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90_HB1168ham001
LRB9004729SMdvam02
1 AMENDMENT TO HOUSE BILL 1168
2 AMENDMENT NO. . Amend House Bill 1168 by replacing
3 the title with the following:
4 "AN ACT concerning financial transactions."; and
5 by replacing everything after the enacting clause with the
6 following:
7 "Section 5. The Illinois Securities Law of 1953 is
8 amended by changing Sections 2.3, 2.9, 2.10, 2.11, 2.12b,
9 2.17b, 2.26, 3, 4, 5, 6, 7, 8, 9, 10, 11, 11a, 12, and 13,
10 and by adding Sections 2.12c, 2.17f, 2.29, 2.30, 2.31, 2.32,
11 and 2a as follows:
12 (815 ILCS 5/2.3) (from Ch. 121 1/2, par. 137.2-3)
13 Sec. 2.3 "Person" means an individual, a corporation, a
14 partnership, an association, a joint stock company, a limited
15 liability company, a limited liability partnership, a trust
16 or any unincorporated organization. As used in this Section,
17 "trust" includes only a trust where the interest or interests
18 of the beneficiary or beneficiaries is a security.
19 (Source: Laws 1961, p. 3663.)
20 (815 ILCS 5/2.9) (from Ch. 121 1/2, par. 137.2-9)
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1 Sec. 2.9. "Salesperson" means an individual, other than
2 an issuer or a dealer, employed or appointed or authorized by
3 a dealer, issuer or controlling person to offer, purchase or
4 sell securities in this State. The partners or officers of a
5 dealer or issuer shall not be deemed to be salespersons
6 within the meaning of this definition if they are not or have
7 not been regularly engaged in securities offering, purchasing
8 or selling activities other than transactions for their own
9 respective accounts. No individual shall be deemed to be a
10 salesperson solely by reason of effecting transactions in a
11 covered security to qualified purchasers as described in
12 Section 18(b)(3) of the Federal 1933 Act, effecting
13 transactions in a covered security as described in Section
14 18(b)(4)(D) of the Federal 1933 Act, or engaging in the fact
15 that such individual is engaged in making offers or effecting
16 sales of securities to employees of the issuer of such
17 securities or to employees of the parent or any wholly-owned
18 subsidiary of such issuer, provided that such individual is
19 an employee of such issuer, parent or subsidiary who has not
20 been employed primarily to make such offers or sales and who
21 receives no special compensation, directly or indirectly, for
22 or on account of any such offer or sale. "Salesperson" also
23 means a limited Canadian salesperson.
24 (Source: P.A. 84-869.)
25 (815 ILCS 5/2.10) (from Ch. 121 1/2, par. 137.2-10)
26 Sec. 2.10. "Registered salesperson" means a salesperson
27 registered under Section 8 of this Act. "Registered
28 salesperson" also means a registered limited Canadian
29 salesperson.
30 (Source: P.A. 80-556.)
31 (815 ILCS 5/2.11) (from Ch. 121 1/2, par. 137.2-11)
32 Sec. 2.11. Investment adviser. "Investment adviser"
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1 means any person who, for compensation, engages in this State
2 in the business of advising others, either directly or
3 through publications or writings, as to the value of
4 securities or as to the advisability of investing in,
5 purchasing, or selling securities or who, in this State for
6 direct or indirect compensation and as part of a regular
7 advisory business, issues or promulgates analyses or reports
8 concerning securities or any financial planner or other
9 person who, as an integral component of other financially
10 related services, provides the foregoing investment advisory
11 services to others for compensation and as part of a business
12 or who holds himself or herself out as providing the
13 foregoing investment advisory services to others for
14 compensation; but "investment adviser" does not include:
15 (1) a bank or trust company, or the regular employees of
16 a bank or trust company;
17 (2) any lawyer, accountant, engineer, geologist or
18 teacher (i) whose performance of such services is solely
19 incidental to the practice of his or her profession or (ii)
20 who:
21 (A) does not exercise investment discretion with
22 respect to the assets of clients or maintain custody of
23 the assets of clients for the purpose of investing those
24 assets, except when the person is acting as a bona fide
25 fiduciary in a capacity such as an executor, trustee,
26 personal representative, estate or trust agent, guardian,
27 conservator, or person serving in a similar fiduciary
28 capacity;
29 (B) does not accept or receive, directly or
30 indirectly, any commission, fee, or other remuneration
31 contingent upon the purchase or sale of any specific
32 security by a client of such person; and
33 (C) does not advise on the purchase or sale of
34 specific securities, except that this clause (C) shall
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1 not apply when the advice about specific securities is
2 based on financial statement analyses or tax
3 considerations that are reasonably related to and in
4 connection with the person's profession;
5 (3) any registered dealer or partner, officer, director
6 or regular employee of a registered dealer, or registered
7 salesperson, whose performance of these services, in each
8 case, is solely incidental to the conduct of the business of
9 the registered dealer or registered salesperson, as the case
10 may be, and who receives no special compensation, directly or
11 indirectly, for such services;
12 (4) any publisher or regular employee of such publisher
13 of a bona fide newspaper, news magazine or business or
14 financial publication of regular and established paid
15 circulation;
16 (5) any person whose advice, analyses or reports relate
17 only to securities which are direct obligations of, or
18 obligations guaranteed as to principal or interest by, the
19 United States, any state or any political subdivision of any
20 state, or any public agency or public instrumentality of any
21 one or more of the foregoing; or
22 (5.5) any person who is a federal covered investment
23 adviser; or
24 (6) any other persons who are not within the intent of
25 this Section as the Secretary of State may designate by rules
26 and regulations or order.
27 (Source: P.A. 87-463.)
28 (815 ILCS 5/2.12b) (from Ch. 121 1/2, par. 137.2-12b)
29 Sec. 2.12b. Investment adviser representative.
30 "Investment adviser representative" means any partner,
31 officer, director of (or a person occupying a similar status
32 or performing similar functions), or other natural person
33 employed by or associated with an investment adviser, except
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1 clerical or ministerial personnel, who in this State:
2 (1) makes any recommendations or otherwise renders
3 advice regarding securities;
4 (2) manages accounts or portfolios of clients;
5 (3) determines what recommendation or advice regarding
6 securities should be given; or
7 (4) supervises any employee who performs any of the
8 foregoing.
9 "Investment adviser representative" does not mean a
10 federal covered investment adviser, a supervised person of a
11 federal covered investment adviser, or a person defined by
12 rule of the Securities and Exchange Commission under Section
13 203A of the Federal Investment Advisers Act as an investment
14 adviser representative.
15 (Source: P.A. 87-463.)
16 (815 ILCS 5/2.12c new)
17 Sec. 2.12c. Registered investment adviser
18 representative. "Registered investment adviser
19 representative" means an investment adviser representative
20 registered under Section 8 of this Act.
21 (815 ILCS 5/2.17b) (from Ch. 121 1/2, par. 137.2-17b)
22 Sec. 2.17b. Federal 1974 Act. "Federal 1974 Act" means
23 the Act of Congress of the United States known as the
24 Commodity Exchange Futures Trading Commission Act of 1974, as
25 amended.
26 (Source: P.A. 89-209, eff. 1-1-96.)
27 (815 ILCS 5/2.17f new)
28 Sec. 2.17f. Federal 1996 Act. "Federal 1996 Act" means
29 the Act of Congress of the United States known as the
30 National Securities Markets Improvement Act of 1996.
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1 (815 ILCS 5/2.26) (from Ch. 121 1/2, par. 137.2-26)
2 Sec. 2.26. Mineral investment contract. "Mineral
3 investment contract" means any investment, account,
4 agreement, or contract whereby the investor's profits are
5 dependent upon the transportation, mining, minting, milling,
6 flotation, refining, hallmarking, sale, resale, or repurchase
7 of a metal or mineral, even if there is any potential for
8 profit from fluctuation in the value of the metal or mineral,
9 except any contract or agreement for the sale or purchase of
10 a metal or mineral between merchants. Nothing herein shall
11 affect the jurisdiction or authority of the Commodity Futures
12 Trading Commission under the Federal 1974 1936 Act or the
13 application of any provision thereof or regulation thereunder
14 to any person or transaction subject thereto. The Secretary
15 of State may, for the purposes of this Section by rules and
16 regulations, define the term "between merchants".
17 (Source: P.A. 87-463.)
18 (815 ILCS 5/2.29 new)
19 Sec. 2.29 Covered security. "Covered security" means
20 any security that is a covered security under Section 18(b)
21 of the Federal 1933 Act or rules or regulations promulgated
22 thereunder.
23 (815 ILCS 5/2.30 new)
24 Sec. 2.30. Federal covered investment adviser. "Federal
25 covered investment adviser" means a person who is (i)
26 registered under Section 203 of the Federal 1940 Investment
27 Advisers Act or (ii) is excluded from the definition of
28 "investment adviser" under Section 202(a)(11) of the Federal
29 1940 Investment Advisers Act.
30 (815 ILCS 5/2.31 new)
31 Sec. 2.31. Limited Canadian salesperson. "Limited
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1 Canadian salesperson" means a salesperson who is a resident
2 of Canada, has no office or other physical presence in this
3 State, and complies with conditions specified by the
4 Secretary of State through rule or order.
5 (815 ILCS 5/2.32 new)
6 Sec. 2.32. Limited Canadian dealer. "Limited Canadian
7 dealer" means a dealer who is a resident of Canada, has no
8 office or other physical presence in this State, and complies
9 with conditions specified by the Secretary of State through
10 rule or order.
11 (815 ILCS 5/2a new)
12 Sec. 2a. Notification filing requirements of issuers of
13 any covered security and payment of fees. All issuers of any
14 covered security (except any security listed or authorized
15 for listing on the New York Stock Exchange or American Stock
16 Exchange or listed on the National Market System of the
17 Nasdaq Stock Market (or any successor to such entities), or
18 listed or authorized for listing on a national securities
19 exchange (or tier or segment thereof) that has listing
20 standards that the federal Securities and Exchange Commission
21 by rule (on its own initiative or on the basis of petition)
22 has determined are substantially similar to the listing
23 standards applicable to any security described in this
24 Section, or is a security of the same issuer that is equal in
25 seniority or that is a senior security described in this
26 Section) shall annually file a notification with the
27 Secretary of State in such form and manner as prescribed by
28 rule or order and pay the notification filing fee established
29 under Section 11a of this Act which shall not be returnable
30 in any event.
31 Anything in this Act to the contrary notwithstanding,
32 until October 10, 1999 or other date as may be legally
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1 permissible, the refusal to file the notification or pay the
2 fee by an issuer of any covered security (except issuers of
3 securities which are being sold under Regulation D, Section
4 506 of the Federal 1933 Act) after written notice by the
5 Secretary of State (which may be by United States Postal
6 Service, facsimile or electronic transmission or other
7 similar means), shall require the issuer or his, her, or its
8 designee to file an application for registration with the
9 Secretary of State under subsection A or B of Section 5, 6,
10 or 7 of this Act and pay the registration fee established
11 under Section 11a of this Act which shall not be returnable
12 in any event. The failure to file any such notification
13 shall constitute a violation of subsection D of Section 12 of
14 this Act, subject to the penalties enumerated in Section 14
15 of this Act. The civil remedies provided for in subsection A
16 of Section 13 of this Act and the civil remedies of
17 rescission and appointment of a receiver, conservator,
18 ancillary receiver, or ancillary conservator provided for in
19 subsection F of Section 13 of this Act shall not be available
20 against any person by reason of the failure to file any such
21 notification or to pay the notification fee.
