is empowered to administer oaths and
17 affirmations, subpoena witnesses, take evidence, and require
18 the production of any books and records, papers, or other
19 documents which the Secretary of State or a person designated
20 by him or her deems relevant or material to the inquiry.
21 (2) The Secretary of State or a person designated by him
22 or her is further empowered to administer oaths and
23 affirmations, subpoena witnesses, take evidence, and require
24 the production of any books and records, papers, or other
25 documents in this State at the request of a securities agency
26 of another state, if the activities constituting the alleged
27 violation for which the information is sought would be in
28 violation of Section 12 of this Act if the activities had
29 occurred in this State.
30 (3) The Circuit Court of any County of this State, upon
31 application of the Secretary of State or a person designated
32 by him or her may order the attendance of witnesses, the
33 production of books and records, papers, accounts and
34 documents and the giving of testimony before the Secretary of
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1 State or a person designated by him or her; and any failure
2 to obey the order may be punished by the Circuit Court as a
3 contempt thereof.
4 (4) The fees of subpoenaed witnesses under this Act for
5 attendance and travel shall be the same as fees of witnesses
6 before the Circuit Courts of this State, to be paid when the
7 witness is excused from further attendance, provided, the
8 witness is subpoenaed at the instance of the Secretary of
9 State; and payment of the fees shall be made and audited in
10 the same manner as other expenses of the Secretary of State.
11 (5) Whenever a subpoena is issued at the request of a
12 complainant or respondent as the case may be, the Secretary
13 of State may require that the cost of service and the fee of
14 the witness shall be borne by the party at whose instance the
15 witness is summoned.
16 (6) The Secretary of State shall have power at his or
17 her discretion, to require a deposit to cover the cost of the
18 service and witness fees and the payment of the legal witness
19 fee and mileage to the witness served with subpoena.
20 (7) A subpoena issued under this Act shall be served in
21 the same manner as a subpoena issued out of a circuit court.
22 (8) The Secretary of State may in any investigation,
23 audits, examinations, or inspections cause the taking of
24 depositions of persons residing within or without this State
25 in the manner provided in civil actions under the laws of
26 this State.
27 E. Anything in this Act to the contrary notwithstanding:
28 (1) If the Secretary of State shall find that the
29 offer or sale or proposed offer or sale or method of
30 offer or sale of any securities by any person, whether
31 exempt or not, except the offer or sale of securities as
32 defined in subsection A of Section 3, in this State, is
33 fraudulent, or would work or tend to work a fraud or
34 deceit, or is being offered or sold in violation of
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1 Section 12, or there has been a failure or refusal to
2 submit any notification filing or fee required under this
3 Act, the Secretary of State may by written order prohibit
4 or suspend the offer or sale of securities by that person
5 or deny or revoke the registration of the securities or
6 the exemption from registration for the securities.
7 (2) If the Secretary of State shall find that any
8 person has violated subsection C, D, E, F, G, H, I, J, or
9 K of Section 12 of this Act, the Secretary of State may
10 by written order temporarily or permanently prohibit or
11 suspend the person from offering or selling any
12 securities, any mineral investment contract, or any
13 mineral deferred delivery contract in this State,
14 provided that any person who is the subject of an order
15 of permanent prohibition may petition the Secretary of
16 State for a hearing to present evidence of rehabilitation
17 or change in circumstances justifying the amendment or
18 termination of the order of permanent prohibition.
19 (3) If the Secretary of State shall find that any
20 person is engaging or has engaged in the business of
21 selling or offering for sale securities as a dealer or
22 salesperson or is acting or has acted as an investment
23 adviser or federal covered investment adviser, without
24 prior thereto and at the time thereof having complied
25 with the registration or notice filing requirements of
26 this Act, the Secretary of State may by written order
27 prohibit or suspend the person from engaging in the
28 business of selling or offering for sale securities, or
29 acting as an investment adviser or federal covered
30 investment adviser, in this State.
31 (4) In addition to any other sanction or remedy
32 contained in this subsection E, the Secretary of State,
33 after finding that any provision of this Act has been
34 violated, may impose a fine as provided by rule,
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1 regulation or order against the violator not to exceed
2 $10,000 for each violation of this Act, and may issue an
3 order of public censure against the violator.
4 F. (1) The Secretary of State shall not deny, suspend or
5 revoke the registration of securities, suspend or revoke the
6 registration of a dealer, salesperson or investment adviser,
7 prohibit or suspend the offer or sale of any securities,
8 prohibit or suspend any person from offering or selling any
9 securities in this State, prohibit or suspend a dealer or
10 salesperson from engaging in the business of selling or
11 offering for sale securities, prohibit or suspend a person
12 from acting as an investment adviser or federal covered
13 investment adviser, impose any fine for violation of this
14 Act, issue an order of public censure, or enter into an
15 agreed settlement except after an opportunity for hearing
16 upon not less than 10 days notice given by personal service
17 or registered mail or certified mail, return receipt
18 requested, to the person or persons concerned. Such notice
19 shall state the date and time and place of the hearing and
20 shall contain a brief statement of the proposed action of the
21 Secretary of State and the grounds for the proposed action.
22 A failure to appear at the hearing or otherwise respond to
23 the allegations set forth in the notice of hearing shall
24 constitute an admission of any facts alleged therein and
25 shall constitute sufficient basis to enter an order.
26 (2) Anything herein contained to the contrary
27 notwithstanding, the Secretary of State may temporarily
28 prohibit or suspend, for a maximum period of 60 days, by an
29 order effective immediately, the offer or sale or
30 registration of securities, the registration of a dealer,
31 salesperson or investment adviser, or the offer or sale of
32 securities by any person, or the business of rendering
33 investment advice, without the notice and prior hearing in
34 this subsection prescribed, if the Secretary of State shall
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1 in his or her opinion, based on credible evidence, deem it
2 necessary to prevent an imminent violation of this Act or to
3 prevent losses to investors which the Secretary of State
4 reasonably believes will occur as a result of a prior
5 violation of this Act. Immediately after taking action
6 without such notice and hearing, the Secretary of State shall
7 deliver a copy of the temporary order to the respondent named
8 therein by personal service or registered mail or certified
9 mail, return receipt requested. The temporary order shall
10 set forth the grounds for the action and shall advise that
11 the respondent may request a hearing as soon as reasonably
12 practicable, that the request for a hearing will not stop the
13 effectiveness of the temporary order and that respondent's
14 failure to request a hearing within 30 days after the date of
15 the entry of the temporary order shall constitute an
16 admission of any facts alleged therein and shall constitute
17 sufficient basis to make the temporary order final. Any
18 provision of this paragraph (2) to the contrary
19 notwithstanding, the Secretary of State may not pursuant to
20 the provisions of this paragraph (2) suspend the registration
21 of a dealer, limited Canadian dealer, salesperson, or
22 investment adviser, or investment adviser representative
23 based upon sub-paragraph (n) of paragraph (l) of subsection E
24 of Section 8 of this Act or revoke the registration of
25 securities or revoke the registration of any a dealer,
26 salesperson, investment adviser representative, or investment
27 adviser.
28 (3) The Secretary of State may issue a temporary order
29 suspending or delaying the effectiveness of any registration
30 of securities under subsection A or B of Section 5, 6 or 7 of
31 this Act subsequent to and upon the basis of the issuance of
32 any stop, suspension or similar order by the Securities and
33 Exchange Commission with respect to the securities which are
34 the subject of the registration under subsection A or B of
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1 Section 5, 6 or 7 of this Act, and the order shall become
2 effective as of the date and time of effectiveness of the
3 Securities and Exchange Commission order and shall be vacated
4 automatically at such time as the order of the Securities and
5 Exchange Commission is no longer in effect.
6 (4) When the Secretary of State finds that an
7 application for registration as a dealer, salesperson or
8 investment adviser should be denied, the Secretary of State
9 may enter an order denying the registration. Immediately
10 after taking such action, the Secretary of State shall
11 deliver a copy of the order to the respondent named therein
12 by personal service or registered mail or certified mail,
13 return receipt requested. The order shall state the grounds
14 for the action and that the matter will be set for hearing
15 upon written request filed with the Secretary of State within
16 30 days after the receipt of the request by the respondent.
17 The respondent's failure to request a hearing within 30 days
18 after receipt of the order shall constitute an admission of
19 any facts alleged therein and shall make the order final. If
20 a hearing is held, the Secretary of State shall affirm,
21 vacate, or modify the order.
22 (5) The findings and decision of the Secretary of State
23 upon the conclusion of each final hearing held pursuant to
24 this subsection shall be set forth in a written order signed
25 on behalf of the Secretary of State by his or her designee
26 and shall be filed as a public record. All hearings shall be
27 held before a person designated by the Secretary of State,
28 and appropriate records thereof shall be kept.
29 (6) Notwithstanding the foregoing, the Secretary of
30 State, after notice and opportunity for hearing, may at his
31 or her discretion enter into an agreed settlement,
32 stipulation or consent order with a respondent in accordance
33 with the provisions of the Illinois Administrative Procedure
34 Act. The provisions of the agreed settlement, stipulation or
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1 consent order shall have the full force and effect of an
2 order issued by the Secretary of State.
3 (7) Anything in this Act to the contrary
4 notwithstanding, whenever the Secretary of State finds that a
5 person is currently expelled from, refused membership in or
6 association with, or limited in any material capacity by a
7 self-regulatory organization registered under the Federal
8 1934 Act or the Federal 1974 Act because of a fraudulent or
9 deceptive act or a practice in violation of a rule,
10 regulation, or standard duly promulgated by the
11 self-regulatory organization, the Secretary of State may, at
12 his or her discretion, enter a Summary Order of Prohibition,
13 which shall prohibit the offer or sale of any securities,
14 mineral investment contract, or mineral deferred delivery
15 contract by the person in this State. The order shall take
16 effect immediately upon its entry. Immediately after taking
17 the action the Secretary of State shall deliver a copy of the
18 order to the named Respondent by personal service or
19 registered mail or certified mail, return receipt requested.
20 A person who is the subject of an Order of Prohibition may
21 petition the Secretary of State for a hearing to present
22 evidence of rehabilitation or change in circumstances
23 justifying the amendment or termination of the Order of
24 Prohibition.
25 G. No administrative action shall be brought by the
26 Secretary of State for relief under this Act or upon or
27 because of any of the matters for which relief is granted by
28 this Act after the earlier to occur of (i) 3 years from the
29 date upon which the Secretary of State had notice of facts
30 which in the exercise of reasonable diligence would lead to
31 actual knowledge of the alleged violation of the Act, or (ii)
32 5 years from the date on which the alleged violation
33 occurred.
34 H. The action of the Secretary of State in denying,
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1 suspending, or revoking the registration of a dealer, limited
2 Canadian dealer, salesperson, or investment adviser, or
3 investment adviser representative, in prohibiting any person
4 from engaging in the business of offering or selling
5 securities as a dealer, limited Canadian dealer, or
6 salesperson, in prohibiting or suspending the offer or sale
7 of securities by any person, in prohibiting a person from
8 acting as an investment adviser, federal covered investment
9 adviser, or investment adviser representative, in denying,
10 suspending, or revoking the registration of securities, in
11 prohibiting or suspending the offer or sale or proposed offer
12 or sale of securities, in imposing any fine for violation of
13 this Act, or in issuing any order shall be subject to
14 judicial review in the Circuit Court of any county in this
15 State. The Administrative Review Law shall apply to and
16 govern every action for the judicial review of final actions
17 or decisions of the Secretary of State under this Act.
18 I. Notwithstanding any other provisions of this Act to
19 the contrary, whenever it shall appear to the Secretary of
20 State that any person is engaged or about to engage in any
21 acts or practices which constitute or will constitute a
22 violation of this Act or of any rule or regulation prescribed
23 under authority of this Act, the Secretary of State may at
24 his or her discretion, through the Attorney General:
25 (1) file a complaint and apply for a temporary
26 restraining order without notice, and upon a proper
27 showing the court may enter a temporary restraining order
28 without bond, to enforce this Act; and
29 (2) file a complaint and apply for a preliminary or
30 permanent injunction, and, after notice and a hearing and
31 upon a proper showing, the court may grant a preliminary
32 or permanent injunction and may order the defendant to
33 make an offer of rescission with respect to any sales or
34 purchases of securities, mineral investment contracts, or
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1 mineral deferred delivery contracts determined by the
2 court to be unlawful under this Act.
3 The court shall further have jurisdiction and authority,
4 in addition to the penalties and other remedies in this Act
5 provided, to enter an order for the appointment of the court
6 or a person as a receiver, conservator, ancillary receiver or
7 ancillary conservator for the defendant or the defendant's
8 assets located in this State, or to require restitution,
9 damages or disgorgement of profits on behalf of the person or
10 persons injured by the act or practice constituting the
11 subject matter of the action, and may assess costs against
12 the defendant for the use of the State; provided, however,
13 that the civil remedies of rescission and appointment of a
14 receiver, conservator, ancillary receiver or ancillary
15 conservator shall not be available against any person by
16 reason of the failure to file with the Secretary of State, or
17 on account of the contents of, any report of sale provided
18 for in subsection G or P of Section 4, paragraph (2) of
19 subsection D of Sections 5 and 6, or paragraph (2) of
20 subsection F of Section 7 of this Act. Appeals may be taken
21 as in other civil cases.
22 J. In no case shall the Secretary of State, or any of
23 his or her employees or agents, in the administration of this
24 Act, incur any official or personal liability by instituting
25 an injunction or other proceeding or by denying, suspending
26 or revoking the registration of a dealer or salesperson, or
27 by denying, suspending or revoking the registration of
28 securities or prohibiting the offer or sale of securities, or
29 by suspending or prohibiting any person from acting as a
30 dealer, limited Canadian dealer, salesperson, or investment
31 adviser, or investment adviser representative or from
32 offering or selling securities.
33 K. No provision of this Act shall be construed to
34 require or to authorize the Secretary of State to require any
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1 investment adviser or federal covered investment adviser
2 engaged in rendering investment supervisory services to
3 disclose the identity, investments, or affairs of any client
4 of the investment adviser or federal covered investment
5 adviser, except insofar as the disclosure may be necessary or
6 appropriate in a particular proceeding or investigation
7 having as its object the enforcement of this Act.
8 L. Whenever, after an examination, investigation or
9 hearing, the Secretary of State deems it of public interest
10 or advantage, he or she may certify a record to the State's
11 Attorney of the county in which the act complained of,
12 examined or investigated occurred. The State's Attorney of
13 that county within 90 days after receipt of the record shall
14 file a written statement at the Office of the Secretary of
15 State, which statement shall set forth the action taken upon
16 the record, or if no action has been taken upon the record
17 that fact, together with the reasons therefor, shall be
18 stated.
19 M. The Secretary of State may initiate, take, pursue, or
20 prosecute any action authorized or permitted under Section 6d
21 of the Federal 1974 1936 Act.
22 N. (1) Notwithstanding any provision of this Act to the
23 contrary, to encourage uniform interpretation,
24 administration, and enforcement of the provisions of this
25 Act, the Secretary of State may cooperate with the securities
26 agencies or administrators of one or more states, Canadian
27 provinces or territories, or another country, the Securities
28 and Exchange Commission, the Commodity Futures Trading
29 Commission, the Securities Investor Protection Corporation,
30 any self-regulatory organization, and any governmental law
31 enforcement or regulatory agency.
32 (2) The cooperation authorized by paragraph (1) of this
33 subsection includes, but is not limited to, the following:
34 (a) establishing or participating in a central
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1 depository or depositories for registration under this
2 Act and for documents or records required under this Act;
3 (b) making a joint audit, inspection, examination,
4 or investigation;
5 (c) holding a joint administrative hearing;
6 (d) filing and prosecuting a joint civil or
7 criminal proceeding;
8 (e) sharing and exchanging personnel;
9 (f) sharing and exchanging information and
10 documents; or
11 (g) issuing any joint statement or policy.