22 (815 ILCS 5/3) (from Ch. 121 1/2, par. 137.3)
23 Sec. 3. The provisions of Sections 2a, 5, 6 and 7 of
24 this Act shall not apply to any of the following securities:
25 A. Any security (including a revenue obligation) issued
26 or guaranteed by the United States, any state, any political
27 subdivision of a state, or any agency or corporation or other
28 instrumentality of any one or more of the foregoing, or any
29 certificate of deposit for any such security.
30 B. Any security issued or guaranteed by Canada, any
31 Canadian province, any political subdivision of any such
32 province, any agency or corporation or other instrumentality
33 of one or more of the foregoing, or any other foreign
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1 government with which the United States then maintains
2 diplomatic relations, if the security is recognized as a
3 valid obligation by the issuer or guarantor.
4 C. (1) Any security issued by and representing an
5 interest in or a debt of, or guaranteed by, any bank or
6 savings bank organized under the laws of the United States,
7 or any bank, savings bank, savings institution or trust
8 company organized and supervised under the laws of any state,
9 or any interest or participation in any common trust fund or
10 similar fund maintained by any such bank, savings bank,
11 savings institution or trust company exclusively for the
12 collective investment and reinvestment of assets contributed
13 thereto by such bank, savings bank, savings institution or
14 trust company or any affiliate thereof, in its capacity as
15 fiduciary, trustee, executor, administrator or guardian.
16 (2) Any security issued or guaranteed to both principal
17 and interest by an international bank of which the United
18 States is a member.
19 D. (1) Any security issued by and representing an
20 interest in or a debt of, or guaranteed by, any federal
21 savings and loan association, or any savings and loan
22 association or building and loan association organized and
23 supervised under the laws of any state.
24 (2) Any security issued or guaranteed by any federal
25 credit union or any credit union, industrial loan
26 association, or similar organization organized and supervised
27 under the laws of any state.
28 E. Any security issued or guaranteed by any railroad,
29 other common carrier, public utility or holding company where
30 such issuer or guarantor is subject to the jurisdiction of
31 the Interstate Commerce Commission or successor entity, or is
32 a registered holding company under the Public Utility Holding
33 Company Act of 1935 or a subsidiary of such a company within
34 the meaning of that Act, or is regulated in respect of its
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1 rates and charges by a governmental authority of the United
2 States or any state, or is regulated in respect of the
3 issuance or guarantee of the security by a governmental
4 authority of the United States, any state, Canada, or any
5 Canadian province.
6 F. Equipment trust certificates in respect of equipment
7 leased or conditionally sold to a person, if securities
8 issued by such person would be exempt under subsection E of
9 this Section.
10 G. Any security which at the time of sale is listed or
11 approved for listing upon notice of issuance on the New York
12 Stock Exchange, Inc., the American Stock Exchange, Inc., the
13 Pacific Stock Exchange, Inc., the Chicago Stock Exchange,
14 Inc., the Chicago Board of Trade, the Philadelphia Stock
15 Exchange, Inc., the Chicago Board Options Exchange,
16 Incorporated, the Nasdaq National Market System of the Nasdaq
17 Stock Market, or any other exchange, automated quotation
18 system or board of trade which the Secretary of State, by
19 rule or regulation, deems to have substantially equivalent
20 standards for listing or designation as required by any such
21 exchange, automated quotation system or board of trade; and
22 securities senior or of substantially equal rank, both as to
23 dividends or interest and upon liquidation, to securities so
24 listed or designated; and warrants and rights to purchase any
25 of the foregoing; provided, however, that this subsection G
26 shall not apply to investment fund shares or securities of
27 like character, which are being continually offered at a
28 price or prices determined in accordance with a prescribed
29 formula.
30 The Secretary of State may, after notice and opportunity
31 for hearing, revoke the exemption afforded by this
32 subparagraph with respect to any securities by issuing an
33 order if the Secretary of State finds that the further sale
34 of the securities in this State would work or tend to work a
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1 fraud on purchasers of the securities.
2 H. Any security issued by a person organized and
3 operated not for pecuniary profit and exclusively for
4 religious, educational, benevolent, fraternal, agricultural,
5 charitable, athletic, professional, trade, social or
6 reformatory purposes, or as a chamber of commerce or local
7 industrial development corporation, or for more than one of
8 said purposes and no part of the net earnings of which inures
9 to the benefit of any private stockholder or member.
10 I. Instruments evidencing indebtedness under an
11 agreement for the acquisition of property under contract of
12 conditional sale.
13 J. A note secured by a first mortgage upon tangible
14 personal or real property when such mortgage is made,
15 assigned, sold, transferred and delivered with such note or
16 other written obligation secured by such mortgage, either to
17 or for the benefit of the purchaser or lender; or bonds or
18 notes not more than 10 in number secured by a first mortgage
19 upon the title in fee simple to real property if the
20 aggregate principal amount secured by such mortgage does not
21 exceed $500,000 and also does not exceed 75% of the fair
22 market value of such real property.
23 K. A note or notes not more than 10 in number secured by
24 a junior mortgage lien if the aggregate principal amount of
25 the indebtedness represented thereby does not exceed 50% of
26 the amount of the then outstanding prior lien indebtedness
27 and provided that the total amount of the indebtedness
28 (including the indebtedness represented by the subject junior
29 mortgage note or notes) shall not exceed 90% of the fair
30 market value of the property securing such indebtedness; and
31 provided further that each such note or notes shall bear
32 across the face thereof the following legend in letters at
33 least as large as 12 point type: "THIS NOTE IS SECURED BY A
34 JUNIOR MORTGAGE".
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1 L. Any negotiable promissory note or draft, bill of
2 exchange or bankers' acceptance which arises out of a current
3 transaction or the proceeds of which have been or are to be
4 used for current transactions, and which evidences an
5 obligation to pay cash within 9 months of the date of
6 issuance exclusive of days of grace, or any renewal of such
7 note, draft, bill or acceptance which is likewise limited, or
8 any guarantee of such note, draft, bill or acceptance or of
9 any such renewal, provided that the note, draft, bill, or
10 acceptance is a negotiable security eligible for discounting
11 by banks that are members of the Federal Reserve System. Any
12 instrument exempted under this subsection from the
13 requirement of Sections 5, 6, and 7 of this Act shall bear
14 across the face thereof the following legend in letters at
15 least as large as 12 point type: "THIS INSTRUMENT IS NEITHER
16 GUARANTEED, NOR IS THE ISSUANCE THEREOF REGULATED BY ANY
17 AGENCY OR DEPARTMENT OF THE STATE OF ILLINOIS OR THE UNITED
18 STATES.". However, the foregoing legend shall not be
19 required with respect to any such instrument:
20 (i) sold to a person described in subsection C or H
21 of Section 4 of this Act;
22 (ii) sold to a "Qualified Institutional Buyer" as
23 that term is defined in Rule 144a adopted under the
24 Securities Act of 1933;
25 (iii) where the minimum initial subscription for
26 the purchase of such instrument is $100,000 or more; or
27 (iv) issued by an issuer that has any class of
28 securities registered under Section 12 of the Securities
29 Exchange Act of 1934 or has any outstanding class of
30 indebtedness rated in one of the 3 highest categories by
31 a rating agency designated by the Department;
32 M. Any security issued by and representing an interest
33 in or a debt of, or guaranteed by, any insurance company
34 organized under the laws of any state.
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1 N. Any security issued pursuant to (i) a written
2 compensatory benefit plan (including without limitation, any
3 purchase, savings, option, bonus, stock appreciation, profit
4 sharing, thrift, incentive, pension, or similar plan) and
5 interests in such plans established by one or more of the
6 issuers thereof or its parents or majority-owned subsidiaries
7 for the participation of their employees, directors, general
8 partners, trustees (where the issuer is a business trust),
9 officers, or consultants or advisers of such issuers or its
10 parents or majority-owned subsidiaries, provided that bona
11 fide services are rendered by consultants or advisers and
12 those services are not in connection with the offer and sale
13 of securities in a capital-raising transaction or (ii) a
14 written contract relating to the compensation of any such
15 person.
16 O. Any option, put, call, spread or straddle issued by a
17 clearing agency registered as such under the Federal 1934
18 Act, if the security, currency, commodity, or other interest
19 underlying the option, put, call, spread or straddle is not
20 required to be registered under Section 5.
21 P. Any security which meets all of the following
22 conditions:
23 (1) If the issuer is not organized under the laws
24 of the United States or a state, it has appointed a duly
25 authorized agent in the United States for service of
26 process and has set forth the name and address of the
27 agent in its prospectus.
28 (2) A class of the issuer's securities is required
29 to be and is registered under Section 12 of the Federal
30 1934 Act, and has been so registered for the three years
31 immediately preceding the offering date.
32 (3) Neither the issuer nor a significant subsidiary
33 has had a material default during the last seven years,
34 or for the period of the issuer's existence if less than
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1 seven years, in the payment of (i) principal, interest,
2 dividend, or sinking fund installment on preferred stock
3 or indebtedness for borrowed money, or (ii) rentals under
4 leases with terms of three years or more.
5 (4) The issuer has had consolidated net income,
6 before extraordinary items and the cumulative effect of
7 accounting changes, of at least $1,000,000 in four of its
8 last five fiscal years including its last fiscal year;
9 and if the offering is of interest bearing securities,
10 has had for its last fiscal year, net income, before
11 deduction for income taxes and depreciation, of at least
12 1-1/2 times the issuer's annual interest expense, giving
13 effect to the proposed offering and the intended use of
14 the proceeds. For the purposes of this clause "last
15 fiscal year" means the most recent year for which audited
16 financial statements are available, provided that such
17 statements cover a fiscal period ended not more than 15
18 months from the commencement of the offering.
19 (5) If the offering is of stock or shares other
20 than preferred stock or shares, the securities have
21 voting rights and the rights include (i) the right to
22 have at least as many votes per share, and (ii) the right
23 to vote on at least as many general corporate decisions,
24 as each of the issuer's outstanding classes of stock or
25 shares, except as otherwise required by law.
26 (6) If the offering is of stock or shares, other
27 than preferred stock or shares, the securities are owned
28 beneficially or of record, on any date within six months
29 prior to the commencement of the offering, by at least
30 1,200 persons, and on that date there are at least
31 750,000 such shares outstanding with an aggregate market
32 value, based on the average bid price for that day, of at
33 least $3,750,000. In connection with the determination
34 of the number of persons who are beneficial owners of the
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1 stock or shares of an issuer, the issuer or dealer may
2 rely in good faith for the purposes of this clause upon
3 written information furnished by the record owners.
4 (7) The issuer meets the conditions specified in
5 paragraphs (2), (3) and (4) of this subsection P if
6 either the issuer or the issuer and the issuer's
7 predecessor, taken together, meet such conditions and if:
8 (a) the succession was primarily for the purpose of
9 changing the state of incorporation of the predecessor or
10 forming a holding company and the assets and liabilities
11 of the successor at the time of the succession were
12 substantially the same as those of the predecessor; or
13 (b) all predecessors met such conditions at the time of
14 succession and the issuer has continued to do so since
15 the succession.
16 Q. Any security appearing on the List of OTC Margin
17 Stocks published by the Board of Governors of the Federal
18 Reserve System; any other securities of the same issuer which
19 are of senior or substantially equal rank; any securities
20 called for by subscription rights or warrants so listed or
21 approved; or any warrants or rights to purchase or subscribe
22 to any of the foregoing.
23 R. Any security issued by a bona fide agricultural
24 cooperative operating in this State that is organized under
25 the laws of this State or as a foreign cooperative
26 association organized under the law of another state that has
27 been duly qualified to transact business in this State.
28 (Source: P.A. 89-209, eff. 1-1-96.)
29 (815 ILCS 5/4) (from Ch. 121 1/2, par. 137.4)
30 Sec. 4. Exempt transactions. The provisions of Sections
31 2a, 5, 6 and 7 of this Act shall not apply to any of the
32 following transactions, except where otherwise specified in
33 this Section 4:
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1 A. Any offer or sale, whether through a dealer or
2 otherwise, of securities by a person who is not an issuer,
3 underwriter, dealer or controlling person in respect of such
4 securities, and who, being the bona fide owner of such
5 securities, disposes thereof for his or her own account;
6 provided, that such offer or sale is not made directly or
7 indirectly for the benefit of the issuer or of an underwriter
8 or controlling person.
9 B. Any offer, sale, issuance or exchange of securities
10 of the issuer to or with security holders of the issuer
11 except to or with persons who are security holders solely by
12 reason of holding transferable warrants, transferable
13 options, or similar transferable rights of the issuer, if no
14 commission or other remuneration is paid or given directly or
15 indirectly for or on account of the procuring or soliciting
16 of such sale or exchange (other than a fee paid to
17 underwriters based on their undertaking to purchase any
18 securities not purchased by security holders in connection
19 with such sale or exchange).
20 C. Any offer, sale or issuance of securities to any
21 corporation, bank, savings bank, savings institution, savings
22 and loan association, trust company, insurance company,
23 building and loan association, or dealer; to a pension fund,
24 pension trust, or employees' profit sharing trust, other
25 financial institution or institutional investor, any
26 government or political subdivision or instrumentality
27 thereof, whether the purchaser is acting for itself or in
28 some fiduciary capacity; to any partnership or other
29 association engaged as a substantial part of its business or
30 operations in purchasing or holding securities; to any trust
31 in respect of which a bank or trust company is trustee or
32 co-trustee; to any entity in which at least 90% of the equity
33 is owned by persons described under subsection C, H, or S of
34 this Section 4; to any employee benefit plan within the
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1 meaning of Title I of the Federal ERISA Act if (i) the
2 investment decision is made by a plan fiduciary as defined in
3 Section 3(21) of the Federal ERISA Act and such plan
4 fiduciary is either a bank, savings and loan association,
5 insurance company, registered investment adviser or an
6 investment adviser registered under the Federal 1940
7 Investment Advisers Act, or (ii) the plan has total assets in
8 excess of $5,000,000, or (iii) in the case of a self-directed
9 plan, investment decisions are made solely by persons that
10 are described under subsection C, D, H or S of this Section
11 4; to any plan established and maintained by, and for the
12 benefit of the employees of, any state or political
13 subdivision or agency or instrumentality thereof if such plan
14 has total assets in excess of $5,000,000; or to any
15 organization described in Section 501(c)(3) of the Internal
16 Revenue Code of 1986, any Massachusetts or similar business
17 trust, or any partnership, if such organization, trust, or
18 partnership has total assets in excess of $5,000,000.
19 D. The Secretary of State is granted authority to create
20 by rule or regulation a limited offering transactional
21 exemption that furthers the objectives of compatibility with
22 federal exemptions and uniformity among the states. The
23 Secretary of State shall prescribe by rule or regulation the
24 amount of the fee for filing any report required under this
25 subsection, but the fee shall not be less than the minimum
26 amount nor more than the maximum amount established under
27 Section 11a of this Act and shall not be returnable in any
28 event.
29 E. Any offer or sale of securities by an executor,
30 administrator, guardian, receiver or trustee in insolvency or
31 bankruptcy, or at any judicial sale, or at a public sale by
32 auction held at an advertised time and place, or the offer or
33 sale of securities in good faith and not for the purpose of
34 avoiding the provisions of this Act by a pledgee of
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1 securities pledged for a bona fide debt.
2 F. Any offer or sale by a registered dealer, either as
3 principal or agent, of any securities (except face amount
4 certificate contracts and investment fund shares) at a price
5 reasonably related to the current market price of such
6 securities, provided:
7 (1)(a) the securities are issued and outstanding;
8 (b) the issuer is required to file reports pursuant
9 to Section 13 or Section 15(d) of the Federal 1934 Act
10 and has been subject to such requirements during the 90
11 day period immediately preceding the date of the offer or
12 sale, or is an issuer of a security covered by Section
13 12(g)(2)(B) or (G) of the Federal 1934 Act;
14 (c) the dealer has a reasonable basis for believing
15 that the issuer is current in filing the reports required
16 to be filed at regular intervals pursuant to the
17 provisions of Section 13 or Section 15(d), as the case
18 may be, of the Federal 1934 Act, or in the case of
19 insurance companies exempted from Section 12(g) of the
20 Federal 1934 Act by subparagraph 12(g)(2)(G) thereof, the
21 annual statement referred to in Section 12(g)(2)(G)(i) of
22 the Federal 1934 Act; and
23 (d) the dealer has in its records, and makes
24 reasonably available upon request to any person
25 expressing an interest in a proposed transaction in the
26 securities, the issuer's most recent annual report filed
27 pursuant to Section 13 or 15(d), as the case may be, of
28 the Federal 1934 Act or the annual statement in the case
29 of an insurance company exempted from Section 12(g) of
30 the Federal 1934 Act by subparagraph 12(g)(2)(G) thereof,
31 together with any other reports required to be filed at
32 regular intervals under the Federal 1934 Act by the
33 issuer after such annual report or annual statement;
34 provided that the making available of such reports
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1 pursuant to this subparagraph, unless otherwise
2 represented, shall not constitute a representation by the
3 dealer that the information is true and correct, but
4 shall constitute a representation by the dealer that the
5 information is reasonably current; or
6 (2)(a) prior to any offer or sale, an application
7 for the authorization thereof and a report as set forth
8 under sub-paragraph (d) of this paragraph (2) has been
9 filed by any registered dealer with and approved by the
10 Secretary of State pursuant to such rules and regulations
11 as the Secretary of State may prescribe;
12 (b) the Secretary of State shall have the power by
13 order to refuse to approve any application or report
14 filed pursuant to this paragraph (2) if
15 (i) the application or report does not comply
16 with the provisions of this paragraph (2), or
17 (ii) the offer or sale of such securities
18 would work or tend to work a fraud or deceit, or
19 (iii) the issuer or the applicant has violated
20 any of the provisions of this Act;
21 (c) each application and report filed pursuant to
22 this paragraph (2) shall be accompanied by a filing fee
23 and an examination fee in the amount established pursuant
24 to Section 11a of this Act, which shall not be returnable
25 in any event;
26 (d) there shall be submitted to the Secretary of
27 State no later than 120 days following the end of the
28 issuer's fiscal year, each year during the period of the
29 authorization, one copy of a report which shall contain a
30 balance sheet and income statement prepared as of the
31 issuer's most recent fiscal year end certified by an
32 independent certified public accountant, together with
33 such current information concerning the securities and
34 the issuer thereof as the Secretary of State may
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1 prescribe by rule or regulation or order;
2 (e) prior to any offer or sale of securities under
3 the provisions of this paragraph (2), each registered
4 dealer participating in the offer or sale of such
5 securities shall provide upon request of prospective
6 purchasers of such securities a copy of the most recent
7 report required under the provisions of sub-paragraph (d)
8 of this paragraph (2);
9 (f) approval of an application filed pursuant to
10 this paragraph (2) of subsection F shall expire 5 years
11 after the date of the granting of the approval, unless
12 said approval is sooner terminated by (1) suspension or
13 revocation by the Secretary of State in the same manner
14 as is provided for in subsections E, F and G of Section
15 11 of this Act, or (2) the applicant filing with the
16 Secretary of State an affidavit to the effect that (i)
17 the subject securities have become exempt under Section 3
18 of this Act or (ii) the applicant no longer is capable of
19 acting as the applicant and stating the reasons therefor
20 or (iii) the applicant no longer desires to act as the
21 applicant. In the event of the filing of an affidavit
22 under either preceding sub-division (ii) or (iii) the
23 Secretary of State may authorize a substitution of
24 applicant upon the new applicant executing the
25 application as originally filed. However, the
26 aforementioned substituted execution shall have no effect
27 upon the previously determined date of expiration of
28 approval of the application. Notwithstanding the
29 provisions of this subparagraph (f), approvals granted
30 under this paragraph (2) of subsection F prior to the
31 effective date of this Act shall be governed by the
32 provisions of this Act in effect on such date of
33 approval; and
34 (g) no person shall be considered to have violated
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1 Section 5 of this Act by reason of any offer or sale
2 effected in reliance upon an approval granted under this
3 paragraph (2) after a termination thereof under the
4 foregoing subparagraph (f) if official notice of such
5 termination has not been circulated generally to dealers
6 by the Secretary of State and if such person sustains the
7 burden of proof that he or she did not know, and in the
8 exercise of reasonable care, could not have known, of the
9 termination; or
10 (3) the securities, or securities of the same
11 class, are the subject of an existing registration under
12 Section 5 of this Act.
13 The exemption provided in this subsection F shall apply
14 only if the offer or sale is made in good faith and not for
15 the purpose of avoiding any of the provisions of this Act,
16 and only if the offer or sale is not made for the direct or
17 indirect benefit of the issuer of the securities, or the
18 controlling person in respect of such issuer.
19 G. (1) Any offer, sale or issuance of a security,
20 whether to residents or to non-residents of this State,
21 where:
22 (a) all sales of such security to residents of this
23 State (including the most recent such sale) within the
24 immediately preceding 12-month period have been made to
25 not more than 35 persons or have involved an aggregate
26 sales price of not more than $1,000,000 $500,000;
27 (b) such security is not offered or sold by means
28 of any general advertising or general solicitation in
29 this State; and
30 (c) no commission, discount, or other remuneration
31 exceeding 20% of the sale price of such security, if sold
32 to a resident of this State, is paid or given directly or
33 indirectly for or on account of such sales.
34 (2) In computing the number of resident purchasers or
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1 the aggregate sales price under paragraph (1) (a) above,
2 there shall be excluded any purchaser or dollar amount of
3 sales price, as the case may be, with respect to any security
4 which at the time of its sale was exempt under Section 3 or
5 was registered under Section 5, 6 or 7 or was sold in a
6 transaction exempt under other subsections of this Section 4.
7 (3) A prospectus or preliminary prospectus with respect
8 to a security for which a registration statement is pending
9 or effective under the Federal 1933 Act shall not be deemed
10 to constitute general advertising or general solicitation in
11 this State as such terms are used in paragraph (1) (b) above,
12 provided that such prospectus or preliminary prospectus has
13 not been sent or otherwise delivered to more than 150
14 residents of this State.
15 (4) The Secretary of State shall by rule or regulation
16 require the filing of a report or reports of sales made to
17 residents of this State in reliance upon the exemption
18 provided by this subsection G and prescribe the form of such
19 report and the time within which such report shall be filed.