12 (Source: P.A. 88-279; 89-209, eff. 1-1-96; 89-626, eff.
13 8-9-96.)
14 (815 ILCS 5/11a) (from Ch. 121 1/2, par. 137.11a)
15 Sec. 11a. Fees.
16 (1) The Secretary of State shall by rule or regulation
17 impose and shall collect reasonable fees necessary for the
18 administration of this Act including, but not limited to,
19 fees for the following purposes:
20 (a) Filing an application pursuant to paragraph (2)
21 of subsection F of Section 4 of this Act;
22 (b) Examining an application and report pursuant to
23 paragraph (2) of subsection F of Section 4 of this Act;
24 (c) Filing a report pursuant to subsection G of
25 Section 4 of this Act, determined in accordance with
26 paragraph (4) of subsection G of Section 4 of this Act;
27 (d) Examining an offering sheet pursuant to
28 subsection P of Section 4 of this Act;
29 (e) Filing a report pursuant to subsection P of
30 Section 4, determined in accordance with subsection P of
31 Section 4 of this Act;
32 (f) Examining an application to register securities
33 under subsection B of Section 5 of this Act;
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1 (g) Examining an amended or supplemental prospectus
2 filed pursuant to the undertaking required by
3 sub-paragraph (i) of paragraph (2) of subsection B of
4 Section 5 of this Act;
5 (h) Registering or renewing registration of
6 securities under Section 5, determined in accordance with
7 subsection C of Section 5 of this Act;
8 (i) Registering securities in excess of the amount
9 initially registered, determined in accordance with
10 paragraph (2) of subsection C of Section 5 of this Act;
11 (j) Failure to file timely an application for
12 renewal under subsection E of Section 5 of this Act;
13 (k) Failure to file timely any document or
14 information required under Section 5 of this Act;
15 (l) Examining an application to register face
16 amount certificate contracts under subsection B of
17 Section 6 of this Act;
18 (m) Examining an amended or supplemental prospectus
19 filed pursuant to the undertaking required by
20 sub-paragraph (f) of paragraph (2) of subsection B of
21 Section 6 of this Act;
22 (n) Registering or renewing registration of face
23 amount certificate contracts under Section 6 of this Act;
24 (o) Amending a registration of face amount
25 certificate contracts pursuant to subsection E of Section
26 6 of this Act to add any additional series, type or class
27 of contract;
28 (p) Failure to file timely an application for
29 renewal under subsection F of Section 6 of this Act;
30 (q) Adding to or withdrawing from deposits with
31 respect to face amount certificate contracts pursuant to
32 subsection H of Section 6, a transaction charge payable
33 at the times and in the manner specified in subsection H
34 of Section 6 (which transaction charge shall be in
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1 addition to the annual fee called for by subsection H of
2 Section 6 of this Act);
3 (r) Failure to file timely any document or
4 information required under Section 6 of this Act;
5 (s) Examining an application to register investment
6 fund shares under subsection B of Section 7 of this Act;
7 (t) Examining an amended or supplemental prospectus
8 filed pursuant to the undertaking required by
9 sub-paragraph (f) of paragraph (2) of subsection B of
10 Section 7 of this Act;
11 (u) Registering or renewing registration of
12 investment fund shares under Section 7 of this Act;
13 (v) Amending a registration of investment fund
14 shares pursuant to subsection D of Section 7 of this Act
15 to register an additional class or classes of investment
16 fund shares;
17 (w) Failure to file timely an application for
18 renewal under paragraph (l) of subsection G of Section 7
19 of this Act;
20 (x) Examining an application for renewal of
21 registration of investment fund shares under paragraph
22 (2) of subsection G of Section 7 of this Act;
23 (y) Failure to file timely any document or
24 information required under Section 7 of this Act;
25 (z) Filing an application for registration or
26 re-registration of a dealer or limited Canadian dealer
27 under Section 8 of this Act for each office in this
28 State;
29 (aa) In connection with an application for the
30 registration or re-registration of a salesperson under
31 Section 8 or this Act, for the following purposes:
32 (i) filing an application; and
33 (ii) a Securities Audit and Enforcement Fund
34 fee; and
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1 (iii) a notification filing of federal covered
2 investment advisers.
3 (bb) In connection with an application for the
4 registration or re-registration of an investment adviser
5 under Section 8 of this Act;, for the following purposes:
6 (i) filing an application;
7 (ii) for reporting investment adviser
8 representatives; and
9 (iii) a fee for each office in this State;
10 (cc) Failure to file timely any document or
11 information required under Section 8 of this Act;
12 (dd) Filing a consent to service of process under
13 Section 10 of this Act;
14 (ee) Issuing a certificate pursuant to subsection B
15 of Section 15 of this Act;
16 (ff) Issuing a certified copy pursuant to
17 subsection C of Section 15 of this Act;
18 (gg) Issuing a non-binding statement pursuant to
19 Section 15a of this Act.
20 (hh) Filings by Notification under Section 2a;
21 (ii) Notification filing of federal Regulation D,
22 Section 506 offering under the Federal 1933 Act;
23 (jj) Notification filing of securities and
24 closed-end investment company securities;
25 (kk) Notification filing of face amount certificate
26 contracts;
27 (ll) Notification filing of open-end investment
28 company securities;
29 (mm) Filing a report pursuant to subsection D of
30 Section 4 of this Act;
31 (nn) In connection with the filing of an
32 application for registration or re-registration of an
33 investment adviser representative under subsection D of
34 Section 8 of this Act;
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1 (2) The Secretary of State may, by rule or regulation,
2 raise or lower any fee imposed by, and which he or she is
3 authorized by law to collect under, this Act.
4 (Source: P.A. 87-463.)
5 (815 ILCS 5/12) (from Ch. 121 1/2, par. 137.12)
6 Sec. 12. Violation. It shall be a violation of the
7 provisions of this Act for any person:
8 A. To offer or sell any security except in accordance
9 with the provisions of this Act.
10 B. To deliver to a purchaser any security required to be
11 registered under Section 5, Section 6 or Section 7 hereof
12 unless accompanied or preceded by a prospectus that meets the
13 requirements of the pertinent subsection of Section 5 or of
14 Section 6 or of Section 7.
15 C. To act as a dealer, salesperson or investment adviser
16 unless registered as such, where such registration is
17 required, under the provisions of this Act.
18 D. To fail to file with the Secretary of State any
19 application, report or document required to be filed under
20 the provisions of this Act or any rule or regulation made by
21 the Secretary of State pursuant to this Act or to fail to
22 comply with the terms of any order of the Secretary of State
23 issued pursuant to Section 11 hereof.
24 E. To make, or cause to be made, (1) in any application,
25 report or document filed under this Act or any rule or
26 regulation made by the Secretary of State pursuant to this
27 Act, any statement which was false or misleading with respect
28 to any material fact or (2) any statement to the effect that
29 a security (other than a security issued by the State of
30 Illinois) has been in any way endorsed or approved by the
31 Secretary of State or the State of Illinois.
32 F. To engage in any transaction, practice or course of
33 business in connection with the sale or purchase of
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1 securities which works or tends to work a fraud or deceit
2 upon the purchaser or seller thereof.
3 G. To obtain money or property through the sale of
4 securities by means of any untrue statement of a material
5 fact or any omission to state a material fact necessary in
6 order to make the statements made, in the light of the
7 circumstances under which they were made, not misleading.
8 H. To sign or circulate any statement, prospectus, or
9 other paper or document required by any provision of this Act
10 knowing or having reasonable grounds to know any material
11 representation therein contained to be false or untrue.
12 I. To employ any device, scheme or artifice to defraud
13 in connection with the sale or purchase of any security,
14 directly or indirectly.
15 J. When acting as an investment adviser, investment
16 adviser representative, or federal covered investment
17 adviser, by any means or instrumentality, directly or
18 indirectly:
19 (1) To employ any device, scheme or artifice to
20 defraud any client or prospective client;
21 (2) To engage in any transaction, practice, or
22 course of business which operates as a fraud or deceit
23 upon any client or prospective client; or
24 (3) To engage in any act, practice, or course of
25 business which is fraudulent, deceptive or manipulative.
26 The Secretary of State shall for the purposes of this
27 paragraph (3), by rules and regulations, define and
28 prescribe means reasonably designed to prevent such acts,
29 practices, and courses of business as are fraudulent,
30 deceptive, or manipulative.
31 K. When offering or selling any mineral investment
32 contract or mineral deferred delivery contract:
33 (1) To employ any device, scheme, or artifice to
34 defraud any customer, prospective customer, or offeree;
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1 (2) To engage in any transaction, practice, or
2 course of business that operates as a fraud or deceit
3 upon any customer, prospective customer, or offeree; or
4 (3) To engage in any act, practice, or course of
5 business that is fraudulent, deceptive, or manipulative.
6 The Secretary of State shall for the purposes of this
7 paragraph (3), by rules and regulations, define and
8 prescribe means reasonably designed to prevent acts,
9 practices, and courses of business as are fraudulent,
10 deceptive, or manipulative.
11 (Source: P.A. 87-463.)
12 (815 ILCS 5/13) (from Ch. 121 1/2, par. 137.13)
13 Sec. 13. Private and other civil remedies; securities.
14 A. Every sale of a security made in violation of the
15 provisions of this Act shall be voidable at the election of
16 the purchaser exercised as provided in subsection B of this
17 Section; and the issuer, controlling person, underwriter,
18 dealer or other person by or on behalf of whom said sale was
19 made, and each underwriter, dealer or salesperson who shall
20 have participated or aided in any way in making the sale, and
21 in case the issuer, controlling person, underwriter or dealer
22 is a corporation or unincorporated association or
23 organization, each of its officers and directors (or persons
24 performing similar functions) who shall have participated or
25 aided in making the sale, shall be jointly and severally
26 liable to the purchaser as follows:
27 (1) for the full amount paid, together with
28 interest from the date of payment for the securities sold
29 at the rate of the interest or dividend stipulated in the
30 securities sold (or if no rate is stipulated, then at the
31 rate of 10% per annum) less any income or other amounts
32 received by the purchaser on the securities, upon offer
33 to tender to the seller or tender into court of the
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1 securities sold or, where the securities were not
2 received, of any contract made in respect of the sale; or
3 (2) if the purchaser no longer owns the securities,
4 for the amounts set forth in clause (1) of this
5 subsection A less any amounts received by the purchaser
6 for or on account of the disposition of the securities.
7 If the purchaser shall prevail in any action brought to
8 enforce any of the remedies provided in this subsection, the
9 court shall assess costs together with the reasonable fees
10 and expenses of the purchaser's attorney against the
11 defendant. Any provision of this subsection A to the contrary
12 notwithstanding, the civil remedies provided in this
13 subsection A shall not be available against any person by
14 reason of the failure to file with the Secretary of State, or
15 on account of the content of, any report of sale provided for
16 in subsection G or P of Section 4, paragraph (2) of
17 subsection D of Sections 5 and 6, or paragraph (2) of
18 subsection F of Section 7 of this Act.
19 B. Notice of any election provided for in subsection A
20 of this Section shall be given by the purchaser within 6
21 months after the purchaser shall have knowledge that the sale
22 of the securities to him or her is voidable, to each person
23 from whom recovery will be sought, by registered mail or
24 certified mail, return receipt requested, addressed to the
25 person to be notified at his or her last known address with
26 proper postage affixed, or by personal service.
27 C. No purchaser shall have any right or remedy under
28 this Section who shall fail, within 15 days from the date of
29 receipt thereof, to accept an offer to repurchase the
30 securities purchased by him or her for a price equal to the
31 full amount paid therefor plus interest thereon and less any
32 income thereon as set forth in subsection A of this Section.
33 Every offer of repurchase provided for in this subsection
34 shall be in writing, shall be delivered to the purchaser or
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1 sent by registered mail or certified mail, return receipt
2 requested, addressed to the purchaser at his or her last
3 known address, and shall offer to repurchase the securities
4 sold for a price equal to the full amount paid therefor plus
5 interest thereon and less any income thereon as set forth in
6 subsection A of this Section. Such offer shall continue in
7 force for 15 days from the date on which it was received by
8 the purchaser, shall advise the purchaser of his or her
9 rights and the period of time limited for acceptance thereof,
10 and shall contain such further information, if any, as the
11 Secretary of State may prescribe. Any agreement not to
12 accept or refusing or waiving any such offer made during or
13 prior to said 15 days shall be void.
14 D. No action shall be brought for relief under this
15 Section or upon or because of any of the matters for which
16 relief is granted by this Section after 3 years from the date
17 of sale; provided, that if the party bringing the action
18 neither knew nor in the exercise of reasonable diligence
19 should have known of any alleged violation of subsection E,
20 F, G, H, I or J of Section 12 of this Act which is the basis
21 for the action, the 3 year period provided herein shall begin
22 to run upon the earlier of:
23 (1) the date upon which the party bringing the
24 action has actual knowledge of the alleged violation of
25 this Act; or
26 (2) the date upon which the party bringing the
27 action has notice of facts which in the exercise of
28 reasonable diligence would lead to actual knowledge of
29 the alleged violation of this Act; but in no event shall
30 the period of limitation so extended be more than 2
31 years beyond the expiration of the 3 year period
32 otherwise applicable.
33 E. The term purchaser as used in this Section shall
34 include the personal representative or representatives of the
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1 purchaser.
2 F. Anything in this Act to the contrary notwithstanding
3 and in addition to all other remedies, the Secretary of State
4 through the Office of the Attorney General may bring an
5 action in any circuit court of the State of Illinois in the
6 name and on behalf of the State of Illinois against any
7 person or persons participating in or about to participate in
8 a violation of this Act to enjoin those persons who are
9 continuing or doing any act in violation of this Act or to
10 enforce compliance with this Act. Upon a proper showing the
11 court may grant a permanent or preliminary injunction or
12 temporary restraining order without bond, and may order the
13 defendant to make an offer of rescission of any sales or
14 purchases of securities determined by the court to be
15 unlawful under this Act. The court shall further have
16 jurisdiction and authority, in addition to the other
17 penalties and remedies in this Act provided, to act or
18 appoint another person as a receiver, conservator, ancillary
19 receiver or ancillary conservator for the defendant or the
20 defendant's assets located in this State and may assess costs
21 against the defendant for the use of the State.
22 G. (1) Whenever any person has engaged or is about to
23 engage in any act or practice constituting a violation of
24 this Act, any party in interest may bring an action in the
25 circuit court of the county in which the party in interest
26 resides, or where the person has his, her or its principal
27 office or registered office or where any part of the
28 transaction has or will take place, to enjoin that person
29 from continuing or doing any act in violation of or to
30 enforce compliance with this Act. Upon a proper showing, the
31 court shall grant a permanent or preliminary injunction or
32 temporary restraining order or rescission of any sales or
33 purchases of securities determined to be unlawful under this
34 Act, and may assess costs of the proceedings against the
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1 defendant.
2 (2) A copy of the complaint shall be served upon the
3 Secretary of State within one business day of filing in the
4 form and manner prescribed by the Secretary of State by rule
5 or regulation; provided, that the failure to comply with this
6 provision shall not invalidate the action which is the
7 subject of the complaint.
8 H. Any provision of this Section 13 to the contrary
9 notwithstanding, neither the civil remedies provided in
10 subsection A of this Section 13 nor the remedies of
11 rescission and appointment of a receiver, conservator,
12 ancillary receiver or ancillary conservator provided in
13 subsection I of Section 11 of this Act and in subsections F
14 and G of this Section 13 of this Act nor the remedies of
15 restitution, damages or disgorgement of profits provided in
16 subsection I of Section 11 of this Act shall be available
17 against any person by reason of the failure to file with the
18 Secretary of State, or on account of the contents of, any
19 notice filing under Section 2a of this Act or subsection C-5
20 of Section 8 of this Act or any report of sale provided for
21 in subsection G or P of Section 4, paragraph (2) of
22 subsection D of Sections 5 and 6, or paragraph (2) of
23 subsection F of Section 7 of this Act.
24 (Source: P.A. 89-209, eff. 1-1-96; 89-626, eff. 8-9-96.)
25 Section 10. The Illinois Loan Brokers Act of 1995 is
26 amended by changing Sections 15-15, 15-30, 15-35, 15-40,
27 15-45, 15-55, 15-60, and 15-80, and by adding Sections
28 15-5.03, 15-30.5, and 15-100 as follows:
29 (815 ILCS 175/15-5.03 new)
30 Sec. 15-5.03. Borrower. "Borrower" means any person who
31 has signed an agreement with a loan broker that provides for
32 the services described in Section 15-5.15, for compensation.
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1 (815 ILCS 175/15-15)
2 Sec. 15-15. Application for registration, contents,
3 bond, issuance, effective date, and consent to Secretary of
4 State as process agent.
5 (a) In order to be registered under this Act a loan
6 broker shall file an application for registration with the
7 Secretary of State. The application for registration shall
8 contain:
9 (1) The disclosure document required under
10 subsection (b) of Section 15-30 of this Act and the form
11 of disclosure statement proposed to be used under item
12 (1) of subsection (b) of Section 15-30 of this Act.
13 (2) Consent to service of process under subsection
14 (e) of this Section;
15 (3) Evidence of the bond required in subsection (b)
16 of this Section;
17 (4) A fee in the amount as specified in subsection
18 (a) of Section 15-25 of this Act, and shall not be
19 returnable in any event.
20 (b) A loan broker who engages in any loan brokerage
21 transactions where the loan is subject to the
22 Truth-in-Lending Act must maintain a bond satisfactory to the
23 Secretary of State in the amount of $25,000, which shall be
24 in favor of the State.
25 (c) Whenever the provisions of this Law have been
26 complied with, the Secretary of State shall issue a
27 certificate of registration to the applicant, authorizing the
28 applicant to engage in the business of loan brokering.
29 (d) An application for registration becomes effective 30
30 days after it is filed, unless a certificate an order of the
31 Secretary of State establishes an earlier effective date.
32 Every registration is effective until January 1 of the year
33 after it goes into effect.
34 (e) Every applicant for registration shall file with the
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1 Secretary of State, in such form as the Secretary of State
2 may prescribe by rule or regulation, an irrevocable consent
3 appointing the Secretary of State to be the applicant's agent
4 to receive service of any lawful process in any noncriminal
5 suit, action or proceeding against the applicant arising from
6 the violation of any provision of this Act.
7 (f) An application shall be considered filed when all
8 required documentation and fees are received by the Office of
9 the Secretary of State.
10 (Source: P.A. 89-209, eff. 1-1-96.)
11 (815 ILCS 175/15-30)
12 Sec. 15-30. Disclosure document to be provided by loan
13 broker.
14 (a) At least 7 days before the time any person signs a
15 contract for the services of a loan broker, or at the time 7
16 days before the loan broker receives any consideration upon
17 the contract, whichever occurs first, the loan broker must
18 provide to the contracting person a written disclosure
19 document that meets the requirements set forth in subsection
20 (b) of this Section.
21 (b) A written disclosure statement shall contain the
22 following information:
23 (1) A disclosure statement which shall be the cover
24 sheet and shall be entitled in at least 10-point boldface
25 capital letters "DISCLOSURES REQUIRED BY LAW". Under
26 this title shall appear the statement in at least
27 10-point type that "THE SECRETARY OF STATE HAS NOT
28 REVIEWED AND DOES NOT APPROVE, RECOMMEND, ENDORSE OR
29 SPONSOR ANY LOAN BROKERAGE CONTRACT. THE INFORMATION
30 CONTAINED IN THIS DISCLOSURE HAS NOT BEEN VERIFIED BY THE
31 SECRETARY OF STATE. IF YOU HAVE ANY QUESTIONS SEE AN
32 ATTORNEY BEFORE YOU SIGN A CONTRACT OR AGREEMENT."
33 Nothing except the title and the required statement shall
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1 appear on the cover sheet.
2 (2) The name and form of organization of the
3 broker, the names under which the broker has done, is
4 doing, or intends to do business, and the name of any
5 parent organization or affiliate of the broker.
6 (3) The names, addresses and titles of the broker's
7 officers, directors, trustees, general partners, general
8 managers, principal executives and any other person
9 performing similar duties.
10 (4) The length of time the broker has conducted
11 business as a loan broker.
12 (5) A full and detailed description of the actual
13 services that the loan broker undertakes to perform for
14 the prospective borrower.
15 (6) A specific statement of the circumstances under
16 which the broker will be entitled to obtain or retain
17 consideration from the party with whom the broker
18 contracts.
19 (7) Any other information the Secretary of State
20 may require by rule or regulation.
21 (b-5) The information in subdivisions b(5) and b(6) of
22 this Section need not be set out on the disclosure document
23 if the loan broker's contract is provided with the disclosure
24 document.
25 (c) A loan broker shall amend the disclosure document
26 required by subsection (b) of this Section whenever necessary
27 to prevent it from containing any false or misleading
28 statement of a material fact and shall deliver a copy of the
29 amended disclosure document to the Secretary of State on or
30 before the date of the amendment.
31 (d) A loan broker shall deliver to any person who
32 proposes to become obligated for a loan an estimated
33 disclosure document if the creditor is would be required to
34 deliver to the person a disclosure document under the
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1 Truth-in-Lending Law, 15 U.S.C. 1601-1667e, for the
2 transaction. The estimated disclosure document shall:
3 (1) Be delivered to the person before the person
4 becomes contractually obligated on the loan; or
5 (2) Be delivered or placed in the mail to the
6 person not later than 3 business days after the person
7 enters into an agreement with the loan broker whichever
8 occurs first. The estimated disclosure document must
9 contain all the information and be in the form required
10 by the Truth-in-Lending Law, 15 U.S.C. 1601-1667e, and
11 regulations under that Law. However, the annual
12 percentage rate, finance charge, total of payments and
13 other matters required under the Truth-in-Lending Law, 15
14 U.S.C. 1601-1667e, shall be adjusted to reflect the
15 amount of all fees and charges of the loan broker that
16 the creditor could exclude from an estimated disclosure
17 document. The estimated disclosure document must state
18 at the top in at least 10 point type: "THE FOLLOWING IS
19 AN ESTIMATED DISCLOSURE DOCUMENT SHOWING YOUR LOAN
20 TRANSACTION AS IF THE FEES AND CHARGES YOU ARE SCHEDULED
21 TO PAY US WERE CHARGED TO YOU DIRECTLY BY THE CREDITOR."
22 After the estimated disclosure document is delivered to
23 any person, the loan broker shall deliver to the person
24 an additional statement redisclosing all items if the
25 actual annual percentage rate will vary from the annual
26 percentage rate contained in the original estimated
27 disclosure document by more than 0.125%. Any required
28 additional disclosure document shall be delivered or
29 placed in the mail before consummation of the loan or no
30 later than 3 days from when the information that requires
31 redisclosure becomes available, whichever occurs first.
32 (e) If none of the exemptions in Section 10-30.5 apply,
33 then for a period of 7 days after the time the borrower signs
34 a contract for the services, the borrower shall have the
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1 right to rescind the contract for services with the loan
2 broker and receive all fees actually paid thereon; provided,
3 however, that the client who has rescinded the contract may
4 not use or disclose any confidential or non-public
5 information provided to the client by the loan broker.
6 (Source: P.A. 89-209, eff. 1-1-96.)
7 (815 ILCS 175/15-30.5 new)
8 Sec. 15-30.5. Exemption from disclosure requirement.
9 The disclosure requirement of Section 15-30 shall not apply
10 where the borrower to be represented by the loan broker:
11 (a) Is a natural person who has, or is reasonably
12 believed by the loan broker relying upon this Section to
13 have, a net worth or joint net worth with that person's
14 spouse in excess of $1,000,000 at the time of the execution
15 of the loan broker agreement;
16 (b) Is a natural person who has, or is reasonably
17 believed by the loan broker relying upon this Section to
18 have, an income or joint income with that person's spouse in
19 excess of $200,000 in the most recent applicable fiscal year;
20 (c) Is a person who is not a natural person who has, or
21 is reasonably believed by the loan broker relying upon this
22 Section to have, total assets having a value of $1,000,000
23 and has been in existence for at least nine months and was
24 not formed for the purposes of the transaction;
25 (d) Is a person who is not a natural person who has, or
26 is reasonably believed by the loan broker relying upon this
27 Section to have, gross revenue in excess of $200,000 in the
28 most recent applicable fiscal year and has been in existence
29 for at least nine months and was not formed for the purposes
30 of this transaction;
31 (e) Is a person who is not a natural person in which at
32 least 90% of the equity interest is owned, or is reasonably
33 believed by the loan broker relying upon this Section to be
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1 owned, by persons who meet any of the tests set forth in this
2 subsection; or
3 (f) Has had an attorney review the loan broker's
4 contract.
5 A loan broker may rely upon a statement signed by the
6 borrower that such borrower is any of the categories
7 enumerated above.
8 (815 ILCS 175/15-35)
9 Sec. 15-35. Contracts required to be in writing;
10 retention of copy by borrowing party. To be enforceable,
11 every contract for the services of a loan broker shall be in
12 writing and signed by all contracting parties. The borrowing
13 party and loan broker shall retain a copy of the signed
14 contract at the time it is signed. The loan broker shall
15 retain a copy of the contract for a period of 6 years.
16 (Source: P.A. 89-209, eff. 1-1-96.)
17 (815 ILCS 175/15-40)
18 Sec. 15-40. Denial, suspension or revocation of
19 registration; orders and hearing.
20 (a) The Secretary of State may deny, suspend or revoke
21 the registration of a loan broker if the loan broker:
22 (1) Fails to maintain the bond required under
23 subsection (b) of Section 15-15 of this Act.
24 (2) Is insolvent.
25 (3) Has violated any provision of this Act.
26 (4) Has filed with the Secretary of State any
27 document or statement containing any false representation
28 of a material fact or omitting to state a material fact.
29 (5) Has been convicted, within 10 years before the
30 date of the application, renewal or review, of any crime
31 involving fraud or deceit.
32 (b) The Secretary of State may not enter a final order
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1 denying, suspending or revoking the registration of a loan
2 broker without prior notice to all interested parties,
3 opportunity for a hearing and written findings of fact and
4 conclusions of law. The Secretary of State may by summary
5 order deny, suspend or revoke a registration pending final
6 determination of any proceeding under this Section. Upon the
7 entry of a summary order, the Secretary of State shall
8 promptly notify all interested parties that it has been
9 entered, of the reasons for the summary order and, that upon
10 receipt by the Secretary of State of a written request from a
11 party, the matter will be set for hearing which shall be
12 conducted in accordance with the provisions of the Illinois
13 Administrative Procedure Act. If no hearing is requested
14 within 30 days of the entry of the order and none is ordered
15 by the Secretary of State, the order remains in effect until
16 it is modified vacated, or superseded by a final order. A
17 final order may be entered by the Secretary of State against
18 any party who fails to request a hearing within 30 days of
19 the entry of the summary order or vacated by the Secretary of
20 State. If a hearing is requested or ordered, the Secretary
21 of State, after notice of the hearing has been given to all
22 interested persons and the hearing has been held, may modify
23 or vacate the order, or extend it until final determination,
24 or issue a final order.
25 (Source: P.A. 89-209, eff. 1-1-96.)
26 (815 ILCS 175/15-45)
27 Sec. 15-45. Powers of Secretary of State; privilege
28 against self-incrimination; admissibility into evidence.
29 (a) The Secretary of State may do the following:
30 (1) Adopt rules and regulations to implement this
31 Act.
32 (2) Make investigations and examinations:
33 (A) In connection with any application for
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1 registration of any loan broker or any registration
2 already granted; or
3 (B) Whenever it appears to the Secretary of
4 State, upon the basis of a complaint or information,
5 that reasonable grounds exist for the belief that an
6 investigation or examination is necessary or
7 advisable for the more complete protection of the
8 interests of the public.
9 (3) Charge as costs of investigation or examination
10 all reasonable expenses, including a per diem prorated
11 upon the salary of any employee and actual traveling and
12 hotel expenses. All reasonable expenses are to be paid
13 by the party or parties under investigation or
14 examination.
15 (4) Issue notices and orders, including cease and
16 desist notices and orders, after making an investigation
17 or examination under item (2) of subsection (a) of this
18 Section. The Secretary of State may also bring an action
19 to prohibit a person from violating this Act. The
20 Secretary of State shall notify the person that an order
21 or notice has been issued, the reasons for it and that a
22 hearing will be set in accordance with the provisions of
23 the Illinois Administrative Procedure Act after the
24 Secretary of State receives a written request from the
25 person requesting a hearing.
26 (5) Sign all orders, official certifications,
27 documents or papers issued under this Law or delegate the
28 authority to sign any of those items to his or her
29 designee.
30 (6) Hold and conduct hearings.
31 (7) Hear evidence.
32 (8) Conduct inquiries with or without hearings.
33 Inquiries shall include oral and written requests for
34 information. A failure to respond to a written request
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1 for information may be deemed a violation of this Act
2 and the Secretary of State may issue notices and orders,
3 including cease and desist notices and orders, against
4 the violators.
5 (9) Receive reports of investigators or other
6 officers or employees of the State of Illinois or any
7 municipal corporation or governmental subdivision within
8 the State.
9 (10) Administer oaths or cause them to be
10 administered.
11 (11) Subpoena witnesses and compel them to attend
12 and testify.
13 (12) Compel the production of books, records and
14 other documents.
15 (13) Order depositions to be taken of any witness
16 residing within or without the State. The depositions
17 shall be taken in the manner prescribed by law for
18 depositions in civil actions and made returnable to the
19 Secretary of State.
20 (b) If any person refuses to obey a subpoena issued
21 under this Act, the Secretary of State may make application
22 to any court of competent jurisdiction to order the person to
23 appear before the Secretary of State and produce documentary
24 evidence or give evidence as directed in the subpoena. The
25 failure to obey the order of the court shall be subject to
26 punishment by the court as contempt of court.
27 (c) No person shall be excused from complying with a
28 subpoena on the ground that the testimony or evidence
29 required may tend to incriminate the person or subject the
30 person to a penalty or forfeiture. No individual may be
31 prosecuted or subject to any penalty or forfeiture for or on
32 account of any transaction, matter or thing which the
33 individual is compelled to testify or produce evidence, after
34 claiming the privilege against self-incrimination. However,
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1 the individual so testifying shall not be exempt from
2 prosecution and punishment for perjury committed in so
3 testifying.
4 (d) In any prosecution, action, suit or proceeding based
5 upon or arising out of this Act, the Secretary of State may
6 sign a certificate showing compliance or non-compliance with
7 this Act by any loan broker. This shall constitute prima
8 facie evidence of compliance or non-compliance with this Act
9 and shall be admissible in evidence in any court.
10 (e) Whenever it shall appear to the Secretary of State
11 that any person is engaged or about to engage in any acts or
12 practices which constitute or will constitute a violation of
13 this Act, or of any rule or regulation prescribed under
14 authority of this Act, the Secretary of State may at his or
15 her discretion, through the Attorney General:
16 (1) File a complaint and apply for a temporary
17 restraining order without notice, and upon a proper
18 showing the court may enter a temporary restraining order
19 without a bond, to enforce this Act.