20 Such report shall set forth the name and address of the
21 issuer and of the controlling person, if the sale was for the
22 direct or indirect benefit of such person, the total amount
23 of the securities sold under this subsection G to residents
24 of this State, the names and addresses of the resident
25 purchasers, a representation that sales of such securities
26 were not made to residents of this State in excess of those
27 permitted by this subsection G, and any other information
28 deemed necessary by the Secretary of State to enforce
29 compliance with this subsection G. The Secretary of State
30 shall prescribe by rule or regulation the amount of the fee
31 for filing any such report, but such fee shall not be less
32 than the minimum amount nor more than the maximum amount
33 established pursuant to Section 11a of this Act, which and
34 shall not be returnable in any event. The Secretary of State
-23- LRB9004729SMdvam02
1 may impose, in such cases as he or she may deem appropriate,
2 a penalty for failure to file any such report in a timely
3 manner, but no such penalty shall exceed an amount equal to
4 five times the filing fee. The contents of any such report
5 or portion thereof may shall be deemed confidential by the
6 Secretary of State by rule or order and if so deemed shall
7 not be disclosed to the public except by order of court or in
8 court proceedings. The failure to file any such report shall
9 not affect the availability of such exemption, but such
10 failure to file any such report shall constitute a violation
11 of subsection D of Section 12 of this Act, subject to the
12 penalties enumerated in Section 14 of this Act. The civil
13 remedies provided for in subsection A of Section 13 of this
14 Act and the civil remedies of rescission and appointment of a
15 receiver, conservator, ancillary receiver or ancillary
16 conservator provided for in subsection F of Section 13 of
17 this Act shall not be available against any person by reason
18 of the failure to file any such report or on account of the
19 contents of any such report.
20 H. Any offer, sale or issuance of a security to (1) any
21 natural person who has, or is reasonably believed by the
22 person relying upon this subsection H to have, a net worth or
23 joint net worth with that person's spouse, at the time of the
24 offer, sale or issuance, in excess of $1,000,000, or (2) any
25 natural person who had, or is reasonably believed by the
26 person relying upon this subsection H to have had, an income
27 or joint income with that person's spouse, in excess of
28 $200,000 in each of the two most recent years and who
29 reasonably expects, or is reasonably expected to have, an
30 income in excess of $200,000 in the current year, or (3) any
31 person that is not a natural person and in which at least 90%
32 of the equity interest is owned by persons who meet either of
33 the tests set forth in clauses (1) or (2) of this subsection
34 H; provided that such security is not offered or sold by
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1 means of any general advertising or general solicitation in
2 this State.
3 I. Any offer, sale or issuance of securities to or for
4 the benefit of security holders of any person incident to a
5 vote by such security holders pursuant to such person's
6 organizational document or any applicable statute of the
7 jurisdiction of such person's organization, on a merger,
8 consolidation, reclassification of securities, or sale or
9 transfer of assets in consideration of or exchange for
10 securities of the same or another person.
11 J. Any offer, sale or issuance of securities in exchange
12 for one or more outstanding securities, claims or property
13 interests, or partly in such exchange and partly for cash,
14 where such offer, sale or issuance is incident to a
15 reorganization, recapitalization, readjustment, composition
16 or settlement of a claim, as approved by a court of competent
17 jurisdiction of the United States, or any state.
18 K. Any offer, sale or issuance of securities for
19 patronage, or as patronage refunds, or in connection with
20 marketing agreements by cooperative associations organized
21 exclusively for agricultural, producer, marketing,
22 purchasing, or consumer purposes; and the sale of
23 subscriptions for or shares of stock of cooperative
24 associations organized exclusively for agricultural,
25 producer, marketing, purchasing, or consumer purposes, if no
26 commission or other remuneration is paid or given directly or
27 indirectly for or on account of such subscription, sale or
28 resale, and if any person does not own beneficially more than
29 5% of the aggregate amount of issued and outstanding capital
30 stock of such cooperative association.
31 L. Offers for sale or solicitations of offers to buy
32 (but not the acceptance thereof), of securities which are the
33 subject of a pending registration statement filed under the
34 Federal 1933 Act and which are the subject of a pending
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1 application for registration under this Act.
2 M. Any offer or sale of preorganization subscriptions
3 for any securities prior to the incorporation, organization
4 or formation of any issuer under the laws of the United
5 States, or any state, or the issuance by such issuer, after
6 its incorporation, organization or formation, of securities
7 pursuant to such preorganization subscriptions, provided the
8 number of subscribers does not exceed 25 and either (1) no
9 commission or other remuneration is paid or given directly or
10 indirectly for or on account of such sale or sales or
11 issuance, or (2) if any commission or other remuneration is
12 paid or given directly or indirectly for or on account of
13 such sale or sales or issuance, the securities are not
14 offered or sold by any means of general advertising or
15 general solicitation in this State.
16 N. The execution of orders for purchase of securities by
17 a registered salesperson and dealer, provided such persons
18 act as agent for the purchaser, have made no solicitation of
19 the order to purchase the securities, have no direct interest
20 in the sale or distribution of the securities ordered,
21 receive no commission, profit, or other compensation other
22 than the commissions involved in the purchase and sale of the
23 securities and deliver to the purchaser written confirmation
24 of the order which clearly identifies the commissions paid to
25 the registered dealer.
26 O. Any offer, sale or issuance of securities, other than
27 fractional undivided interests in an oil, gas or other
28 mineral lease, right or royalty, for the direct or indirect
29 benefit of the issuer thereof, or of a controlling person,
30 whether through a dealer (acting either as principal or
31 agent) or otherwise, if the securities sold, immediately
32 following the sale or sales, together with securities already
33 owned by the purchaser, would constitute 50% or more of the
34 equity interest of any one issuer, provided that the number
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1 of purchasers is not more than 5 and provided further that no
2 commission, discount or other remuneration exceeding 15% of
3 the aggregate sale price of the securities is paid or given
4 directly or indirectly for or on account of the sale or
5 sales.
6 P. Any offer, sale or issuance of securities (except
7 face amount certificate contracts and investment fund shares)
8 issued by and representing an interest in an issuer which is
9 a business corporation incorporated under the laws of this
10 State, the purposes of which are to provide capital and
11 supervision solely for the redevelopment of blighted urban
12 areas located in a municipality in this State and whose
13 assets are located entirely within that municipality,
14 provided: (1) no commission, discount or other remuneration
15 is paid or given directly or indirectly for or on account of
16 the sale or sales of such securities; (2) the aggregate
17 amount of any securities of the issuer owned of record or
18 beneficially by any one person will not exceed the lesser of
19 $5,000 or 4% of the equity capitalization of the issuer; (3)
20 the officers and directors of the corporation have been bona
21 fide residents of the municipality not less than 3 years
22 immediately preceding the effectiveness of the offering sheet
23 for the securities under this subsection P; and (4) the
24 issuer files with the Secretary of State an offering sheet
25 descriptive of the securities setting forth:
26 (a) the name and address of the issuer;
27 (b) the title and total amount of securities to be
28 offered;
29 (c) the price at which the securities are to be
30 offered; and
31 (d) such additional information as the Secretary of
32 State may prescribe by rule and regulation.
33 The Secretary of State shall within a reasonable time
34 examine the offering sheet so filed and, unless the Secretary
-27- LRB9004729SMdvam02
1 of State shall make a determination that the offering sheet
2 so filed does not conform to the requirements of this
3 subsection P, shall declare the offering sheet to be
4 effective, which offering sheet shall continue effective for
5 a period of 12 months from the date it becomes effective.
6 The fee for examining the offering sheet shall be as
7 established pursuant to Section 11a of this Act, and shall
8 not be returnable in any event. The Secretary of State shall
9 by rule or regulation require the filing of a report or
10 reports of sales made to residents of this State in reliance
11 upon the exemption provided by this subsection P and
12 prescribe the form of such report and the time within which
13 such report shall be filed. The Secretary of State shall
14 prescribe by rule or regulation the amount of the fee for
15 filing any such report, but such fee shall not be less than
16 the minimum amount nor more than the maximum amount
17 established pursuant to Section 11a of this Act, and shall
18 not be returnable in any event. The Secretary of State may
19 impose, in such cases as he or she may deem appropriate, a
20 penalty for failure to file any such report in a timely
21 manner, but no such penalty shall exceed an amount equal to
22 five times the filing fee. The contents of any such report
23 shall be deemed confidential and shall not be disclosed to
24 the public except by order of court or in court proceedings.
25 The failure to file any such report shall not affect the
26 availability of such exemption, but such failure to file any
27 such report shall constitute a violation of subsection D of
28 Section 12 of this Act, subject to the penalties enumerated
29 in Section 14 of this Act. The civil remedies provided for
30 in subsection A of Section 13 of this Act and the civil
31 remedies of rescission and appointment of a receiver,
32 conservator, ancillary receiver or ancillary conservator
33 provided for in subsection F of Section 13 of this Act shall
34 not be available against any person by reason of the failure
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1 to file any such report or on account of the contents of any
2 such report.
3 Q. Any isolated transaction, whether effected by a
4 dealer or not.
5 R. Any offer, sale or issuance of a security to any
6 person who purchases at least $150,000 of the securities
7 being offered, where the purchaser's total purchase price
8 does not, or it is reasonably believed by the person relying
9 upon this subsection R that said purchase price does not,
10 exceed 20 percent of the purchaser's net worth at the time of
11 sale, or if a natural person a joint net worth with that
12 person's spouse, for one or any combination of the following:
13 (i) cash, (ii) securities for which market quotations are
14 readily available, (iii) an unconditional obligation to pay
15 cash or securities for which quotations are readily
16 available, which obligation is to be discharged within five
17 years of the sale of the securities to the purchaser, or (iv)
18 the cancellation of any indebtedness owed by the issuer to
19 the purchaser; provided that such security is not offered or
20 sold by means of any general advertising or general
21 solicitation in this State.
22 S. Any offer, sale or issuance of a security to any
23 person who is, or who is reasonably believed by the person
24 relying upon this subsection S to be, a director, executive
25 officer, or general partner of the issuer of the securities
26 being offered or sold, or any director, executive officer, or
27 general partner of a general partner of that issuer. For
28 purposes of this subsection S, "executive officer" shall mean
29 the president, any vice president in charge of a principal
30 business unit, division or function (such as sales,
31 administration or finance), any other officer who performs a
32 policy making function, or any other person who performs
33 similar policy making functions for the issuer. Executive
34 officers of subsidiaries may be deemed executive officers of
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1 the issuer if they perform such policy making functions for
2 the issuer.
3 A document being filed pursuant to this Section 4 shall
4 be deemed filed, and any fee paid pursuant to this Section 4
5 shall be deemed paid, upon the date of actual receipt thereof
6 by the Secretary of State.
7 (Source: P.A. 89-209, eff. 1-1-96; 89-626, eff. 8-9-96.)
8 (815 ILCS 5/5) (from Ch. 121 1/2, par. 137.5)
9 Sec. 5. Registration of Securities. All securities
10 except those set forth under Section 2a of this Act, or those
11 exempt under Section 3 of this Act, or those offered or sold
12 in transactions exempt under Section 4 of this Act, or face
13 amount certificate contracts required to be registered under
14 Section 6 of this Act, or investment fund shares required to
15 be registered under Section 7 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.
19 A. Registration by Coordination.
20 (1) Securities which are being or have been
21 registered under the Federal 1933 Act may be registered
22 by coordination in the manner provided in this subsection
23 A, if the effective date of the registration under the
24 Federal 1933 Act is not more than 30 days before the
25 filing with the Secretary of State.