20 (2) File a complaint and apply for a preliminary or
21 permanent injunction, and, after notice and hearing and
22 upon a proper showing, the court may grant a preliminary
23 or permanent injunction and may order the defendant to
24 make an offer of rescission with respect to any contract
25 for loan brokerage services determined by the court to be
26 unlawful under this Act.
27 (f) The court shall further have jurisdiction and
28 authority, in addition to the penalties and other remedies in
29 this Act provided, to enter an order for the appointment of
30 the court or a person as a receiver, conservator, ancillary
31 receiver or ancillary conservator for the defendant or the
32 defendant's assets located in this State, or to require
33 restitution, damages or disgorgement of profits on behalf of
34 the person or persons injured by the act or practice
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1 constituting the subject matter of the action, and may assess
2 costs and attorneys fees against the defendant for the use of
3 the State.
4 (Source: P.A. 89-209, eff. 1-1-96.)
5 (815 ILCS 175/15-55)
6 Sec. 15-55. Violations; administrative fines;
7 enforcement.
8 (a) If the Secretary of State determines, after notice
9 and opportunity for a hearing, that a person has violated
10 this Act, the Secretary of State may in addition to all other
11 remedies, impose an administrative fine upon the person in an
12 amount not to exceed $10,000 for each violation.
13 (b) The Secretary of State may bring an action in the
14 circuit court of Sangamon or Cook county to enforce payment
15 of fines imposed under this Section.
16 (c) If the Secretary of State shall find that any person
17 has violated any provision of this Act, the Secretary of
18 State may, by written order temporarily or permanently
19 prohibit or suspend such person from acting as a loan broker.
20 (d) If the Secretary of State shall find that any person
21 is acting or has acted as a loan broker as defined in Section
22 15-5.15 15-5.10 of this Act, without prior thereto or at the
23 time thereof having complied with the registration
24 requirements of this Act, the Secretary of State may by
25 written order prohibit such person from acting as a loan
26 broker in this State.
27 (e) Anything herein contained to the contrary
28 notwithstanding, the Secretary of State may temporarily
29 prohibit or suspend, for a maximum period of 90 days, by an
30 order effective immediately, any individual or entity acting
31 as a loan broker or engaging in the registration of a loan
32 broker or the business of providing loan brokerage services,
33 without notice and prior hearing, if the Secretary of State
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1 shall in his or her opinion, based upon credible evidence,
2 deems it necessary to prevent an imminent violation of this
3 Act or to prevent losses to clients which the Secretary of
4 State reasonably believes will occur as a result of a prior
5 violation of this Act. Immediately after taking action
6 without such notice and hearing, the Secretary of State shall
7 deliver a copy of the temporary order to the respondent named
8 therein by personal service or registered mail or certified
9 mail, return receipt requested. The temporary order shall
10 set forth the grounds for the action and shall advise that
11 the respondent may request a hearing to be held as soon as
12 reasonably practicable, that the request for a hearing will
13 not stop the effectiveness of the temporary order and that
14 respondent's failure to request a hearing within 30 days
15 after the date of the entry of the temporary order, shall
16 constitute an admission of any facts alleged therein and
17 shall constitute sufficient basis to make the temporary order
18 final.
19 (f) The Secretary of State may issue a temporary order
20 suspending or delaying the effectiveness of any registration
21 of a loan broker under this Act subsequent to and upon the
22 basis of the issuance of any stop, suspension or similar
23 order by any agency of the United States regulating loan
24 brokers or any state or federal courts with respect to the
25 person who is the subject of the registration under this Act,
26 and such order shall become effective as of the date and time
27 of effectiveness of the agency or court order and shall be
28 vacated automatically at such time as the order of the agency
29 or court order is no longer in effect.
30 (Source: P.A. 89-209, eff. 1-1-96.)
31 (815 ILCS 175/15-60)
32 Sec. 15-60. Violations; liability of loan broker to
33 damaged parties; rights of prospective borrower. A person
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1 who violates this Act, in connection with a contract for the
2 services of a loan broker, is liable to any person damaged by
3 the violation, for the amount of the actual damages suffered,
4 interest at the legal rate, and attorney fees. If a loan
5 broker violates any provision of this Act, in connection
6 with a contract for loan brokering services, the contract is
7 void, and the prospective borrower is entitled to receive
8 from the loan broker all sums paid to the loan broker, with
9 interest and any attorney's fee required to enforce this
10 Section. Any provision of this Section to the contrary
11 notwithstanding, the civil remedies of this Section shall not
12 be available against any person by reason of failure to
13 comply with the requirements of Section 15-75 of this Act.
14 (Source: P.A. 89-209, eff. 1-1-96.)
15 (815 ILCS 175/15-80)
16 Sec. 15-80. Persons exempt from registration and other
17 duties; burden of proof thereof.
18 (a) The following persons are exempt from the
19 registration and bonding requirements of this Act:
20 (1) Any attorney while engaging in the practice of
21 law.
22 (2) Any certified public accountant licensed to
23 practice in Illinois, while engaged in practice as a
24 certified public accountant and whose service in relation
25 to procurement of a loan is incidental to his or her
26 practice.
27 (3) Any person licensed to engage in business as a
28 real estate broker or salesperson in Illinois while
29 rendering services in the ordinary course of a
30 transaction in which a license as a real estate broker or
31 salesperson is required.
32 (4) Any dealer, salesperson or investment adviser
33 registered under the Illinois Securities Law of 1953, or
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1 an investment advisor, representative, or any person who
2 is regularly engaged in the business of offering or
3 selling securities in a transaction exempted under
4 subsection C, H, M, R, Q, or S of Section 4 of the
5 Illinois Securities Law of 1953 or subsection G of
6 Section 4 of the Illinois Securities Law of 1953 provided
7 that such person is registered under the federal
8 securities law.
9 (4.1) An associated person described in subdivision
10 (h)(2) of Section 15 of the Federal 1934 Act.
11 (4.2) An investment adviser registered pursuant to
12 Section 203 of the Federal 1940 Investment Advisors Act.
13 (4.3) A person described in subdivision (a)(11) of
14 Section 202 of the Federal 1940 Investment Advisors Act.
15 (5) Any person whose fee is wholly contingent on
16 the successful procurement of a loan from a third party
17 and to whom no fee, other than a bona fide third party
18 fee, is paid before the procurement.
19 (6) Any person who is a creditor, or proposed to be
20 a creditor, for any loan.
21 (7) (Blank). Any person authorized to conduct
22 business under the Residential Mortgage License Act of
23 1987.
24 (8) Any person regulated by the Department of
25 Financial Institutions or the Office of Banks and Real
26 Estate, or any insurance producer or company authorized
27 to do business in this State, any dealer, salesperson or
28 investment adviser registered under the Illinois
29 Securities Law of 1953, or any investment adviser
30 representative, or any person who is regularly engaged in
31 the business of offering or selling securities in a
32 transaction exempted under subsection C, H, M, R, Q, or S
33 of Section 4 of the Illinois Securities Law of 1953 or
34 subsection G of Section 4 of the Illinois Securities Law
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1 of 1953 provided that such person is registered under the
2 federal securities law.
3 (b) As used in this Section, "bona fide third party fee"
4 includes fees for:
5 (1) Credit reports, appraisals and investigations.
6 (2) If the loan is to be secured by real property,
7 title examinations, an abstract of title, title
8 insurance, a property survey and similar purposes.
9 (c) As used in this Section, "successful procurement of
10 a loan" means that a binding commitment from a creditor to
11 advance money has been received and accepted by the borrower.
12 (d) The burden of proof of any exemption provided in
13 this Act shall be on the party claiming the exemption.
14 (Source: P.A. 89-209, eff. 1-1-96; 89-508, eff. 7-3-96.)
15 (815 ILCS 175/15-100 new)
16 Sec. 15-100. Immunity for official acts. In no case
17 shall the Secretary of State or any of his or her employees
18 or agents, in the administration of this Act, incur any
19 official or personal liability while acting in accordance
20 with their official duties or authority.
21 Section 15. The Illinois Business Brokers Act of 1995 is
22 amended by changing Sections 10-5.10, 10-10, 10-25, 10-30,
23 10-35, 10-40, 10-45, 10-55, 10-60, 10-75, 10-80, and 10-85,
24 and by adding Sections 10-5.16, 10-5.17, 10-5.18, 10-5.25,
25 10-5.30, 10-30.5, 10-95, 10-100, 10-105, 10-110, and 10-115
26 as follows:
27 (815 ILCS 307/10-5.10)
28 Sec. 10-5.10. Business Broker. "Business Broker" means
29 any person who is required to register under Section 10-10 of
30 this Act and, in return for a fee, commission, or other
31 compensation:
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1 (1) promises to procure a business for any person
2 or assists any person in procuring a business from any
3 third person;
4 (2) negotiates, offers, attempts or agrees to
5 negotiate the sale, exchange, or purchase of a business;
6 (3) buys, sells, offers to buy or sell or otherwise
7 deals in options on businesses;
8 (4) advertises or represents himself as a business
9 broker;
10 (5) assists or directs in the procuring of
11 prospects intended to result in the purchase, sale, or
12 exchange of a business;
13 (6) offers, promotes, lists or agrees to offer,
14 promote, or list a business for sale, lease, or exchange.
15 (Source: P.A. 89-209, eff. 1-1-96.)
16 (815 ILCS 307/10-5.16 new)
17 Sec. 10-5.16. Client. "Client" means any person who has
18 signed an agreement with a business broker that provides for
19 the services described in Section 10-5.10 for compensation.
20 (815 ILCS 307/10-5.17 new)
21 Sec. 10-5.17. Insolvency. "Insolvency" means the
22 rendering of a business broker financially unable to perform
23 any contractual obligations of its business brokering duties.
24 (815 ILCS 307/10-5.18 new)
25 Sec. 10-5.18. Material. "Material", when used to qualify
26 a requirement for the furnishing of information as to any
27 subject, limits the information required to those matters as
28 to which there is a substantial likelihood that a reasonable
29 person would consider important.
30 (815 ILCS 307/10-5.25 new)
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1 Sec. 10-5.25. Purchaser. "Purchaser" means a person who
2 enters into a contract or agreement for the acquisition of a
3 business or a person to whom an offer to sell a business is
4 directed.
5 (815 ILCS 307/10-5.30 new)
6 Sec. 10-5.30. Seller. "Seller" means a person who sells
7 or offers to sell a business or any agent who directly or
8 indirectly acts on behalf of such person, except that a
9 person acting as a business broker is neither a seller nor
10 purchaser.
11 (815 ILCS 307/10-10)
12 Sec. 10-10. Registration of business brokers. Every
13 person engaging in the business of business brokering shall
14 be registered with the Office of the Secretary of State
15 pursuant to the provisions of this Act. Persons employed,
16 contracted by, or working on behalf of other persons who are
17 registered under this Act need not register separately;
18 provided that such non-registered employed or contracted
19 persons working for a business broker have been identified in
20 the registration submitted and proper fees, if any, are paid.
21 (a) In order to be registered under this Act, a business
22 broker shall file an application for registration with the
23 Secretary of State. The application for registration shall
24 contain, to the extent reasonably available to the applicant:
25 (1) The disclosure document required under
26 subsection (b) of Section 10-30 of this Act and the form
27 of disclosure statement proposed to be used under
28 subsection (b)(1) of Section 10-30 of this Act.
29 (2) Consent to service of process under subsection
30 (d) of this Section;
31 (3) A fee in the amount as provided for specified
32 in subsection (a) of Section 10-25 of this Act, and shall
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1 not be returnable in any event; and
2 (4) Any other information deemed necessary by the
3 Secretary of State as prescribed by rule or regulation.
4 (b) Whenever the provisions of this Act have been
5 complied with, the Secretary of State shall issue a
6 certificate of registration to the applicant, authorizing the
7 applicant to engage in the business of business brokering.
8 (c) An application for registration becomes effective 30
9 days after it is filed, unless an order of the Secretary of
10 State establishes an earlier effective date. Every
11 registration is effective until January 1 of the year after
12 it goes into effect.
13 (d) Every applicant for registration shall file with the
14 Secretary of State, in such form as the Secretary of State
15 may prescribe by rule or regulation, an irrevocable consent
16 appointing the Secretary of State to be the applicant's agent
17 to receive service of any process in any noncriminal suit,
18 action, or proceeding against the applicant arising from the
19 violation of any provision of this Act.
20 (e) The Secretary of State shall maintain a record,
21 which shall be open for public inspection, upon which shall
22 be entered the name and address of each business broker and
23 all orders of the Secretary of State denying, suspending, or
24 revoking registration. The Secretary of State may designate
25 by rule or order any statements, information, or reports
26 submitted to or filed with him or her pursuant to this Act
27 which the Secretary of State determines are of a sensitive
28 nature and therefore should be exempt from public disclosure.
29 Any statement, information, or reports determined by the
30 Secretary of State to be of a sensitive nature shall not be
31 disclosed to the public except upon consent of the person
32 filing or submitting the statement, information, or reports
33 or by order of a court or in court proceedings.
34 (Source: P.A. 89-209, eff. 1-1-96.)
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1 (815 ILCS 307/10-25)
2 Sec. 10-25. Fees and funds. All fees and funds accruing
3 for the administration of this Act shall be accounted for by
4 the Secretary of State and shall be deposited with the State
5 Treasurer who shall deposit them in the Securities Audit and
6 Enforcement Fund.
7 (a) The Secretary of State shall, by rule or regulation,
8 impose and collect fees necessary for the administration of
9 this Act, including but not limited to, fees for the
10 following purposes:
11 (1) Filing an application pursuant to Section 10-10
12 of this Act;
13 (2) Examining an application pursuant to Sections
14 10-10 and 10-20 of this Act;
15 (3) Registering a business broker under Section
16 10-10 of this Act;
17 (4) Renewing registration of a business broker
18 pursuant to Section 10-20 of this Act;
19 (5) Failure to file or file timely any document or
20 information required under this Act;
21 (6) Filing a notice of lien pursuant to Section
22 10-115 of this Act.
23 (b) The Secretary of State may, by rule or regulation,
24 raise or lower any fee imposed by, and which he or she is
25 authorized by law to collect under, this Act.
26 (Source: P.A. 89-209, eff. 1-1-96.)
27 (815 ILCS 307/10-30)
28 Sec. 10-30. Disclosure document to be provided by
29 business broker.
30 (a) A business broker must provide a written disclosure
31 document that meets the requirements set forth in subsection
32 (b) of this Section to a client at the time or before the
33 client signs a contract for the services of a business broker
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1 or at the time or before the business broker receives any
2 consideration upon the contract. Any person who signs a
3 contract for the services of a business broker shall have 7
4 days from the date of signing of the contract to rescind the
5 contract and receive a refund of all payments, if any, made
6 by that person. At least 7 days before the time any person
7 signs a contract for the services of a business broker, or 7
8 days before the business broker receives any consideration
9 upon the contract, whichever occurs first, the business
10 broker must provide to the contracting person a written
11 disclosure document that meets the requirements set forth in
12 subsection (b) of this Section.
13 (b) A written disclosure document statement shall
14 contain the following information:
15 (1) A disclosure statement which shall be the cover
16 sheet and shall be entitled, in at least 10-point
17 boldface capital letters "DISCLOSURES REQUIRED BY LAW".