26 (2) Securities may be registered by coordination by
27 the filing with the Secretary of State by the issuer, by
28 a controlling person or by a registered dealer of:
29 (a) One copy of the registration statement
30 (without exhibits) descriptive of the securities on
31 file with the Securities and Exchange Commission in
32 its most recent form as of the date of the initial
33 filing under this subsection A.;
-30- LRB9004729SMdvam02
1 (b) An application, in such form and executed,
2 verified, or authenticated by such person as the
3 Secretary of State shall by rule or regulation
4 prescribe, setting forth the title and the total
5 amount of securities to be offered, the amount of
6 securities and the proposed maximum aggregate price
7 thereof to be offered in this State under this
8 subsection A and, if the applicant is electing the
9 date of effectiveness of a post-effective amendment
10 as its effective date as provided in Section 2.13 of
11 this Act, specifying such date as the effective date
12 for purposes of registration under this subsection
13 A;
14 (c) An undertaking to forward to the Secretary
15 of State, in writing (which may be by electronic
16 telegraphic or facsimile transmission), any and all
17 subsequent amendments of and supplements to the
18 registration statement not later than the 7th day
19 after the forwarding thereof to the Securities and
20 Exchange Commission, or such longer period as the
21 Secretary of State may permit by rule, regulation or
22 order; and
23 (d) If the applicant is not a registered
24 dealer, the name of at least one registered dealer
25 for the securities being registered under this
26 subsection A (except that, in the case of securities
27 being offered and sold on a delayed or continuous
28 basis pursuant to Rule 415 under the Federal 1933
29 Act, 17 C.F.R. Section 230.415, or any similar or
30 successor rule thereto as may be designated by the
31 Secretary of State by rule or regulation, the name
32 of the registered dealer may be furnished no later
33 than the close of business on the second business
34 day following the commencement of sales of the
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1 registered securities in this State) or a written
2 statement setting forth the method of offer and sale
3 in this State of the securities being registered in
4 compliance with Section 8 of this Act.
5 (3) Registration of securities by coordination
6 shall take effect automatically as of the effective date
7 of the registration statement (or post-effective
8 amendment) filed under the Federal 1933 Act, provided
9 that on the effective date, the information required by
10 sub-paragraphs (a), (b), and (d) and the undertaking
11 required by sub-paragraph (c) of paragraph (2) of this
12 subsection A have been on file with the Secretary of
13 State for at least 10 business days, or such shorter
14 period as the Secretary of State may permit by rule,
15 regulation or order. If, however, the time period
16 referred to in the preceding sentence shall not have
17 expired on the effective date of the registration
18 statement (or post-effective amendment) filed under the
19 Federal 1933 Act, registration of such securities by
20 coordination shall, upon the expiration of such time
21 period, take effect automatically as of the effective
22 date of the registration statement (or post-effective
23 amendment) filed under the Federal 1933 Act.
24 (4) If the information required by sub-paragraphs
25 (a), (b), and (d) and the undertaking required by
26 sub-paragraph (c) of paragraph (2) of this subsection A
27 are not filed with the Secretary of State prior to the
28 effective date of the registration statement (or
29 post-effective amendment) filed under the Federal 1933
30 Act, any registration of securities by coordination under
31 this subsection A shall take effect automatically as soon
32 as all of the following conditions have been satisfied:
33 (a) the information required by sub-paragraphs
34 (a), (b), and (d) and the undertaking required by
-32- LRB9004729SMdvam02
1 sub-paragraph (c) of paragraph (2) of this
2 subsection A have been on file with the Secretary of
3 State for 10 business days, or for such shorter
4 period as the Secretary of State may permit by rule,
5 regulation or order;
6 (b) the registration statement or
7 post-effective amendment filed under the Federal
8 1933 Act is then in effect; and
9 (c) the prospectus then on file with the
10 Secretary of State satisfies the requirements of
11 Section 10(a)(3) of the Federal 1933 Act.
12 (5) The applicant shall furnish to the Secretary of
13 State written notice (which may be by electronic,
14 telegraphic, or facsimile transmission) confirming the
15 date of effectiveness and the title of the securities
16 registered under the Federal 1933 Act, final pricing
17 information, the total amount of securities registered
18 under the Federal 1933 Act, and the amount registered in
19 this State if different than the amounts then on file
20 with the Secretary of State, no later than the close of
21 business on the second business day following the date on
22 which the registration statement becomes effective under
23 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
-33- LRB9004729SMdvam02
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 securities and the
5 Secretary of State may, at his or her discretion, grant
6 such waiver of automatic effectiveness. Upon the grant
7 by the Secretary of State of the request of waiver of
8 automatic effectiveness, such registration of securities
9 shall become effective automatically on the date that the
10 issuer, controlling person or registered dealer who filed
11 the application set forth in subparagraph (b) of
12 paragraph (2) of this subsection A notifies the Secretary
13 of State in writing.
14 B. Registration by Qualification. Securities may be
15 registered by qualification in the manner provided in this
16 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 this Act, which is not returnable in any event.
22 Such application shall be executed, 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 and total amount of the
27 securities to be offered;
28 (c) The amount of the securities to be offered
29 in this State;
30 (d) The price at which the securities are to
31 be offered, or the method by which such price is to
32 be determined, provided that such price or method
33 may be furnished by written notice (which may be by
34 electronic, telegraphic, or facsimile transmission)
-34- LRB9004729SMdvam02
1 to the Secretary of State subsequent to the filing
2 of the application but prior to registration of the
3 securities under this Law; and
4 (e) The aggregate underwriting commissions,
5 remuneration or discount.
6 (2) If the issuer, dealer, or controlling person
7 has not filed a registration statement that is then in
8 effect under the Federal 1933 Act, there shall be filed
9 with the application:
10 (a) (Blank); If the issuer is a corporation, a
11 copy of its charter or articles of incorporation as
12 then in effect, unless then on file with the
13 Secretary of State; if other than a corporation, a
14 copy of all instruments, if any, by which the issuer
15 was created and all amendments thereto;
16 (b) (Blank); A copy of the by-laws, or other
17 code of regulations, if any, of the issuer;
18 (c) A copy of the indenture or other
19 instrument, if any, under which the securities are
20 to be or have been issued;
21 (d) A specimen copy of the securities or a
22 copy of the form of the instrument to evidence the
23 securities;
24 (e) An opinion of counsel as to the legality
25 of the securities;
26 (f) A copy of the underwriting and selling
27 agreements, if any;
28 (g) An undertaking to file promptly (no later
29 than 2 business days after the occurrence of any
30 event which requires a material change in the
31 prospectus) with the Secretary of State all
32 amendments of and supplements to the prospectus as
33 theretofore filed under this subsection B, together
34 with any additional information, document or
-35- LRB9004729SMdvam02
1 undertaking which the Secretary of State, at his or
2 her discretion, deems material, accompanied by the
3 amendment filing fee established pursuant to Section
4 11a of this Act or, in lieu thereof, a notification
5 in writing that all offers and sales of the
6 securities have been suspended pending the filing
7 with the Secretary of State of such amendment of or
8 supplement to the prospectus; and
9 (h) A written statement setting forth the name
10 of at least one registered dealer for the securities
11 being registered under this subsection B, or an
12 application for registration of a salesperson or a
13 written statement setting forth the method of offer
14 and sale in this State of the securities being
15 registered in compliance with Section 8 of this Act.
16 (3) In addition, there shall be filed with the
17 application such additional information and material in
18 such form as the Secretary of State may by rule,
19 regulation or order prescribe and a prospectus which
20 contains but is not limited to the following:
21 (a) The date and form of organization of the
22 issuer;
23 (b) A brief description of the business
24 conducted and intended to be conducted by the issuer
25 and by its subsidiaries and the general development
26 of such business during the past 5 years or such
27 shorter period as the issuer and such subsidiaries
28 may have been in existence;
29 (c) The location and general character of the
30 physical properties of the issuer and of its
31 subsidiaries;
32 (d) The authorized and issued capitalization
33 of the issuer and a description of the securities
34 being registered and of all authorized securities;
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1 (e) The proposed method of sale of the
2 securities, the price thereof to the public or the
3 method by which such price is to be computed, and
4 the underwriting and selling discounts and
5 commissions;
6 (f) The intended use by the issuer of the
7 proceeds of the securities;
8 (g) The names and addresses of all of the
9 issuer's officers and directors, or persons
10 performing similar functions, their business
11 experience during the preceding 5 years and the
12 remuneration paid to each by the issuer and its
13 subsidiaries during the fiscal year last past and
14 proposed to be paid for the then current fiscal
15 year;
16 (h) The names and addresses of all persons
17 owning of record, and of all persons owning
18 beneficially, to the extent known to the applicant,
19 10% or more of any class of equity securities of the
20 issuer, and the percentage owned by each;
21 (i) A brief description of any pending
22 material legal proceeding, and of any material legal
23 proceeding known to be contemplated by governmental
24 authorities, involving the issuer or its
25 subsidiaries;
26 (j) The following financial statements of the
27 issuer:
28 (i) A balance sheet as of a date
29 within 135 days prior to the date of
30 submitting the application. If such
31 balance sheet is not certified by an
32 independent certified public accountant,
33 the prospectus shall also contain a
34 balance sheet certified by an independent
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1 certified public accountant as of the
2 close of the issuer's last fiscal year,
3 unless such fiscal year ended within 135
4 days prior to the time of filing the
5 application, in which case the certified
6 balance sheet may be as of the end of the
7 preceding fiscal year.
8 (ii) An income statement for each of
9 the issuer's 3 fiscal years (or for the
10 period of existence of the issuer if less
11 than 3 years) next preceding the date of
12 the certified balance sheet and for the
13 period, if any, between the date of the
14 certified balance sheet and the date of
15 the most recent balance sheet. Such
16 statement shall be certified by an
17 independent certified public accountant
18 for the periods ending with the date of
19 the certified balance sheet.
20 (iii) An analysis of each surplus
21 account of the issuer for each period for
22 which an income statement is filed,
23 certified by an independent certified
24 public accountant for the periods for
25 which certified income statements are
26 filed.
27 (iv) An analysis (which need not be
28 certified to by independent certified
29 public accountants and which may be in
30 narrative form if desired by the
31 applicant) of all surplus accounts of the
32 issuer for a period beginning on a date
33 not less than 8 years prior to the date of
34 the certified balance sheet required by
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1 the above sub-division (i) of this
2 sub-paragraph (j), or from the date of the
3 organization of the issuer, whichever is
4 later, and ending on the day before the
5 first day of the earliest period covered
6 by the analysis of surplus accounts
7 furnished pursuant to the above
8 sub-division (iii) of this sub-paragraph
9 (j); and
10 (k) If the issuer owns more than 50% of the
11 voting securities of one or more entities, there
12 shall also be included in the prospectus either (i)
13 like financial statements for each such entity, or
14 (ii) like consolidated financial statements for the
15 issuer and such entities;
16 (l) Anything in sub-paragraphs (j) and (k) of
17 this paragraph (3) to the contrary notwithstanding,
18 the financial statements contained in the prospectus
19 need not be certified by an independent certified
20 public accountant if the securities being registered
21 under this subsection B are covered by a
22 Notification under Regulation A or an Offering Sheet
23 under Regulation D adopted pursuant to the Federal
24 1933 Act or any other regulation so adopted which
25 the Secretary of State may by rule or regulation or
26 by order determine to have filing or disclosure
27 requirements substantially similar to such
28 Regulation A or Regulation D unless the financial
29 statements furnished pursuant to any such Federal
30 regulation are required to be or are certified by an
31 independent certified public accountant.
32 (4) If the securities being registered under this
33 subsection B are certificates of deposit, voting trust
34 certificates, collateral-trust certificates, certificates
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1 of interest, fractional interests in oil, gas or other
2 mineral rights of unincorporated issuers or like
3 securities, the prospectus may omit such of the foregoing
4 items in sub-paragraphs (a) through (k) of paragraph (3)
5 of this subsection B, but shall include such pertinent
6 information, as the Secretary of State may by rule,
7 regulation or order prescribe; such prospectus shall
8 contain a description of the properties and businesses
9 from which such certificates, shares or interests derive
10 value.