18 Under this title shall appear the statement, in at least
19 10 point type that "THE SECRETARY OF STATE HAS NOT
20 REVIEWED AND DOES NOT APPROVE, RECOMMEND, ENDORSE, OR
21 SPONSOR ANY BUSINESS BROKERAGE CONTRACT. THE INFORMATION
22 CONTAINED IN THIS DISCLOSURE HAS NOT BEEN VERIFIED BY THE
23 SECRETARY OF STATE. IF YOU HAVE ANY QUESTIONS, SEE AN
24 ATTORNEY BEFORE YOU SIGN A CONTRACT OR AGREEMENT."
25 Nothing except the title and the required statement shall
26 appear on the cover sheet, except that the name of the
27 business broker, address, telephone number, facsimile
28 number, and any other information as authorized by the
29 Secretary of State by rule may appear on the cover sheet.
30 (2) The name and form of organization of the
31 business broker, the names under which the business
32 broker has done or, is doing, or intends to do business,
33 and the name of any parent organization or affiliate of
34 the business broker.
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1 (3) The names, addresses, and titles of the
2 business broker's officers, directors, trustees, general
3 partners, general managers, principal executives, and any
4 other person performing similar duties.
5 (4) A full and detailed description of the actual
6 services that the business broker undertakes to perform
7 for the prospective client.
8 (5) A specific statement of the circumstances under
9 which the business broker will be entitled to obtain or
10 retain consideration from the party with whom the
11 business broker contracts.
12 (6) Any other information the Secretary of State
13 may require by rule or regulation.
14 (c) A business broker shall amend the disclosure
15 document required by subsection (b) of this Section whenever
16 necessary to prevent it from containing any false or
17 misleading statement of a material fact and shall deliver a
18 copy of the amended disclosure document to the Secretary of
19 State on or before the date of the amendment.
20 (d) The information in subdivisions (b)(4) and (b)(5) of
21 this Section need not be set out on the disclosure document
22 if the business broker's contract contains the information
23 required in subdivisions (b)(4) and (b)(5) of this Section
24 and is provided with the disclosure document.
25 (Source: P.A. 89-209, eff. 1-1-96.)
26 (815 ILCS 307/10-30.5 new)
27 Sec. 10-30.5. Exemptions from disclosure requirements.
28 Section 10-30 shall not apply if:
29 (a) the client to be represented by the business broker
30 is:
31 (1) a natural person who has, or is reasonably
32 believed by the business broker relying upon this
33 Section to have, a net worth or joint net worth with that
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1 person's spouse in excess of $1,000,000 at the time of
2 the execution of the business broker agreement or
3 contract;
4 (2) a natural person who has, or is reasonably
5 believed by the business broker relying upon this
6 Section to have, an income or joint income with that
7 person's spouse in excess of $200,000 in the most recent
8 fiscal year;
9 (3) a company, business, or other non-natural
10 person that has, or is reasonably believed by the
11 business broker relying upon this Section to have, a
12 total asset value in excess of $1,000,000 and has been in
13 existence for at least nine months and was not formed for
14 the purpose of the subject transaction;
15 (4) a company, business, or other non-natural
16 person that has, or is reasonably believed by the
17 business broker relying upon this Section to have, gross
18 revenues or gross sales in excess of $200,000 in the most
19 recent fiscal year and has been in existence for at least
20 nine months and was not formed for the purposes of the
21 subject transaction; or
22 (5) a company, business, or other non-natural
23 person in which at least 90% of the equity interest is
24 owned, or is reasonably believed by the business broker
25 relying upon this Section to be owned, by persons who
26 meet any of the tests set forth in subdivisions (a)(1),
27 (a)(2), (a)(3), (a)(4), or (a)(5) of this Section; or
28 (b) the client to be represented by the business broker
29 has had an attorney review the business broker's contract for
30 the client.
31 (815 ILCS 307/10-35)
32 Sec. 10-35. Contracts required to be in writing;
33 retention of copy by client. To be enforceable, every
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1 contract for the services of a business broker shall be in
2 writing and signed by all contracting parties. The client
3 shall have the right to retain a copy of the signed contract
4 for the services of a business broker. The client's copy of
5 the contract shall be provided to the client when the
6 contract is signed, if that is reasonably feasible and the
7 client so requests. Otherwise, the contract shall be mailed
8 or otherwise sent to the client within one week of execution.
9 No account number, as referred to in Section 10-75 of this
10 Act, is required on the client's copy of the contract at the
11 time it is signed.
12 (Source: P.A. 89-209, eff. 1-1-96.)
13 (815 ILCS 307/10-40)
14 Sec. 10-40. Denial, suspension or revocation of
15 registration; orders and hearing.
16 (a) The Secretary of State may deny, suspend or revoke
17 the registration of a business broker if the business broker:
18 (1) Is insolvent.
19 (2) Has violated any provision of this Act.
20 (3) Has filed with the Secretary of State any
21 document or statement containing any false representation
22 of a material fact or omitting to state a material fact.
23 (4) Has been convicted, within 10 years before the
24 date of the application, renewal or review, of any crime
25 involving fraud or deceit.
26 (5) Has been found by any court or agency, within
27 10 years before the date of the application, renewal, or
28 review, to have engaged in any activity involving fraud
29 or deceit.
30 (b) The Secretary of State may not enter a final order
31 denying, suspending, or revoking the registration of a
32 business broker without prior notice to all interested
33 parties, opportunity for a hearing and written findings of
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1 fact and conclusions of law. The Secretary of State may by
2 summary order deny, suspend, or revoke a registration pending
3 final determination of any proceeding under this Section.
4 Upon the entry of a summary order, the Secretary of State
5 shall promptly notify all interested parties that it has been
6 entered, of the reasons for the summary order and, that upon
7 receipt by the Secretary of State of a written request from a
8 party, the matter will be set for hearing which shall be
9 conducted in accordance with the provisions of the Illinois
10 Administrative Procedure Act. If no hearing is requested and
11 none is ordered by the Secretary of State, the order remains
12 in effect until it is modified or vacated by the Secretary of
13 State. If a hearing is requested or ordered, the Secretary
14 of State, after notice of the hearing has been given to all
15 interested persons and the hearing has been held, may modify
16 or vacate the order or extend it until final determination.
17 (Source: P.A. 89-209, eff. 1-1-96.)
18 (815 ILCS 307/10-45)
19 Sec. 10-45. Powers of Secretary of State; privilege
20 against self-incrimination; admissibility into evidence.
21 (a) The Secretary of State may do the following:
22 (1) Adopt rules and regulations to implement this
23 Act.
24 (2) Conduct investigations and examinations:
25 (A) In connection with any application for
26 registration of any business broker or any
27 registration already granted; or
28 (B) Whenever it appears to the Secretary of
29 State, upon the basis of a complaint or information,
30 that reasonable grounds exist for the belief that an
31 investigation or examination is necessary or
32 advisable for the more complete protection of the
33 interests of the public.
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1 (3) Charge as costs of investigation or examination
2 all reasonable expenses, including a per diem prorated
3 upon the salary of any employee and actual traveling and
4 hotel expenses. All reasonable expenses are to be paid
5 by the party or parties under investigation or
6 examination.
7 (4) Issue notices and orders, including cease and
8 desist notices and orders, after making an investigation
9 or examination under paragraph (2) of subsection (a) of
10 this Section. The Secretary of State may also bring an
11 action to prohibit a person from violating this Act. The
12 Secretary of State shall notify the person that an order
13 or notice has been issued, the reasons for it and that a
14 hearing will be set in accordance with the provisions of
15 the Illinois Administrative Procedure Act after the
16 Secretary of State receives a written request from the
17 person requesting a hearing.
18 (5) Sign all orders, official certifications,
19 documents or papers issued under this Act or delegate the
20 authority to sign any of those items to his or her
21 designee.
22 (6) Hold and conduct hearings.
23 (7) Hear evidence.
24 (8) Conduct inquiries with or without hearings.
25 (9) Receive reports of investigators or other
26 officers or employees of the State of Illinois or any
27 municipal corporation or governmental subdivision within
28 the State.
29 (10) Administer oaths or cause them to be
30 administered.
31 (11) Subpoena witnesses and compel them to attend
32 and testify.
33 (12) Compel the production of books, records and
34 other documents.
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1 (13) Order depositions to be taken of any witness
2 residing within or without the State. The depositions
3 shall be taken in the manner prescribed by law for
4 depositions in civil actions and made returnable to the
5 Secretary of State.
6 (b) If any person refuses to obey a subpoena issued
7 under this Act, the Secretary of State may make application
8 to any court of competent jurisdiction to order the person to
9 appear before the Secretary of State and produce documentary
10 evidence or give evidence as directed in the subpoena. The
11 failure to obey the order of the court shall be subject to
12 punishment by the court as contempt of court.
13 (c) No person shall be excused from complying with a
14 subpoena on the ground that the testimony or evidence
15 required may tend to incriminate the person or subject the
16 person to a penalty or forfeiture. No individual may be
17 prosecuted or subject to any penalty or forfeiture for or on
18 account of any transaction, matter or thing which the
19 individual is compelled to testify or produce evidence, after
20 claiming the privilege against self-incrimination. However,
21 the individual so testifying shall not be exempt from
22 prosecution and punishment for perjury committed in so
23 testifying.
24 (d) In any prosecution, action, suit or proceeding based
25 upon or arising out of this Act, the Secretary of State may
26 sign a certificate showing compliance or non-compliance with
27 this Act by any business broker. This shall constitute prima
28 facie evidence of compliance or non-compliance with this Act
29 and shall be admissible in evidence in any court to enforce
30 this Act.
31 (e) Whenever it shall appear to the Secretary of State
32 that any person is engaged or about to engage in any acts or
33 practices which constitute or will constitute a violation of
34 this Act, or of any rule or regulation prescribed under
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1 authority of this Act, the Secretary of State may at his or
2 her discretion, through the Attorney General:
3 (1) File a complaint and apply for a temporary
4 restraining order without notice, and upon a proper
5 showing the court may enter a temporary restraining order
6 without a bond, to enforce this Act.
7 (2) File a complaint and apply for a preliminary or
8 permanent injunction, and, after notice and hearing and
9 upon a proper showing, the court may grant a preliminary
10 or permanent injunction and may order the defendant to
11 make an offer of rescission with respect to any contract
12 for business brokerage services determined by the court
13 to be unlawful under this Act.
14 (f) The court shall further have jurisdiction and
15 authority, in addition to the penalties and other remedies in
16 this Act provided, to enter an order for the appointment of
17 the court or a person as a receiver, conservator, ancillary
18 receiver or ancillary conservator for the defendant or the
19 defendant's assets located in this State, or to require
20 restitution or damages on behalf of the person or persons
21 injured by the act or practice constituting the subject
22 matter of the action, and may assess costs against the
23 defendant for the use of the State.
24 (g) No provision of this Act imposing liability shall
25 apply to any act done or omitted in good faith in conformity
26 with any rule of the Secretary of State under this Act,
27 notwithstanding that such rule may, after such act or
28 omission, be amended or rescinded or be determined by
29 judicial or other authority to be invalid for any reason.
30 (Source: P.A. 89-209, eff. 1-1-96.)
31 (815 ILCS 307/10-55)
32 Sec. 10-55. Violations; administrative fines;
33 enforcement.
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1 (a) If the Secretary of State determines, after notice
2 and opportunity for a hearing, that a person has violated
3 this Act, the Secretary of State may in addition to all other
4 remedies, impose an administrative fine upon the person in an
5 amount not to exceed $10,000 for each violation.
6 (b) The Secretary of State may bring an action in the
7 circuit court of Sangamon or Cook county to enforce payment
8 of fines imposed under this Section.
9 (c) If the Secretary of State shall find that any person
10 has violated any provision of this Act, the Secretary of
11 State may, by written order temporarily or permanently
12 prohibit or suspend such person from acting as a business
13 broker.
14 (d) If the Secretary of State shall find, after notice
15 and opportunity for hearing, that any person is acting or has
16 acted as a business broker as defined in Section 10-5.10 of
17 this Act, without prior thereto or at the time thereof having
18 complied with the registration requirements of this Act, the
19 Secretary of State may by written order prohibit or suspend
20 such person from acting as a business broker in this State.
21 (e) Anything herein contained to the contrary
22 notwithstanding, the Secretary of State may temporarily
23 prohibit or suspend, for a maximum period of 90 days, by an
24 order effective immediately, the registration of a business
25 broker or the business of providing business brokerage
26 services, without notice and prior hearing, if the Secretary
27 of State shall in his or her opinion, based upon credible
28 evidence, deem it necessary to prevent an imminent violation
29 of this Act Law or to prevent losses to clients which the
30 Secretary of State reasonably believes will occur as a result
31 of a prior violation of this Act. Immediately after taking
32 action without such notice and hearing, the Secretary of
33 State shall deliver a copy of the temporary order to the
34 respondent named therein by personal service or registered
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1 mail or certified mail, return receipt requested. The
2 temporary order shall set forth the grounds for the action
3 and shall advise that the respondent may request a hearing as
4 soon as reasonably practicable, that the request for a
5 hearing will not stop the effectiveness of the temporary
6 order and that respondent's failure to request a hearing
7 within 30 days after the date of the entry of the temporary
8 order, shall constitute an admission of any facts alleged
9 therein and shall make the temporary order final. A business
10 broker whose registration has been suspended pursuant to this
11 Section may request the Secretary of State permission to
12 continue to receive payment for any executory contracts at
13 the time of any suspension and to continue to perform its
14 obligation thereunder. The decision to grant or deny
15 permission to receive payment for any executory contracts or
16 perform any obligation thereunder shall be at the sole
17 discretion of the Secretary of State and shall not be subject
18 to review under the Administrative Review Law.
19 (f) The Secretary of State may issue a temporary order
20 suspending or delaying the effectiveness of any registration
21 of a business broker under this Act subsequent to and upon
22 the basis of the issuance of any stop, suspension or similar
23 order by any agency of the United States regulating business
24 brokers or any state or federal courts with respect to the
25 person who is the subject of the registration under this Act,
26 and such order shall become effective as of the date and time
27 of effectiveness of the agency or court order and shall be
28 vacated automatically at such time as the order of the agency
29 or court order is no longer in effect.
30 (Source: P.A. 89-209, eff. 1-1-96.)
31 (815 ILCS 307/10-60)
32 Sec. 10-60. Violations; liability of business broker to
33 damaged parties; rights of prospective client. A person who
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1 commits a material violation of violates this Act, in
2 connection with a contract for the services of a business
3 broker, is liable to any client person damaged by the
4 violation, for the amount of the actual damages suffered, but
5 not more than the fees actually paid by the client seeking
6 relief, together with interest at the legal rate, and
7 attorney fees. If a business broker commits a material
8 violation of Sections 10-10, 10-20, and 10-30 of this Act
9 violates any provision of this Act, in connection with a
10 contract for business brokering services, the contract is
11 void, and the prospective client is entitled to receive from
12 the business broker all sums paid to the business broker,
13 with interest and any attorney's fee required to enforce this
14 Section.
15 (Source: P.A. 89-209, eff. 1-1-96.)
16 (815 ILCS 307/10-75)
17 Sec. 10-75. Account numbers; retention and maintenance of
18 records.
19 (a) Each business broker agreement shall be given an
20 account number and all instruments executed taken in
21 connection with that agreement must bear this number, except
22 as provided in Section 10-35 of this Act. Each business
23 broker shall keep and maintain the following records or their
24 equivalent:
25 (1) A business agreement register that consists of
26 a chronological listing of all business broker agreements
27 that have been entered into. For each business broker
28 agreement the register shall contain the following:
29 (A) The account number.
30 (B) The date of the agreement.
31 (C) The name of the client or any proposed
32 client.
33 (D) The amount of any fees charged.
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1 (E) The cost and type of any insurance
2 required.
3 (2) A record file for each client or proposed
4 client shall contain the following:
5 (A) The name and address of the client or any
6 proposed client.
7 (B) A copy of the signed business broker
8 agreement.
9 (C) A copy of any other papers or instruments
10 used in connection with the business broker
11 agreement and signed by the client or any proposed
12 client, including a copy of the disclosure document
13 required by Section 10-30 of this Act, that contains
14 an acknowledged receipt by the client or any
15 proposed client.