11 (5) The Secretary of State may, upon written
12 request by the applicant and where consistent with the
13 protection of investors, permit the omission of one or
14 more of the financial statements required by this
15 subsection B or the filing in substitution therefor of
16 appropriate financial statements of comparable character
17 or permit the omission of any of the information required
18 by this subsection B. The Secretary of State may also by
19 written notice require the filing of other financial
20 statements or information in addition to, or in
21 substitution for, the financial statements or information
22 required by this subsection B in any case where such
23 additional financial statements or information is
24 necessary or appropriate for an adequate presentation of
25 the financial condition of any issuer or otherwise
26 required for fair disclosure respecting the business and
27 property of any issuer.
28 (6) The Secretary of State shall within a
29 reasonable time examine the application and documents
30 filed with him or her, and unless the Secretary of State
31 makes a determination that the application and documents
32 so filed do not conform to the requirements of this
33 subsection B, or there is a proceeding pending under
34 Section 11 of this Act, shall register the securities for
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1 offer and sale in this State under this subsection B. If
2 the securities registered shall not have been sold and
3 distributed at the expiration of a period of 6 months
4 following the date of registration, the Secretary of
5 State may require the filing of such current information
6 concerning the securities and the issuer thereof as he or
7 she may by rule, regulation or order prescribe.
8 (7) The Secretary of State is granted authority to
9 create by rule or regulation a limited offering
10 registration provision that furthers the objectives of
11 compatibility with federal exemptions and uniformity
12 among the states. The Secretary of State shall prescribe
13 by rule or regulation the amount of the fees for
14 examining and filing any documents required under this
15 subparagraph, but each fee shall not be less than the
16 minimum amount nor more than the maximum amount
17 established under Section 11a of this Act and shall not
18 be returnable in any event.
19 C. Pending Application, Filing Fee and Oversales of
20 Securities.
21 (1) No application shall be deemed to be filed or
22 pending and no securities covered by such application
23 shall be deemed to be registered under subsection A of
24 this Section 5 unless a filing fee has been paid. No
25 application shall be deemed to be filed or pending and no
26 securities covered by such application shall be deemed to
27 be registered under subsection B of this Section 5 unless
28 the examination fee and filing fee have been paid. The
29 filing fee payable under the provisions of subsections A
30 and B of this Section 5 shall be established by rule or
31 regulation, but in no event shall the fee be less than
32 the minimum amount nor more than the maximum amount of
33 filing fee established pursuant to Section 11a of this
34 Act, and in no case shall such fee be returnable. The
-41- LRB9004729SMdvam02
1 "maximum aggregate price" as used in subsection A of this
2 Section 5 and in this subsection C shall be the
3 applicant's bona fide estimate thereof, determined in the
4 manner prescribed by the Secretary of State by rule or
5 regulation.
6 (2) If after an offering of securities is
7 registered under this Section 5 (except for securities
8 registered under subsection B of this Section 5 wherein
9 the entire offering of securities was registered), the
10 offeror sells or determines that it will sell, prior to
11 the expiration of the period during which the offeror
12 intends the registration of the securities together with
13 any renewals thereof to remain in effect in this State,
14 an amount of that offering in excess of the amount
15 registered, the applicant may amend the registration and
16 register the excess securities by filing an amended
17 application and paying a filing fee equal to the
18 difference between the initial filing fee paid and the
19 filing fee which would have been paid under paragraph (1)
20 of this subsection C for the entire amount registered
21 together with an additional fee established pursuant to
22 Section 11a of this Act. The fees shall not be
23 returnable in any event. With respect to the excess
24 securities being registered, the "maximum aggregate
25 price" shall be the actual sales price of such
26 securities. Upon receipt of such amended application,
27 filing fee, and additional fee by the Secretary of
28 State, registration of the excess securities shall become
29 effective retroactively to the date of the initial
30 registration.
31 D. Effective Period and Sales Reports.
32 (1) A registration effected under Section 5 of this
33 Act shall continue effective for a period of one year
34 from the date of registration or renewal of registration
-42- LRB9004729SMdvam02
1 unless sooner terminated by (1) suspension or revocation
2 by the Secretary of State; or (2) the applicant filing
3 with the Secretary of State an affidavit evidencing
4 either that (a) the securities have been fully sold and
5 distributed to the public or (b) that it is no longer
6 desired to offer such securities in this State or (c)
7 that such securities have become exempt from the
8 registration requirements under Section 3 or paragraph
9 (1) of subsection F of Section 4 of this Act.
10 (2) The Secretary of State may, at his or her
11 discretion, require each issuer, controlling person or
12 registered dealer on whose behalf a registration of
13 securities is effected under this Section 5 to file a
14 report, in such form and of such content and for such
15 time period as the Secretary of State may by rule or
16 regulation prescribe, stating the aggregate dollar amount
17 of securities sold to Illinois residents. The civil
18 remedies provided for in subsection A of Section 13 of
19 this Act and the civil remedies of rescission and
20 appointment of a receiver, conservator, ancillary
21 receiver or ancillary conservator provided for in
22 subsection I of Section 11 and in subsection F and G of
23 Section 13 of this Act and the civil remedies of
24 restitution, damages and disgorgement of profits provided
25 for in subsection I of Section 11 of this Act shall not
26 be available against any person by reason of the failure
27 to file any such report or on account of the contents of
28 any such report.
29 E. Renewal of Registration. A registration of securities
30 in effect under subsection A of this Section 5 or subsection
31 B of this Section 5 if a registration statement or
32 post-effective amendment is then in effect under the Federal
33 1933 Act may be renewed for the amount of securities which
34 remain unsold under such registration as then in effect, by
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1 the issuer, by a controlling person or by a registered dealer
2 by filing an application for renewal with the Secretary of
3 State no later than 10 business days prior to the date (or
4 such lesser period as the Secretary of State may prescribe by
5 rule or regulation) upon which such registration would
6 otherwise expire, in such form and executed, verified, or
7 authenticated by such person as the Secretary of State shall
8 prescribe by rule or regulation. Such application shall be
9 accompanied by a prospectus in its most current form together
10 with a renewal fee equal in amount to a registration fee
11 calculated in accordance with paragraph (1) of subsection C
12 of this Section 5 and based upon the amount of securities
13 initially registered for sale in this State but which remain
14 unsold; except that the "maximum aggregate price" of such
15 securities shall be the applicant's bona fide estimate
16 thereof at the time the application for renewal of
17 registration is filed with the Secretary of State pursuant to
18 this subsection E. A renewal of registration of securities
19 shall take effect as of the date and time that the prior
20 registration under subsection A of this Section 5 or prior
21 renewal under this subsection E would otherwise have expired
22 and thereafter shall be deemed to be a new registration of
23 the amount of unsold securities specified in the application
24 for renewal. The Secretary of State may by rule or
25 regulation prescribe an additional fee for the failure to
26 file timely an application for renewal and limit the number
27 of times that a registration may be renewed.
28 F. The applicant or registrant shall notify the
29 Secretary of State, by written notice (which may be by
30 electronic, telegraphic, or facsimile transmission), within 2
31 business days after its receipt of any stop order, denial,
32 order to show cause, suspension or revocation order,
33 injunction or restraining order, or similar order entered or
34 issued by any state, federal or other regulatory authority or
-44- LRB9004729SMdvam02
1 by any court, concerning the securities which are being or
2 have been registered in this State or any other securities of
3 the issuer currently being or proposed to be offered to the
4 public, if the matter which is the subject of, or the failure
5 to disclose the existence of, such order would in this State
6 constitute a violation of subsection E, F, G, H, I or J of
7 Section 12 of this Act. The obligation contained in this
8 subsection F shall continue until such time as offers and
9 sales of the securities registered under this Section 5 are
10 no longer being made in this State by the applicant or
11 registrant.
12 G. Any document being filed pursuant to this Section 5
13 shall be deemed filed, and any fee being paid pursuant to
14 this Section 5 shall be deemed paid, upon the date of actual
15 receipt thereof by the Secretary of State.
16 H. The Secretary of State may require by rule or
17 regulation the payment of an additional fee for the filing of
18 information or documents required to be filed by this Section
19 5 which have not been filed in a timely manner. Such fees
20 shall be deposited into the Securities Investors Education
21 Fund, a special fund hereby created in the State treasury.
22 The amounts deposited into such Fund shall be used to promote
23 public awareness of the dangers of securities fraud.
24 (Source: P.A. 89-209, eff. 1-1-96; 89-626, eff. 8-9-96.)
25 (815 ILCS 5/6) (from Ch. 121 1/2, par. 137.6)
26 Sec. 6. Registration of Face Amount Certificate
27 Contracts. All face amount certificate contracts except
28 those set forth under Section 2a of this Act, or those exempt
29 under Section 3 of this Act, or those offered or sold in
30 transactions exempt under Section 4 of this Act, shall be
31 registered either by coordination or by qualification, as
32 hereinafter in this Section provided, prior to their offer or
33 sale in this State.
-45- LRB9004729SMdvam02
1 A. Registration of Face Amount Certificate Contracts by
2 Coordination.
3 (1) Face amount certificate contracts which are
4 being or have been registered under the Federal 1933 Act
5 may be registered by coordination in the manner provided
6 in this subsection A, if the effective date of the
7 registration under the Federal 1933 Act is not more than
8 30 days before the filing with the Secretary of State.
9 (2) Face amount certificate contracts may be
10 registered by coordination by the filing with the
11 Secretary of State by the issuer, by a controlling person
12 or by a registered dealer of:
13 (a) One copy of the registration statement
14 (without exhibits) descriptive of the face amount
15 certificate contracts on file with the Securities
16 and Exchange Commission in its most recent form as
17 of the date of the initial filing under this
18 subsection A;
19 (b) An application, in such form and executed,
20 verified, or authenticated by such person as the
21 Secretary of State shall by rule or regulation
22 prescribe, setting forth the title of every series,
23 type or class of face amount certificate contracts
24 to be offered in this State under this subsection A
25 and, if the applicant is electing the date of
26 effectiveness of a post-effective amendment as its
27 effective date as provided in Section 2.13 of this
28 Act, specifying such date as the effective date for
29 purposes of registration under this subsection A;
30 (c) An undertaking to forward to the Secretary
31 of State, in writing (which may be by electronic
32 telegraphic or facsimile transmission), any and all
33 subsequent amendments of and supplements to the
34 registration statement not later than the 7th day
-46- LRB9004729SMdvam02
1 after the forwarding thereof to the Securities and
2 Exchange Commission, or such longer period as the
3 Secretary of State may permit by rule, regulation or
4 order; and
5 (d) If the applicant is not a registered
6 dealer, the name of at least one registered dealer
7 for the face amount certificate contracts being
8 registered under this subsection A or a written
9 statement setting forth the method of offer and sale
10 in this State of the face amount certificate
11 contracts being registered in compliance with
12 Section 8 of this Act.
13 (3) Registration of face amount certificate
14 contracts by coordination shall take effect automatically
15 as of the effective date of the registration statement
16 (or post-effective amendment) filed under the Federal
17 1933 Act, provided that on the effective date, the
18 information required by sub-paragraphs (a), (b), and (d)
19 and the undertaking required by sub-paragraph (c) of
20 paragraph (2) of this subsection A have been on file with
21 the Secretary of State for at least 10 business days, or
22 such shorter period as the Secretary of State may permit
23 by rule, regulation or order. If, however, the time
24 period referred to in the preceding sentence shall not
25 have expired on the effective date of the registration
26 statement (or post-effective amendment) filed under the
27 Federal 1933 Act, registration of such face amount
28 certificate contracts by coordination shall, upon the
29 expiration of such time period, take effect automatically
30 as of the effective date of the registration statement
31 (or post-effective amendment) filed under the Federal
32 1933 Act.
33 (4) If the information required by sub-paragraphs
34 (a), (b), and (d) and the undertaking required by
-47- LRB9004729SMdvam02
1 sub-paragraph (c) of paragraph (2) of this subsection A
2 are not filed with the Secretary of State prior to the
3 effective date of the registration statement (or
4 post-effective amendment) filed under the Federal 1933
5 Act, any registration of face amount certificate
6 contracts by coordination under this subsection A shall
7 take effect automatically as soon as all of the following
8 conditions have been satisfied:
9 (a) the information required by sub-paragraphs
10 (a), (b), and (d) and the undertaking required by
11 sub-paragraph (c) of paragraph (2) of this
12 subsection A have been on file with the Secretary of
13 State for 10 business days, or for such shorter
14 period as the Secretary of State may permit by rule,
15 regulation or order;
16 (b) the registration statement or
17 post-effective amendment filed under the Federal
18 1933 Act is then in effect; and
19 (c) the prospectus then on file with the
20 Secretary of State satisfies the requirements of
21 Section 10(a)(3) of the Federal 1933 Act.
22 (5) The applicant shall furnish to the Secretary of
23 State written notice (which may be by electronic,
24 telegraphic, or facsimile transmission) confirming the
25 date of effectiveness and the title of the face amount
26 certificate contracts registered under the Federal 1933
27 Act, no later than the close of business on the second
28 business day following the date on which registration
29 becomes effective under the Federal 1933 Act.
30 (6) No action by the Secretary of State shall be
31 necessary to evidence the effectiveness of the
32 registration by coordination under this subsection A.
33 The Secretary of State may, at his or her discretion,
34 provide a statement attesting to such registration, which
-48- LRB9004729SMdvam02
1 statement shall be in such form as the Secretary of State
2 may deem appropriate.
3 (7) Notwithstanding the foregoing, the issuer,
4 controlling person or registered dealer who filed the
5 application set forth in subparagraph (b) of paragraph
6 (2) of this subsection A may request, in writing (which
7 may be by electronic, telegraphic, or facsimile
8 transmission) prior to or upon notice of effectiveness
9 under the Federal 1933 Act, a waiver of automatic
10 effectiveness of the registration of the face amount
11 certificate contracts and the Secretary of State may, at
12 his or her discretion, grant such waiver of automatic
13 effectiveness. Upon the grant by the Secretary of State
14 of the request of waiver of automatic effectiveness, such
15 registration of the face amount certificate contracts
16 shall become effective automatically on the date that the
17 issuer, controlling person or registered dealer who filed
18 the application set forth in subparagraph (b) of
19 paragraph (2) of this subsection A notifies the Secretary
20 of State in writing.
21 B. Registration of Face Amount Certificate Contracts by
22 Qualification. Face amount certificate contracts may be
23 registered by qualification in the manner provided in this
24 subsection B.
25 (1) An application for registration by
26 qualification shall be made by the issuer, by a
27 controlling person or by a registered dealer together
28 with the examination fee established pursuant to Section
29 11a of the Act, which shall not be returnable in any
30 event. Such application shall be executed, verified, or
31 authenticated by the applicant and filed with the
32 Secretary of State. The application shall set forth:
33 (a) The names and addresses of the persons
34 creating or sponsoring the face amount certificate
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1 contracts; and
2 (b) The title of each series, type or class of
3 face amount certificate contracts to be offered.
4 (2) If the issuer, dealer, or controlling person
5 has not filed a registration statement or post-effective
6 amendment which is then in effect under the Federal 1933
7 Act, there shall be filed with the application:
8 (a) Specimen copies of each and every series,
9 type or class of face amount certificate contract
10 proposed to be offered in this State, and specimen
11 copies of each and every form of face amount
12 certificate contract or other security being issued
13 or proposed to be offered and issued elsewhere;
14 (b) (Blank); If the issuer is a corporation, a
15 copy of its charter or articles of incorporation and
16 all amendments thereto, unless then on file with the
17 Secretary of State; or if other than a corporation,
18 a copy of all instruments, if any, by which the
19 issuer was created, and all amendments thereto;
20 (c) (Blank); A copy of the by-laws or other
21 code of regulations, if any, of the issuer;
22 (d) An opinion of counsel as to the legality
23 of the face amount certificate contracts;
24 (e) An undertaking to file promptly (no later
25 than 2 business days after the occurrence of any
26 event which requires a material change in the
27 prospectus) with the Secretary of State any and all
28 amendments of and supplements to the prospectus as
29 theretofore filed under this subsection B, together
30 with any additional information, document or
31 undertaking which the Secretary of State at his or
32 her discretion, deems material, accompanied by the
33 amendment filing fee established pursuant to Section
34 11a of this Act or, in lieu thereof, a notification
-50- LRB9004729SMdvam02
1 in writing that all offers and sales of the face
2 amount certificate contracts have been suspended
3 pending the filing with the Secretary of State of
4 such amendment of or supplement to the prospectus;
5 and
6 (3) In addition, there shall be filed with the
7 application such additional information and material in
8 such form as the Secretary of State may by rule,
9 regulation or order prescribe and a prospectus which
10 contains, but is not limited to the following:
11 (a) The date and form of organization of the
12 issuer;
13 (b) A brief description of the business
14 conducted and intended to be conducted by the issuer
15 and by its subsidiaries and the general development
16 of such business during the past 5 years or such
17 shorter period as the issuer and such subsidiaries
18 may have been in existence;
19 (c) The location and general character of the
20 physical properties of the issuer and of its
21 subsidiaries;
22 (d) A complete description of the terms and
23 conditions of each and every series, type or class
24 of face amount certificate contracts being issued or
25 proposed to be offered in this State or elsewhere,
26 which description shall include appropriate tables
27 of initial or periodic installment payments required
28 of the purchaser, surrender or liquidation values,
29 maturity values, optional plans of extended contract
30 periods and schedules of annuity payments which may
31 be elected by a face amount certificate contract
32 holder;
33 (e) A schedule of all types of deductions
34 which may be made from plan payments or the income
-51- LRB9004729SMdvam02
1 therefrom or the avails thereof as charges prior to
2 distributions to holders of the face amount
3 certificate contracts;
4 (f) The names and addresses of all of the
5 issuer's officers and directors, or persons
6 performing similar functions, their business
7 experience during the preceding 5 years and the
8 remuneration paid to each by the issuer and its
9 subsidiaries during the fiscal year last past and
10 proposed to be paid for the then current fiscal
11 year;
12 (g) The names and addresses of all persons
13 owning of record, and of all persons owning
14 beneficially, to the extent known to the applicant,
15 10% or more of any class of equity securities of the
16 issuer, and the percentage owned by each;
17 (h) A brief description of any pending
18 material legal proceeding, and of any material legal
19 proceeding known to be contemplated by governmental
20 authorities, involving the issuer or its
21 subsidiaries; and
22 (i) The following financial statements of the
23 issuer:
24 (i) a balance sheet as of a date within
25 135 days prior to the date application for
26 registration is received by the Secretary of
27 State, which balance sheet, if not certified by
28 an independent certified public accountant,
29 shall be accompanied by a certified balance
30 sheet of the issuer as of the close of the last
31 prior fiscal year;
32 (ii) a detailed statement of income and
33 expenses, including income from investments,
34 service fees, loading and other sources,
-52- LRB9004729SMdvam02
1 operating expenses and provisions for contract
2 reserves or any additional credits to contract
3 liabilities, profits realized and losses
4 sustained in transactions in investments, and
5 all other charges to operations, for a period
6 of not less than 3 fiscal years (or for the
7 period of existence of the issuer if less than
8 3 years) last preceding the date of the balance
9 sheet presented under subdivision (i) of this
10 subparagraph (i), which statement of income and
11 expenses, if not certified by an independent
12 certified public accountant, shall be
13 accompanied by a certified statement of income
14 and expenses for a period of 3 years last
15 preceding the uncertified period or periods
16 presented as and for this subdivision (ii);
17 (iii) a detailed analysis of each surplus
18 and reserve account for the same period or
19 periods covered by subdivision (ii) of this
20 subparagraph (i), with like requirement for
21 independent certification; and
22 (iv) such other financial data as the
23 Secretary of State may reasonably require in
24 any specific case or by rule or regulation.
25 (4) The Secretary of State shall within a
26 reasonable time examine the application and related
27 documents filed with him or her and, unless the Secretary
28 of State makes a determination that the application and
29 related documents so filed do not conform to the
30 requirements of this subsection B or there is a
31 proceeding pending under Section 11 of this Act, shall
32 upon receipt of the deposit required by subsection G of
33 this Section 6 and upon receipt of the registration fee
34 as hereinafter prescribed, register the face amount
-53- LRB9004729SMdvam02
1 certificate contracts, as described by series, type or
2 class within the application, for offer and sale in this
3 State under this subsection B.
4 C. Pending Application and Filing Fee. No application
5 for registration of face amount certificate contracts shall
6 be deemed to be filed or pending and no face amount
7 certificate contracts covered by such application shall be
8 deemed to be registered under subsection A of this Section 6
9 unless a filing fee in the amount established pursuant to
10 Section 11a of this Act has been paid, which shall not be
11 returnable in any event. No application for registration of
12 face amount certificate contracts shall be deemed to be filed
13 or pending and no face amount certificate contracts covered
14 by such application shall be deemed to be registered under
15 subsection B of this Section 6 unless the examination fee and
16 filing fee established pursuant to Section 11a of this Act
17 have been paid, which fees shall not be returnable in any
18 event.
19 D. Effective Period and Sales Reports.
20 (1) A registration under subsection A or B of this
21 Section 6, unless sooner terminated by the voluntary
22 action of the issuer, or by suspension or revocation by
23 the Secretary of State, shall continue in force and
24 effect for a period of one year from the date of
25 registration or renewal of registration or such other
26 period of time as the Secretary of State may prescribe by
27 rule or regulation, and shall permit the offer and sale
28 of face amount certificate contracts so registered
29 without limitation as to number or aggregate amount
30 during such period of registration; provided, however,
31 that, in the case of face amount certificate contracts
32 registered under subsection B of this Section 6, the
33 issuer shall promptly file with the Secretary of State,
34 throughout such registration year, (i) one specimen copy
-54- LRB9004729SMdvam02
1 of each monthly, quarterly, semi-annual or other periodic
2 or special report and of each financial statement
3 distributed to contract holders; (ii) one certified copy
4 of all statements and reports filed with any regulatory
5 authority or agency of the Federal Government which
6 relate to the issuer or the issuance of the securities
7 registered pursuant to this Section 6 and (iii) one copy
8 of each independently certified audit report pertaining
9 to the financial affairs and position of the issuer
10 covering the issuer's fiscal year ending during the
11 registration year, to be supplied to the Secretary of
12 State as soon as available after the close of the
13 issuer's fiscal year.
14 (2) The Secretary of State may, at his or her
15 discretion, require each issuer, controlling person or
16 registered dealer on whose behalf a registration of face
17 amount certificate contracts is effective under this
18 Section 6 to file a report, in such form and of such
19 content and for such time period as the Secretary of
20 State may by rule or regulation prescribe, stating the
21 aggregate dollar amount of face amount certificate
22 contracts sold to Illinois residents. The civil remedies
23 provided for in subsection A of Section 13 of this Act
24 and the civil remedies of rescission and appointment of a
25 receiver, conservator, ancillary receiver or ancillary
26 conservator provided for in subsection I of Section 11
27 and in subsections F and G of Section 13 of this Act and
28 the civil remedies of restitution, damages and
29 disgorgement of profits provided for in subsection I of
30 Section 11 of this Act shall not be available against any
31 person by reason of the failure to file any such report
32 or on account of the contents of any such report.