16 (D) The amount of the business broker's fee
17 that the client has paid. If there is an unpaid
18 balance, the status of any collection efforts.
19 (3) All receipts from or for the account of clients
20 or any proposed clients and all disbursements to or for
21 the account of clients or any proposed clients, recorded
22 so that the transactions are readily identifiable.
23 (4) (Blank). A general ledger that shall be posted
24 at least monthly, and a trial balance sheet and profit
25 and loss statement prepared within 30 days of the
26 Secretary of State's request for the information.
27 (5) A copy of:
28 (A) All advertisements, pamphlets, circulars,
29 letters, articles or communications published in any
30 newspaper, magazine or periodical.
31 (B) Scripts of any recording, radio or
32 television announcement.
33 (C) Any sales kits or literature to be used in
34 solicitation of clients.
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1 (b) The records listed in subsection (a) of this Section
2 shall be kept for a period of 6 years in the business
3 broker's principal office and must be separate or readily
4 identifiable from the records of any other business that is
5 conducted in the office of the business broker. After a
6 period of 2 years, a copy of this information may be retained
7 on magnetic, digital, or other electronic medium in a form
8 that may be readily retrieved.
9 (c) The records listed in subsection (a) of this Section
10 need not be kept for a client where no fee, expense
11 reimbursement, retainer, or other charge was incurred and no
12 transaction was consummated.
13 (Source: P.A. 89-209, eff. 1-1-96.)
14 (815 ILCS 307/10-80)
15 Sec. 10-80. Persons exempt from registration and other
16 duties under law; burden of proof thereof.
17 (a) The following persons are exempt from the
18 requirements of this Act:
19 (1) Any attorney who is licensed to practice in
20 this State, while engaged engaging in the practice of law
21 and whose service in relation to the business broker
22 transaction is incidental to the attorney's practice.
23 (2) Any person licensed as a real estate broker or
24 salesperson under the Illinois Real Estate License Act of
25 1983 who is primarily engaged in business activities for
26 which a license is required under that Act and who, on an
27 incidental basis, acts as a business broker.
28 (3) Any dealer, salesperson, or investment adviser
29 registered pursuant to under the Illinois Securities Law
30 of 1953 or any investment adviser representative, or any
31 person who is regularly engaged in the business of
32 offering or selling securities in a transaction exempted
33 under subsection C, H, M, R, Q, or S of Section 4 of the
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1 Illinois Securities Law of 1953 or subsection G of
2 Section 4 of the Illinois Securities Law of 1953 provided
3 that such person is registered pursuant to under the
4 federal securities law.
5 (4) An associated person described in subdivision
6 (h)(2) of Section 15 of the Federal 1934 Act.
7 (5) An investment adviser registered pursuant to
8 Section 203 of the Federal 1940 Investment Advisors Act.
9 (6) A person described in subdivision (a)(11) of
10 Section 202 of the Federal 1940 Investment Advisors Act.
11 (7) Any person who is selling a business owned or
12 operated (in whole or in part) by that person in a one
13 time transaction.
14 (b) This Act shall not be deemed to apply in any manner,
15 directly or indirectly, to: (i) a State bank or national
16 bank, as those terms are defined in the Illinois Banking Act,
17 or any subsidiary of a State bank or national bank; (ii) a
18 bank holding company, as that term is defined in the Illinois
19 Bank Holding Company Act of 1957, or any subsidiary of a bank
20 holding company; (iii) a foreign banking corporation, as that
21 term is defined in the Foreign Banking Office Act, or any
22 subsidiary of a foreign banking corporation; (iv) a
23 representative office, as that term is defined in the
24 Foreign Bank Representative Office Act; (v) a corporate
25 fiduciary, as that term is defined in the Corporate Fiduciary
26 Act, or any subsidiary of a corporate fiduciary; (vi) a
27 savings bank organized under the Savings Bank Act, or a
28 federal savings bank organized under federal law, or any
29 subsidiary of a savings bank or federal savings bank; (vii) a
30 savings bank holding company organized under the Savings Bank
31 Act, or any subsidiary of a savings bank holding company;
32 (viii) an association or federal association, as those terms
33 are defined in the Illinois Savings and Loan Act of 1985, or
34 any subsidiary of an association or federal association; (ix)
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1 a foreign savings and loan association or foreign savings
2 bank subject to the Illinois Savings and Loan Act of 1985, or
3 any subsidiary of a foreign savings and loan association or
4 foreign savings bank; or (x) a savings and loan association
5 holding company, as that term is defined in the Illinois
6 Savings and Loan Act of 1985, or any subsidiary of a savings
7 and loan association holding company.
8 (b-1) Persons registered under the Illinois Franchise
9 Disclosure Act of 1987 (and their employees) are exempt from
10 the requirements of this Act as to: offers and sales in
11 connection with franchising activities; or assisting any of
12 their franchisees in the offer or sale of a franchise by any
13 such franchisee for the franchisee's own account regardless
14 of whether the sale is effected by or through the registered
15 persons.
16 (b-2) Any certified public accountant licensed to
17 practice in Illinois, while engaged in the practice as a
18 certified public accountant and whose service in relation to
19 the business broker transaction is incidental to his or her
20 practice, is exempt from the requirements of this Act.
21 (b-3) Any publisher, or regular employee of such
22 publisher, of a bona fide newspaper or news magazine of
23 regular and established paid circulation who, in the routine
24 course of selling advertising, advertises businesses for sale
25 and in which no other related services are provided is exempt
26 from the requirements of this Act.
27 (c) The burden of proof of any exemption or
28 classification provided in this Act shall be on the party
29 claiming the exemption or classification.
30 (Source: P.A. 89-209, eff. 1-1-96; 89-665, eff. 8-14-96.)
31 (815 ILCS 307/10-85)
32 Sec. 10-85. Prohibited acts.
33 (a) A business broker shall not, in connection with a
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1 contract for the services of a business broker, either
2 directly or indirectly, do any of the following:
3 (1) (a) Employ any device, scheme or article to
4 defraud.
5 (2) (b) Make any untrue statements of a material
6 fact or omit to state a material fact necessary in order
7 to make the statements made, in the light of
8 circumstances under which they are made, not misleading,
9 unless the statement is made in reasonable reliance on
10 information provided by the client.
11 (3) (c) Engage in any act, practice or course of
12 business that operates or would operate as a fraud or
13 deceit upon any person.
14 (b) A business broker shall not either directly or
15 indirectly do the following:
16 (1) Engage in the business of acting as a business
17 broker without registration under this Act unless exempt
18 under the Act.
19 (2) Fail to file with the Secretary of State any
20 application, report, document, or answer required to be
21 filed under the provisions of this Act or any rule made
22 by the Secretary of State pursuant to this Act or fail to
23 comply with the terms of any order issued pursuant to
24 this Act or rule or made by the Secretary of State.
25 (3) Fail to maintain any records as required under
26 the provisions of this Act or any rule made by Secretary
27 of State pursuant to this Act.
28 (Source: P.A. 89-209, eff. 1-1-96.)
29 (815 ILCS 307/10-95 new)
30 Sec. 10-95. Miscellaneous provisions.
31 (a) The rights and remedies under this Act are in
32 addition to any other rights or remedies that may exist at
33 law or equity.
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1 (b) Any condition, stipulation, or provision binding any
2 client of a business broker to waive compliance with or
3 relieve a person from any duty or liability imposed by or any
4 right provided by this Act or any rule or order pursuant to
5 this Act is void.
6 (c) If any provision of this Act or its application to
7 any person or circumstance is held invalid, the invalidity of
8 that provision or application does not effect other
9 provisions or applications of this Act that can be given
10 effect without the invalid provision or application.
11 (815 ILCS 307/10-100 new)
12 Sec. 10-100. Immunity for official acts. In no case
13 shall the Secretary of State, or any of his or her employees
14 or agents, in the administration of this Act, incur any
15 official or personal liability while acting in accordance
16 with their official duties or authority or both.
17 (815 ILCS 307/10-105 new)
18 Sec. 10-105. Scope of the Act. This Act shall apply
19 only when the person engaged or sought to be engaged by the
20 business broker is domiciled in this State or when the
21 company or business sought to be sold has its principal place
22 of business in this State.
23 (815 ILCS 307/10-110 new)
24 Sec. 10-110. Previous and ongoing agreements or
25 contracts and transactions not affected. All business broker
26 agreements or contracts and transactions between a business
27 broker and its clients or proposed clients which do not
28 comply with the Act, if entered into prior to January 1,
29 1996, shall be deemed to be valid and enforceable,
30 notwithstanding this Act.
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1 (815 ILCS 307/10-115 new)
2 Sec. 10-115 Business broker lien.
3 (a) Any business broker shall have a lien upon the
4 assets of a business that is the subject of a business
5 broker's contract and the proceeds from the sale of such
6 business in the amount that the broker is due.
7 (b) The lien shall be available to the business broker
8 named in the instrument signed by the seller or purchaser.
9 The lien arising under this Act shall be in addition to any
10 other rights that a business broker may have.
11 (c) The lien under this Act shall attach upon the
12 business broker being otherwise entitled to a fee or
13 commission under a written instrument signed by the seller or
14 purchaser or the seller or purchaser's duly authorized agent,
15 as applicable.
16 (d) When payment to a business broker is due in
17 installments, a portion of which is due only after the
18 conveyance or transfer of the business, any claim for lien
19 for those payments due after the transfer or conveyance may
20 be filed at any time subsequent to the transfer or conveyance
21 of the business and prior to the date on which the payment is
22 due but shall only be effective as a lien against the
23 business or proceeds to the extent moneys are still owed to
24 the transferor by the transferee. The lien shall attach as of
25 the filing of the notice of lien and not relate back to the
26 date of the written agreement.
27 (e) If a business broker has a written agreement with a
28 prospective purchaser or seller, then the lien shall attach
29 upon the prospective purchaser or seller that is purchasing,
30 selling, or otherwise accepting a conveyance or transfer of
31 the business and the filing of a notice of lien by the
32 business broker in the Office of the Secretary of State
33 within 90 days after the purchase, sale, or other conveyance
34 or transfer of the business that is the subject of the
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1 written agreement with the business broker. The lien shall
2 attach as of the date of the receipt of any consideration by
3 the seller of the business that is the subject of the written
4 agreement with the business broker.
5 (f) The business broker shall, within 10 days after
6 filing its notice of lien, mail a copy of the notice of lien
7 to the owner of the business by registered or certified mail,
8 with return receipt requested, or personally served on the
9 owner of record or his agent. If the lien is filed within 10
10 days prior to closing, the business broker is not required to
11 mail or personally serve a copy of the notice of lien.
12 Mailing of the copy of the notice of lien is effective if
13 mailed to the address of the business that is the subject of
14 the notice of lien, or to such other address as the seller or
15 purchaser has provided to the business broker in writing and
16 signed by the seller or purchaser. Mailing of the copy of
17 the notice of claim for lien is effective when deposited in a
18 United States mailbox with postage prepaid. The broker's
19 lien shall be unenforceable if mailing of the copy of the
20 notice of lien does not occur at the time and in the manner
21 required by this Act.
22 (g) A business broker may bring suit to enforce a lien
23 in the circuit court in the county where the headquarters of
24 the business being sold is located, where the purchaser
25 resides (or maintains its headquarters) if the lien is being
26 filed against the purchaser, or where the seller resides (or
27 maintains its headquarters) if the lien is filed against the
28 seller, by filing a complaint and sworn affidavit that the
29 lien has been filed.
30 (h) The person claiming a lien shall, within 2 years
31 after filing the lien, commence proceedings by filing a
32 complaint. Failure to commence proceedings within 2 years
33 after filing the lien shall extinguish the lien. No
34 subsequent notice of lien may be given for the same claim nor
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1 may that claim be asserted in any proceedings under this Act.
2 (i) A complaint under this Section shall contain a brief
3 statement of the contract or agreements on which the lien is
4 founded, the date when the contract or agreement was made, a
5 description of the services performed, the amount due and
6 unpaid, a description of the business that is, or the
7 proceeds from sale of which are, subject to the lien, and
8 other facts necessary for a full understanding of the rights
9 of the parties. The plaintiff shall make all interested
10 parties, of whose interest the plaintiff is notified or has
11 knowledge, defendants to the action and shall issue summons
12 and provide service as in other civil actions. When any
13 defendant resides or has gone out of the State, or on inquiry
14 cannot be found, or is concealed within this State so that
15 process cannot be served on that defendant, the plaintiff
16 shall cause a notice to be given to that defendant, or cause
17 a copy of the complaint to be served upon that defendant, in
18 the manner and upon the same conditions as in other civil
19 actions. Failure of the plaintiff to provide proper summons
20 or notice shall be grounds for judgment against the plaintiff
21 with prejudice.
22 (j) The lien notice shall state the name of the
23 claimant, the name of the purchaser or seller whose property
24 or assets are subject to the lien, a description of the
25 business upon which or upon the proceeds from the sale of
26 which the lien is being claimed, the amount for which the
27 lien is claimed, and the registration number of the business
28 broker. The notice of lien shall recite that the information
29 contained in the notice is true and accurate to the knowledge
30 of the signatory. The notice of lien shall be signed by the
31 business broker or by a person authorized to sign on behalf
32 of the business broker and shall be verified.
33 (k) Whenever a claim for lien has been filed with the
34 Office of the Secretary of State and a condition occurs that
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1 would preclude the business broker from receiving
2 compensation under the terms of the business broker's written
3 agreement, the business broker shall provide to the purchaser
4 of the business, if the lien is filed against the purchaser,
5 or the seller of the business, if the lien is filed against
6 the seller, within 10 days following demand by the owner of
7 record, a written release or satisfaction of the lien.
8 (l) Upon written demand of the owner, lienee, or other
9 authorized agent, served on the person claiming the lien
10 requiring suit to be commenced to enforce the lien or answer
11 to be filed in a pending suit, a suit shall be commenced or
12 answer filed within 30 days thereafter, or the lien shall be
13 extinguished. Service may be by registered or certified
14 mail, return receipt requested, or by personal service.
15 (m) If a claim for lien has been filed with the
16 Secretary of State and is paid, or if there is failure to
17 institute a suit to enforce the lien within the time provided
18 by this Act, the business broker shall acknowledge
19 satisfaction or release of the lien, in writing, on written
20 demand of the purchaser of the business, if the lien is filed
21 against the purchaser, or the seller of the business, if the
22 lien is filed against the seller, within 5 days after payment
23 or expiration of the time in which to file the lien.
24 (n) The cost of proceedings asserting or defending a
25 business broker's claim of lien, including reasonable
26 attorneys' fees, costs, and prejudgment interests due to the
27 prevailing party, shall be borne by the nonprevailing party
28 or parties. When more than one party is responsible for
29 costs, fees, and prejudgment interest, the costs, fees, and
30 prejudgment interest shall be equitably apportioned by the
31 court among those responsible parties.
32 (o) Prior recorded liens and mortgages shall have
33 priority over a broker's lien. A prior recorded lien shall
34 include, without limitation, (i) a valid mechanic's lien
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1 claim that is recorded subsequent to the broker's notice of
2 lien but which relates back to a date prior to the recording
3 date of the broker's notice of lien and (ii) prior recorded
4 liens securing revolving credit and future advances of
5 construction loans as described in Section 15-1302 of the
6 Code of Civil Procedure.
7 Section 20. The Business Opportunity Sales Law of 1995
8 is amended by changing Sections 5-5.10, 5-15, 5-35, 5-45,
9 5-55, 5-60, 5-65, 5-70, 5-75, 5-95, 5-115, and 5-130 as
10 follows:
11 (815 ILCS 602/5-5.10)
12 Sec. 5-5.10. Business opportunity.
13 (a) "Business opportunity" means a contract or
14 agreement, between a seller and purchaser, express or
15 implied, orally or in writing, wherein it is agreed that the
16 seller or a person recommended by the seller shall provide to
17 the purchaser any product, equipment, supplies or services
18 enabling the purchaser to start a business when the purchaser
19 is required to make a payment to the seller or a person
20 recommended by the seller of more than $500 and the seller
21 represents directly or indirectly, orally or in writing,
22 that:
23 (1) The seller or a person recommended by the
24 seller will provide or assist the purchaser in finding
25 locations for the use or operation of vending machines,
26 racks, display cases or other similar devices, on
27 premises neither owned nor leased by the purchaser or
28 seller;
29 (2) The seller or a person recommended by the
30 seller will provide or assist the purchaser in finding
31 outlets or accounts for the purchaser's products or
32 services;
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1 (3) The seller or a person specified by the seller
2 will purchase any or all products made, produced,
3 fabricated, grown, bred or modified by the purchaser;
4 (4) The seller guarantees that the purchaser will
5 derive income from the business which exceeds the price
6 paid to the seller;
7 (5) The seller will refund all or part of the price
8 paid to the seller, or repurchase any of the products,
9 equipment or supplies provided by the seller or a person
10 recommended by the seller, if the purchaser is
11 dissatisfied with the business; or
12 (6) The seller will provide a marketing plan,
13 provided that this Law shall not apply to the sale of a
14 marketing plan made in conjunction with the licensing of
15 a federally registered trademark or federally registered
16 service mark.
17 (b) "Business opportunity" does not include:
18 (1) Any offer or sale of an ongoing business
19 operated by the seller and to be sold in its entirety;
20 (2) Any offer or sale of a business opportunity to
21 an ongoing business where the seller will provide
22 products, equipment, supplies or services which are
23 substantially similar to the products, equipment,
24 supplies or services sold by the purchaser in connection
25 with the purchaser's ongoing business;
26 (3) Any offer or sale of a business opportunity
27 which is a franchise as defined by the Franchise
28 Disclosure Act of 1987;
29 (4) Any offer or sale of a business opportunity
30 which is registered pursuant to the Illinois Securities
31 Law of 1953;
32 (5) Any offer or sale of a business opportunity
33 which involves a marketing plan made in conjunction with
34 the licensing of a federally registered trademark or
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1 federally registered service mark provided that the
2 seller had a minimum net worth of $1,000,000 as
3 determined on the basis of the seller's most recent
4 audited financial statement prepared within 13 months of
5 the first offer in this State. Net worth may be
6 determined on a consolidated basis where the seller is at
7 least 80% owned by one person and that person expressly
8 guarantees the obligations of the seller with regard to
9 the offer or sale of any business opportunity claimed to
10 be excluded under this item; or
11 (6) Any offer or sale of a business opportunity by
12 an executor, administrator, sheriff, marshal, receiver,
13 trustee in bankruptcy, guardian or conservator or a
14 judicial offer or sale, of a business opportunity.
15 (7) Cash payments made by a purchaser not exceeding
16 $500 and the payment is made for the not-for-profit sale
17 of sales demonstration equipment, material or samples, or
18 the payment is made for product inventory sold to the
19 purchaser at a bona fide wholesale price.
20 (Source: P.A. 89-209, eff. 1-1-96.)
21 (815 ILCS 602/5-15)
22 Sec. 5-15. Denial or revocation of exemptions.
23 (a) The Secretary of State may by order deny or revoke
24 any exemption specified in Section 5-10 of this Law with
25 respect to a particular offering of one or more business
26 opportunities. No such order may be entered without
27 appropriate prior notice to all interested parties,
28 opportunity for hearing, and written findings of fact and
29 conclusions of law.
30 (b) If the public interest or the protection of
31 purchasers so requires, the Secretary of State may by summary
32 order deny or revoke any of the specified exemptions pending
33 final determination of any proceedings under this Section.
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1 Upon the entry of the order, the Secretary of State shall
2 promptly notify all interested parties that it has been
3 entered and of the reasons therefor and that the matter will
4 be set for hearing upon written request filed with the
5 Secretary of State within 30 days after the receipt of the
6 request by the respondent within 15 days of the receipt of a
7 written request the matter will be set down for hearing. If
8 no hearing is requested and none is ordered by the Secretary
9 of State, the order will remain in effect until it is
10 modified or vacated by the Secretary of State. If a hearing
11 is requested and none is ordered by the Secretary of State,
12 the order will remain in effect until it is modified or
13 vacated by the Secretary of State. If a hearing is requested
14 or ordered, the Secretary of State, after notice of an
15 opportunity for hearing to all interested persons, may modify
16 or vacate the order or extend it until final determination.
17 (c) No order under this Section may operate
18 retroactively.
19 (d) No person may be considered to have violated Section
20 5-25 by reason of any offer or sale effected after the entry
21 of an order under paragraph (1) of Section 5-65 of this Law
22 if he or she sustains the burden of proof that he or she did
23 not know, and in the exercise of reasonable care could not
24 have known, of the order.
25 (e) Notwithstanding any provision to the contrary, this
26 Law shall not apply to (i) any dealer, salesperson, or
27 investment adviser registered under the Illinois Securities
28 Law of 1953 or any investment adviser representative, or any
29 person who is regularly engaged in the business of offering
30 or selling securities in a transaction exempted under
31 subsection C, H, M, R, Q, or S of Section 4 of the Illinois
32 Securities Law of 1953 or subsection G of Section 4 of the
33 Illinois Securities Law of 1953 provided that such person is
34 registered under the federal securities law, (ii) an
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1 associated person described in subdivision (h)(2) of Section
2 15 of the Federal 1934 Act, (iii) an investment adviser
3 registered under Section 203 of the Federal 1940 Investment
4 Advisors Act, or (iv) a person described in subdivision
5 (a)(11) of Section 202 of the Federal 1940 Investment
6 Advisors Act.
7 (f) This Law shall not be deemed to apply in any manner,
8 directly or indirectly, to: (i) a State bank or national
9 bank, as those terms are defined in the Illinois Banking Act,
10 or any subsidiary of a State bank or national bank; (ii) a
11 bank holding company, as that term is defined in the Illinois
12 Bank Holding Company Act of 1957, or any subsidiary of a bank
13 holding company; (iii) a foreign banking corporation, as that
14 term is defined in the Foreign Banking Office Act, or any
15 subsidiary of a foreign banking corporation; (iv) a
16 representative office, as that term is defined in the
17 Foreign Bank Representative Office Act, (v) a corporate
18 fiduciary, as that term is defined in the Corporate Fiduciary
19 Act, or any subsidiary of a corporate fiduciary; (vi) a
20 savings bank organized under the Savings Bank Act, or a
21 federal savings bank organized under federal law, or any
22 subsidiary of a savings bank or federal savings bank; (vii) a
23 savings bank holding company organized under the Savings Bank
24 Act, or any subsidiary of a savings bank holding company;
25 (viii) an association or federal association, as those terms
26 are defined in the Illinois Savings and Loan Act of 1985, or
27 any subsidiary of an association or federal association; (ix)
28 a foreign savings and loan association or foreign savings
29 bank subject to the Illinois Savings and Loan Act of 1985, or
30 any subsidiary of a foreign savings and loan association or
31 foreign savings bank; or (x) a savings and loan association
32 holding company, as that term is defined in the Illinois
33 Savings and Loan Act of 1985, or any subsidiary of a savings
34 and loan association holding company.
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1 (Source: P.A. 89-209, eff. 1-1-96.)
2 (815 ILCS 602/5-35)
3 Sec. 5-35. Disclosure requirements.
4 (a) It shall be unlawful for any person to offer or,
5 sell any business opportunity required to be registered under
6 this Law unless a written disclosure document as filed under
7 subsection (a) of Section 5-30 of this Law is delivered to
8 each purchaser at least 10 business days prior to the
9 execution by a purchaser of any contract or agreement
10 imposing a binding legal obligation on the purchaser or the
11 payment by a purchaser of any consideration in connection
12 with the offer or sale of the business opportunity.
13 (b) The disclosure document shall have a cover sheet
14 which is entitled, in at least 10-point bold type,
15 "DISCLOSURE REQUIRED BY THE STATE OF ILLINOIS." Under the
16 title shall appear the statement in at least 10-point bold
17 type that "THE REGISTRATION OF THIS BUSINESS OPPORTUNITY DOES
18 NOT CONSTITUTE APPROVAL, RECOMMENDATION OR ENDORSEMENT
19 ENFORCEMENT BY THE STATE OF ILLINOIS. THE INFORMATION
20 CONTAINED IN THIS DISCLOSURE DOCUMENT HAS NOT BEEN VERIFIED
21 BY THIS STATE. IF YOU HAVE ANY QUESTIONS OR CONCERNS ABOUT
22 THIS INVESTMENT, SEEK PROFESSIONAL ADVICE BEFORE YOU SIGN A
23 CONTRACT OR MAKE ANY PAYMENT. YOU ARE TO BE PROVIDED 10
24 BUSINESS DAYS TO REVIEW THIS DOCUMENT BEFORE SIGNING ANY
25 CONTRACT OR AGREEMENT OR MAKING ANY PAYMENT TO THE SELLER OR
26 THE SELLER'S REPRESENTATIVE". The seller's name and principal
27 business address, along with the date of the disclosure
28 document shall also be provided on the cover sheet. No other
29 information shall appear on the cover sheet. The disclosure
30 document shall contain the following information unless the
31 seller uses a disclosure document as provided in paragraph
32 (1) or (2) of subsection (a) of Section 5-30 of this Law:
33 (1) The names and residential addresses of those
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1 salespersons who will engage in the offer or sale of the
2 business opportunity in this State.
3 (2) The name of the seller, whether the seller is
4 doing business as an individual, partnership or
5 corporation; the names under which the seller has
6 conducted, is conducting or intends to conduct business;
7 and the name of any parent or affiliated company that
8 will engage in business transactions with purchasers or
9 which will take responsibility for statements made by the
10 seller.
11 (3) The names, addresses and titles of the seller's
12 officers, directors, trustees, general managers,
13 principal executives, agents, and any other persons
14 charged with responsibility for the seller's business
15 activities relating to the sale of the business
16 opportunity.
17 (4) Prior business experience of the seller
18 relating to business opportunities including:
19 (A) The name, address, and a description of
20 any business opportunity previously offered by the
21 seller;
22 (B) The length of time the seller has offered
23 each such business opportunity; and
24 (C) The length of time the seller has
25 conducted the business opportunity currently being
26 offered to the purchaser.
27 (5) With respect to persons identified in item (3)
28 of this subsection:
29 (A) A description of the persons' business
30 experience for the 10 year period preceding the
31 filing date of this disclosure document. The
32 description of business experience shall list
33 principal occupations and employers; and
34 (B) A listing of the persons' educational and
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1 professional backgrounds including, the names of
2 schools attended and degrees received, and any other
3 information that will demonstrate sufficient
4 knowledge and experience to perform the services
5 proposed.
6 (6) Whether the seller or any person identified in
7 item (3) of this subsection:
8 (A) Has been convicted of any felony, or
9 pleaded nolo contendere to a felony charge, or has
10 been the subject of any criminal, civil or
11 administrative proceedings alleging the violation of
12 any business opportunity law, securities law,
13 commodities law, franchise law, fraud or deceit,
14 embezzlement, fraudulent conversion, restraint of
15 trade, unfair or deceptive practices,
16 misappropriation of property or comparable
17 allegations;
18 (B) Has filed in bankruptcy, been adjudged
19 bankrupt, been reorganized due to insolvency, or was
20 an owner, principal officer or general partner or
21 any other person that has so filed or was so
22 adjudged or reorganized during or within the last 7
23 years.
24 (7) The name of the person identified in item (6)
25 of this subsection, nature of and parties to the action
26 or proceeding, court or other forum, date of the
27 institution of the action, docket references to the
28 action, current status of the action or proceeding, terms
29 and conditions or any order or decree, the penalties or
30 damages assessed and terms of settlement.
31 (8) The initial payment required, or when the exact
32 amount cannot be determined, a detailed estimate of the
33 amount of the initial payment to be made to the seller.
34 (9) A detailed description of the actual services
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1 the seller agrees to perform for the purchaser.
2 (10) A detailed description of any training the
3 seller agrees to provide for the purchaser.
4 (11) A detailed description of services the seller
5 agrees to perform preform in connection with the
6 placement of equipment, products or supplies at a
7 location, as well as any agreement necessary in order to
8 locate or operate equipment, products or supplies on a
9 premises neither owned nor leased by the purchaser or
10 seller.
11 (12) A detailed description of any license or
12 permit that will be necessary in order for the purchaser
13 to engage in or operate the business opportunity.
14 (13) The business opportunity seller that is
15 required to secure a bond under Section 5-50 of this Law,
16 shall state in the disclosure document "As required by
17 the State of Illinois, the seller has secured a bond
18 issued by (insert name and address of surety company), a
19 surety company, authorized to do business in this State.
20 Before signing a contract or agreement to purchase this
21 business opportunity, you should check with the surety
22 company to determine the bond's current status.".
23 (14) Any representations made by the seller to the
24 purchaser concerning sales or earnings that may be made
25 from this business opportunity, including, but not
26 limited to:
27 (A) The bases or assumptions for any actual,
28 average, projected or forecasted sales, profits,
29 income or earnings;
30 (B) The total number of purchasers who, within
31 a period of 3 years of the date of the disclosure
32 document, purchased a business opportunity involving
33 the product, equipment, supplies or services being
34 offered to the purchaser; and
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1 (C) The total number of purchasers who, within
2 3 years of the date of the disclosure document,
3 purchased a business opportunity involving the
4 product, equipment, supplies or services being
5 offered to the purchaser who, to the seller's
6 knowledge, have actually received earnings in the
7 amount or range specified.
8 (15) Any seller who makes a guarantee to a
9 purchaser shall give a detailed description of the
10 elements of the guarantee. Such description shall
11 include, but shall not be limited to, the duration,
12 terms, scope, conditions and limitations of the
13 guarantee.
14 (16) A statement of:
15 (A) The total number of business opportunities
16 that are the same or similar in nature to those that
17 have been sold or organized by the seller;
18 (B) The names and addresses of purchasers who
19 have requested a refund or rescission from the
20 seller within the last 12 months and the number of
21 those who have received the refund or rescission;
22 and
23 (C) The total number of business opportunities
24 the seller intends to sell in this State within the
25 next 12 months.
26 (17) A statement describing any contractual
27 restrictions, prohibitions or limitations on the
28 purchaser's conduct. Attach a copy of all business
29 opportunity and other contracts or agreements proposed
30 for use or in use in this State including, without
31 limitation, all lease agreements, option agreements, and
32 purchase agreements.
33 (18) The rights and obligations of the seller and
34 the purchaser regarding termination of the business
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1 opportunity contract or agreement.
2 (19) A statement accurately describing the grounds
3 upon which the purchaser may initiate legal action to
4 terminate the business opportunity contract or agreement.
5 (20) A copy of the most recent audited financial
6 statement of the seller, prepared within 13 months of the
7 first offer in this State, together with a statement of
8 any material changes in the financial condition of the
9 seller from that date. The Secretary of State may allow
10 the seller to submit a limited review in order to satisfy
11 the requirements of this subsection.
12 (21) A list of the states in which this business
13 opportunity is registered.
14 (22) A list of the states in which this disclosure
15 document is on file.
16 (23) A list of the states which have denied,
17 suspended or revoked the registration of this business
18 opportunity.
19 (24) A section entitled "Risk Factors" containing a
20 series of short concise statements summarizing the
21 principal factors which make this business opportunity a
22 high risk or one of a speculative nature. Each statement
23 shall include a cross-reference to the page on which
24 further information regarding that risk factor can be
25 found in the disclosure document.
26 (25) Any additional information as the Secretary of
27 State may require by rule, regulation, or order.
28 (Source: P.A. 89-209, eff. 1-1-96.)
29 (815 ILCS 602/5-45)
30 Sec. 5-45. Denial, suspension, or revocation of
31 registration.
32 (a) The Secretary of State may issue an order denying
33 effectiveness to, or suspending or revoking the effectiveness
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1 of, a registration if the Secretary of State finds that the
2 order is in the public interest and that any of the following
3 exist:
4 (1) The registration as of its effective date or as
5 of any earlier date in the case of an order denying
6 effectiveness, or any amendment as of its effective date,
7 or any report is incomplete in any material respect or
8 contains any statement which was, in the light of the
9 circumstances under which it was made, false or
10 misleading with respect to any material fact.
11 (2) Any provision of this Law or any rule,
12 regulation, order, or condition lawfully imposed under
13 this Law has been willfully violated, in connection with
14 the business opportunity:
15 (A) by the person filing the registration; or
16 (B) by the seller, any partner, officer, or
17 director of the seller, any person occupying a
18 similar status or performing similar functions, or
19 any person directly or indirectly controlling or
20 controlled by the seller, but only if the person
21 filing the registration is directly or indirectly
22 controlled by or acting for the seller.
23 (3) The business opportunity registered or sought
24 to be registered is the subject of an administrative
25 order denying, suspending or revoking a registration or a
26 permanent or temporary injunction or final order of any
27 court of competent jurisdiction; but the Secretary of
28 State:
29 (A) may not institute a proceeding against an
30 effective registration under this paragraph more
31 than one year from the date of the order or
32 injunction relied on; and
33 (B) may not enter an order under this
34 paragraph on the basis of an order or injunction
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1 entered under any other state act unless that order
2 or injunction was based on facts which would
3 currently constitute a ground for an order under
4 this Section.
5 (4) The seller's enterprise or method of business,
6 or that of the business opportunity, includes or would
7 include activities which are illegal where performed.
8 (5) The business opportunity or the offering of a
9 business opportunity has worked or tended to work a fraud
10 upon purchasers or would so operate.
11 (6) There has been a failure to file any documents
12 or information required by Section 5-30 of this Law;
13 (7) The seller has failed to pay the proper filing
14 fee but the Secretary of State may enter only a denial
15 order under this paragraph and the Secretary of State
16 shall vacate any such order when the deficiency has been
17 corrected.
18 (8) The seller's literature or advertising is
19 misleading, incorrect, incomplete or deceptive.
20 (b) The Secretary of State may not institute a
21 proceeding under this Section against an effective
22 registration on the basis of a fact or transaction known to
23 the Secretary of State when the registration became effective
24 unless the proceeding is instituted within the next 30 days.
25 (c) The Secretary of State may by summary order postpone
26 or suspend the effectiveness of the registration pending
27 final determination of any proceeding under this Section.
28 Upon the entry of the order, the Secretary of State shall
29 promptly notify the seller that the order has been entered
30 and of the reasons therefor and that within 15 days after the
31 receipt of a written request the matter will be set down for
32 hearing. The written request must be made within 30 days of
33 the entry of the order. If no hearing is requested and none
34 is ordered by the Secretary of State, the order will remain
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1 in effect until it is modified or vacated by the Secretary of
2 State. If a hearing is requested or ordered, the Secretary of
3 State, after notice of an opportunity for hearing to the
4 seller, may modify or vacate the order or extend it until
5 final determination.
6 (d) No summary stop order may be entered under any part
7 of this Section, except the first sentence of subsection (c)
8 of this Section, without appropriate prior notice to the
9 seller, opportunity for hearing, and written findings of fact
10 and conclusions of law.
11 (e) The Secretary of State may vacate or modify an order
12 issued under this Section if the Secretary of State finds
13 that the conditions which prompted its entry have changed or
14 that it is otherwise in the public interest to do so.
15 (Source: P.A. 89-209, eff. 1-1-96.)
16 (815 ILCS 602/5-55)
17 Sec. 5-55. Administration of this Law.
18 (a) This Law shall be administered by the Secretary of
19 State.
20 (b) It is unlawful for the Secretary of State or any of
21 his or her officers or employees to use for personal benefit
22 any information which is filed with or obtained by the
23 Secretary of State and which is not made public. No provision
24 of this Law authorizes the Secretary of State or any of the
25 Secretary of State's officers or employees to disclose any
26 such information except among themselves or when necessary or
27 appropriate in a proceeding or investigation under this Law.
28 No provision of this Law either creates or derogates from any
29 privilege which exists at common law or otherwise when
30 documentary or other evidence is sought under a subpoena
31 directed to the Secretary of State or any of the Secretary of
32 State's officers or employees.
33 (c) In no case shall the Secretary of State or any of
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1 his or her employees or agents, in the administration of
2 this Law, incur any official or personal liability by
3 instituting an injunction or other proceeding, by denying,
4 suspending, or revoking the registration of any business
5 opportunity, by prohibiting the offer or sale of any
6 business opportunity, or by prohibiting any person from
7 offering or selling business opportunities.
8 (Source: P.A. 89-209, eff. 1-1-96.)
9 (815 ILCS 602/5-60)
10 Sec. 5-60. Investigations and subpoenas.
11 (a) The Secretary of State:
12 (1) may make such public or private investigations
13 within or outside of this State as the Secretary of State
14 deems necessary to determine whether any person has
15 violated or is about to violate any provision of this Law
16 or any rule, regulation, or order under this Law, or to
17 aid in the enforcement of this Law or in the prescribing
18 of rules and forms under this Law;
19 (2) may require or permit any person to file a
20 statement, under oath or otherwise as the Secretary of
21 State determines, as to all the facts and circumstances
22 concerning the matter to be investigated; and
23 (3) may publish information concerning any
24 violation of this Law or any rule, regulation, or order
25 under this Law.
26 (b) For the purpose of any investigation or proceeding
27 under this Law, the Secretary of State or his or her designee
28 may administer oaths and affirmations, subpoena witnesses,
29 compel their attendance, take evidence and require the
30 production of any books, papers, correspondence, memoranda,
31 agreements, or other documents or records which the Secretary
32 of State deems relevant or material to the inquiry.
33 (c) In case of contumacy by, or refusal to obey a
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1 subpoena issued to any person, through the Office of the
2 Attorney General may bring an appropriate action in any
3 circuit court of the State of Illinois for the purpose of
4 enforcing the subpoena.
5 (d) It shall be a violation of the provisions of this
6 Law for any person to fail to file with the Secretary of
7 State any report, document, or statement required to be filed
8 under the provisions of this Section or to fail to comply
9 with the terms of any order of the Secretary of State issued
10 pursuant to this Law.
11 (Source: P.A. 89-209, eff. 1-1-96.)
12 (815 ILCS 602/5-65)
13 Sec. 5-65. Remedies. Whenever it appears to the Secretary
14 of State that any person has engaged in or is about to engage
15 in any act or practice constituting a violation of any
16 provision of this Law or any rule, regulation, or order under
17 this Law, the Secretary of State may:
18 (1) Issue an order, anything contained in this Law
19 to the contrary notwithstanding, directing the person to
20 cease and desist from continuing the act or practice. Any
21 person named in a cease and desist order issued by the
22 Secretary of State may, within 30 15 days after the date
23 receipt of the entry of the order, file a written request
24 for a hearing with the Secretary of State. If the
25 Secretary of State does not receive a written request for
26 a hearing within the time specified, the cease and desist
27 order will be permanent and the person named in the order
28 will be deemed to have waived all rights to a hearing.
29 If a hearing is requested, the order will remain in force
30 until it is modified, vacated, rescinded or expunged by
31 the Secretary of State.
32 (1.5) Prohibit or suspend the offer or sale of any
33 business opportunity, prohibit or suspend any person
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1 from offering or selling any business opportunities,
2 impose any fine for violation of this Law, issue an order
3 of public censure, or enter into an agreed settlement or
4 stipulation. No such order may be entered without
5 appropriate prior notice to all interested parties,
6 opportunity for hearing, and written findings of fact and
7 conclusions of law.
8 (2) Bring an action in the circuit court of any
9 county to enjoin the acts or practices and to enforce
10 compliance with this Law or any rule, regulation, or
11 order under this Law. Upon a proper showing a permanent
12 or temporary injunction, restraining order, or writ of
13 mandamus shall be granted and a receiver or conservator
14 may be appointed for the defendant or the defendant's
15 assets or the court may order rescission, which shall
16 include restitution plus the legal interest rate, for any
17 sales of business opportunities determined to be unlawful
18 under this Law or any rule, regulation, or order under
19 this Law. The court shall not require the Secretary of
20 State to post a bond.
21 (3) The Secretary of State may refer such evidence
22 as may be available concerning violations of this Law or
23 any rule, regulation, or order under this Law to the
24 Attorney General or the appropriate State's Attorney, who
25 may, with or without such a reference, institute the
26 appropriate proceedings under this Section.
27 (4) In addition to any other sanction or remedy
28 contained in this Section, the Secretary of State, after
29 finding that any provision of this Law has been violated,
30 may impose a fine as provided by rule or order against
31 the violator not to exceed $10,000 per violation, and
32 may issue an order of public censure against the
33 violator.
34 (5) Notwithstanding the foregoing, the Secretary of
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1 State, after notice and opportunity for hearing, may at
2 his or her discretion enter into an agreed settlement,
3 stipulation, or consent order with a respondent in
4 accordance with the provisions of the Illinois
5 Administrative Procedure Act. The provisions of the
6 agreed settlement, stipulation, or consent order shall
7 have the full force and effect of an order issued by the
8 Secretary of State.
9 (6) The action of the Secretary of State in
10 denying, suspending, or revoking the registration of a
11 business opportunity, in prohibiting or suspending a
12 person from offering or selling business opportunities,
13 in prohibiting or suspending the offer or sale of
14 business opportunities, in imposing any fine for
15 violation of this Law, or in issuing any order shall be
16 subject to judicial review under the Administrative
17 Review Law which shall apply to and govern every action
18 for the judicial review of final actions or decisions of
19 the Secretary of State under this Law.
20 (Source: P.A. 89-209, eff. 1-1-96.)
21 (815 ILCS 602/5-70)
22 Sec. 5-70. Rules, forms, orders and hearings.
23 (a) The Secretary of State may amend, modify, vacate,
24 and expunge orders and may make, amend and rescind rules and,
25 forms, and orders as are necessary to carry out the
26 provisions of this Law including rules and forms governing
27 disclosure documents, applications and reports, and defining
28 any terms, whether or not used in this Law insofar as the
29 definitions are not inconsistent with the provisions of this
30 Law. For the purpose of rules and forms, the Secretary of
31 State may classify business opportunities, persons, and
32 matters within his or her jurisdiction, and prescribe
33 different requirements for different classes.
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1 (b) No rule, form, or order may be made, amended, or
2 rescinded unless the Secretary of State finds that the action
3 is necessary or appropriate in the public interest or for the
4 protection of the purchaser. In prescribing rules and forms
5 the Secretary of State may cooperate with the administrators
6 of other jurisdictions with a view to effectuating the policy
7 of this Law to achieve maximum uniformity in the form and
8 content of disclosure statements, applications, and reports
9 whenever practicable.
10 (c) No provision of this Law imposing any liability
11 applies to any act done or omitted in good faith in
12 conformity with any rule, form, or order of the Secretary of
13 State, notwithstanding that the rule, form, or order may
14 later be amended or rescinded or be determined by judicial or
15 other authority to be invalid for any reason.
16 (Source: P.A. 89-209, eff. 1-1-96.)
17 (815 ILCS 602/5-75)
18 Sec. 5-75. Administrative files and opinions.
19 (a) A document is filed with the Secretary of State
20 when all requirements of this Law with respect to filing have
21 been complied with and the required fee has been paid when it
22 is received by the Secretary of State.
23 (b) The Secretary of State shall keep records of all
24 applications for registration and disclosure documents which
25 are or have been effective under this Law and all orders
26 which have been entered under this Law. The register shall be
27 open for public inspection.
28 (c) Unless otherwise provided by law, any registration
29 statement, filing, application, or report filed with the
30 Secretary of State shall be open for public inspection.
31 (d) The Secretary of State may honor written requests
32 from interested persons for non-binding opinions upon the
33 payment of a fee established pursuant to subsection (c) of
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1 Section 5-30 of this Law, which shall not be returnable in
2 any event.
3 (Source: P.A. 89-209, eff. 1-1-96.)
4 (815 ILCS 602/5-95)
5 Sec. 5-95. Fraudulent practices. It is unlawful for any
6 person, in connection with the offer or sale of any business
7 opportunity in this State or any offer or sale pursuant to
8 the exemptions granted under subdivisions 5-10(a), (c), (d),
9 or (h), directly or indirectly:
10 (1) To employ any device, scheme or artifice to
11 defraud;
12 (2) To make any untrue statement of a material fact
13 or to omit to state a material fact necessary in order to
14 make the statements made, in the light of the
15 circumstances under which they are made, not misleading;
16 or
17 (3) To engage in any act, practice or course of
18 business which operates or would operate as a fraud or
19 deceit upon any person.
20 (Source: P.A. 89-209, eff. 1-1-96.)
21 (815 ILCS 602/5-115)
22 Sec. 5-115. Criminal penalties.
23 (a) Any person who willfully violates Sections 5-25,
24 5-50, 5-95, 5-105, 5-110, subsection (a) of Section 5-35, or
25 subsection (a) of Section 5-40, or subsection (d) of Section
26 5-60 of this Law or who willfully violates any order of which
27 the person has notice, or who violates Section 5-100 of this
28 Law knowing that the statement made was false or misleading
29 in any material respect is guilty of a Class 3 felony for
30 each offense. Each of the acts specified shall constitute a
31 separate offense and a prosecution or conviction for any one
32 of such offenses shall not bar prosecution or conviction for
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1 any other offense.
2 (b) No prosecution for any crime under this Law may be
3 commenced more than 5 years after the alleged violation.
4 (c) Nothing in this Law limits the power of the State to
5 punish any person for any conduct which constitutes a crime
6 under any other statute.
7 (d) The Secretary of State may refer such evidence as
8 may be available concerning violations of this Law or any
9 rule, regulation, or order under this Law to the Attorney
10 General or appropriate State's attorney, who may, with or
11 without such a reference, institute the appropriate criminal
12 proceedings under this Law.
13 (Source: P.A. 89-209, eff. 1-1-96.)
14 (815 ILCS 602/5-130)
15 Sec. 5-130. Miscellaneous provisions.
16 (a) No action shall be maintained under Section 5-120 of
17 this Law unless commenced before 3 years after the act or
18 transaction constituting the violation.
19 (a-5) No administrative action shall be brought by the
20 Secretary of State for relief under this Law after the
21 earlier to occur of (i) 3 years from the date upon which the
22 Secretary of State had notice of facts which in the exercise
23 of reasonable diligence would lead to actual knowledge of
24 the alleged violation of the Act, or (ii) 5 years from the
25 date on which the alleged violation occurred.
26 (b) The rights and and remedies under this Law are in
27 addition to any other rights or remedies that may exist at
28 law or in equity.
29 (c) Any condition, stipulation or provision binding any
30 purchaser of a business opportunity to waive compliance with
31 or relieving a person from any duty or liability imposed by
32 or any right provided by this Law or any rule, regulation or
33 order issued pursuant to this Law is void.
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1 (Source: P.A. 89-209, eff. 1-1-96.)
2 Section 99. Effective date. This Act takes effect July
3 1, 1997.