33 E. Amendatory statements and required fees. The
34 Secretary of State may by rule or regulation require the
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1 filing of an amendatory statement and prescribe its form and
2 content. The fee for filing the statement shall be
3 established pursuant to Section 11a of this Act. The fee
4 shall not be returnable in any event.
5 F. Renewal of Registration. A registration of face
6 amount certificate contracts in effect under subsection A or
7 B of this Section 6 may be renewed by the issuer by filing an
8 application for renewal with the Secretary of State no later
9 than 10 business days prior to the date upon which such
10 registration would otherwise expire, (or such lesser period
11 as the Secretary of State may prescribe by rule or
12 regulation) in such form and executed, verified, or
13 authenticated by such person as the Secretary of State shall
14 prescribe by rule or regulation. Such application shall be
15 accompanied by a prospectus in its most current form together
16 with a renewal fee established pursuant to Section 11a of
17 this Act, which shall not be returnable in any event. A
18 renewal of registration of face amount certificate contracts
19 shall take effect as of the date and time that the prior
20 registration under subsection A of this Section 6 or prior
21 renewal under this subsection F would otherwise have expired
22 and (or such alternative date as the Secretary of State may
23 prescribe by rule or regulation) thereafter shall be deemed
24 to be a new registration of the face amount certificate
25 contracts covered thereby. The Secretary of State may by
26 rule or regulation prescribe an additional fee for the
27 failure to file timely an application for renewal and limit
28 the number of times a registration may be renewed.
29 G. Deposit of Securities. No face amount certificate
30 contract shall be registered under subsection B of this
31 Section 6 unless the issuer shall establish and maintain with
32 the Secretary of State, for the benefit of the holders of
33 such contracts residing in this State, a deposit of
34 securities representing debt obligations of the kind in which
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1 life insurance companies organized under the laws of this
2 State are permitted to invest their funds, in an amount
3 having a fair market value of not less than $100,000 and at
4 no time less than the current contract liability on all such
5 face amount certificate contracts held by persons residing in
6 this State, and provided further that deposited securities,
7 other than those secured by entire first mortgage or trust
8 deeds on improved unencumbered real estate, are issued by an
9 issuer required to file reports pursuant to Section 13 or
10 15(d) of the Federal 1934 Act or are covered by Section
11 12(g)(2)(B) or (G) of the Federal 1934 Act, or appear in
12 current quotations in transactions on exchanges recognized by
13 subsection G of Section 3 of this Act, and provided further,
14 that bonds or notes secured by mortgages or trust deeds be
15 limited to those (i) constituting the entire indebtedness
16 secured thereby, (ii) establishing a first lien on improved
17 real estate held in fee simple, and (iii) insured by the
18 Federal Housing Administrator under an Act of Congress of the
19 United States entitled "National Housing Act". Debentures
20 issued by the Federal Housing Administrator under an Act of
21 Congress of the United States entitled the "National Housing
22 Act" may be included in the deposit prescribed by this
23 subsection in amounts related to, and in substitution for,
24 specific insured mortgage loans then included in the subject
25 deposit which are in default, but at no time shall the
26 aggregate principal amount of such debentures included in the
27 subject deposit exceed 5% of the fair market value of
28 securities comprising the subject deposit. The current
29 contract liability in respect of contracts held by persons
30 residing in this State shall be that as determined in such
31 contracts as computed by the issuer and regularly certified
32 to the Secretary of State, on or before the last day of each
33 calendar month as of the close of the month last prior to the
34 date of reporting.
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1 Securities deposited as hereinabove required may be
2 withdrawn by the depositor at any time, and from time to
3 time, whenever other securities eligible for deposit and of a
4 fair market value not less than that withdrawn are deposited
5 in substitution for securities withdrawn.
6 The Secretary of State may, upon receipt of appropriate
7 certification in writing, deemed by the Secretary of State to
8 be competent and adequate, evidencing the reduction of
9 contract liability on contracts held by persons residing in
10 this State to an aggregate amount representing not more than
11 90% of the fair market value of the securities then on
12 deposit, permit an equivalent reduction in the deposited
13 securities.
14 H. Minimum Deposit; Annual Fee; Transaction Charge. The
15 initial and continuing deposit required hereby shall, so long
16 as the face amount certificate contracts registered under
17 subsection B of this Section 6 are being offered and sold in
18 this State, and until all contract liability on all contracts
19 outstanding in this State has been discharged, include
20 obligations of the United States or the State of Illinois in
21 bearer form or fully registered, or registered as to
22 principal, in the title of Treasurer of the State of
23 Illinois, and his or her successors in office, in the minimum
24 principal amount of $50,000. An issuer of face amount
25 certificate contracts, in respect of which a deposit is
26 required to be established and maintained under this Section
27 6, and an issuer of face amount certificate contracts
28 heretofore qualified for issuance to persons residing in this
29 State under "An Act relating to the sale or other disposition
30 of securities and providing penalties for the violation
31 thereof and to repeal Acts in conflict therewith", approved
32 June 10, 1919, as amended, and in respect of which a deposit
33 of securities was established and has been maintained under
34 the Act approved June 10, 1919, as cited above, shall pay to
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1 the Secretary of State an annual fee determined at the rate
2 of 1/30th of one percent on the average of quarterly
3 computations on the aggregate of principal amounts of
4 market-quoted or listed securities and the original loan
5 amounts of real estate loans insured by the Federal Housing
6 Administrator, and in addition each such issuer shall pay to
7 the Secretary of State, against quarterly billings therefor,
8 a transaction charge in the amount established pursuant to
9 Section 11a of this Act, which annual fee and transaction
10 charge shall not be returnable in any event, for each
11 separate issue or loan included in additions to and
12 withdrawals from such deposits, provided however that the
13 transaction charge established pursuant to Section 11a of
14 this Act for each separate issue of market-quoted or listed
15 securities shall apply to all the items of that issue
16 included in a single transaction, regardless of the aggregate
17 principal amount, and in respect of real estate loans such
18 transaction charge shall apply to the group of documents
19 pertaining to each separate loan, and not to the separate
20 items and documents included in such group.
21 Nothing herein contained in respect of prescribed custody
22 of deposited securities with the State Treasurer and of
23 permissible procedures of liquidation of deposited securities
24 by the Secretary of State in the event of insolvency of an
25 issuer of face amount certificate contracts, or the
26 appointment of a trustee in bankruptcy, shall preclude the
27 surrender of deposited securities to a duly qualified trustee
28 under appointment by a Court having jurisdiction under the
29 Federal Bankruptcy Code under an appropriate order of such
30 Court.
31 I. Liquidation of Securities. Upon the insolvency of
32 the issuer of face amount certificate contracts or
33 appointment of a receiver or trustee in bankruptcy, the
34 Secretary of State, if not required otherwise under Federal
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1 law or under an order of a Federal Court of competent
2 jurisdiction, may apply to the Circuit Court of Sangamon
3 County, or any other court of competent jurisdiction, for
4 authority to proceed for the liquidation of such securities
5 held for the benefit of the holders of such contracts who
6 reside in this State. The Secretary of State is hereby
7 authorized to deal with such securities on deposit in this
8 State for the benefit of the holders of such face amount
9 certificate contracts, in his or her name or, if the Court
10 shall so order, in the name of the issuer. The Secretary of
11 State may, subject to the approval of the Court, sell or
12 otherwise dispose of the securities so deposited or any part
13 thereof. The Secretary of State shall as soon as may be
14 conveniently possible, give notice by publication as provided
15 by law, and as the Court may direct, to all contract holders
16 residing in this State who may have claims against the issuer
17 under such face amount certificate contracts and for whose
18 benefit such deposit is held, to file and prove their claims
19 in the manner and within the time the Court shall direct. In
20 order to preserve so far as possible the rights and interests
21 of the holders of outstanding contracts of such issuer who
22 reside in this State, the Secretary of State may liquidate
23 such securities on deposit in this State by entering into
24 contracts with any issuer or person able to buy such
25 securities in whole, or in part. Upon receiving an offer or
26 offers for the purchase of such securities in whole, or in
27 part, the Secretary of State shall submit such offer or
28 offers to the Court, and if, after a full hearing upon the
29 petition filed by the Secretary of State, the court shall
30 find that the Secretary of State endeavored to obtain the
31 best contract price for the benefit of the contract holders,
32 and if the court shall find that the best contract price in
33 the interests of the contract holders has been obtained, and
34 that it is for the best interests of the holders of such
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1 contracts that such securities be sold, the court shall, by
2 written order approve the acts of the Secretary of State and
3 authorize him or her to dispose of such securities. Upon the
4 conversion of such securities to cash, the Secretary of State
5 may then proceed to dispose of the sum received for such
6 securities among the respective holders of such contracts as
7 their interests may appear. Upon the liquidation and
8 distribution of such funds, the Secretary of State may make
9 proper liquidation of such securities and the distribution or
10 disposition thereof or of the proceeds therefrom as herein
11 provided.
12 For the purpose of liquidation of such securities, the
13 Secretary of State shall have the power to appoint one or
14 more special deputies as his or her agent or agents and to
15 employ such clerks, assistants or attorneys as may by him or
16 her be deemed necessary and to give each of such persons such
17 power to assist him or her as he or she may consider wise.
18 The compensation of every such special deputy, agent, clerk,
19 assistant or attorney shall be fixed, and all expenses of
20 taking possession of such securities of the issuer and the
21 administration thereof shall be approved, by the Secretary of
22 State subject to the approval of the court and shall be paid
23 out of the funds or assets received from the liquidation of
24 such securities.
25 J. The applicant or registrant shall notify the
26 Secretary of State, by written notice (which may be by
27 electronic, telegraphic, or facsimile transmission), within 2
28 business days after its receipt of any stop order, denial,
29 order to show cause, suspension or revocation order,
30 injunction or restraining order, or similar order entered or
31 issued by any state, federal or other regulatory authority or
32 by any court, concerning the face amount certificate
33 contracts which are being or have been registered in this
34 State or any other securities of the issuer currently being
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1 or proposed to be offered to the public, if the matter which
2 is the subject of, or the failure to disclose the existence
3 of, such order would in this State constitute a violation of
4 subsection E, F, G, H, I or J of Section 12 of this Act. The
5 obligation contained in this subsection J shall continue
6 until such time as offers and sales of the face amount
7 certificate contracts registered under this Section 6 are no
8 longer being made in this State by the applicant or
9 registrant.
10 K. Any document being filed pursuant to this Section 6
11 shall be deemed filed, and any fee being paid pursuant to
12 this Section 6 shall be deemed paid, upon the date of actual
13 receipt thereof by the Secretary of State.
14 L. The Secretary of State may require by rule or
15 regulation the payment of an additional fee for the filing of
16 information or documents required to be filed by this Section
17 6 which have not been filed in a timely manner. Such fees
18 shall be deposited into the Securities Investors Education
19 Fund and used to promote public awareness of the dangers of
20 securities fraud.
21 (Source: P.A. 89-209, eff. 1-1-96.)
22 (815 ILCS 5/7) (from Ch. 121 1/2, par. 137.7)
23 Sec. 7. Registration of Investment Fund Shares. All
24 investment fund shares except those set forth under Section
25 2a of this Act, or those exempt under Section 3 of this Act,
26 or those offered or sold in transactions exempt under Section
27 4 of this Act, or face amount certificate contracts required
28 to be registered under Section 6 of this Act, shall be
29 registered either by coordination or by qualification, as
30 hereinafter in this Section provided, prior to their offer or
31 sale in this State. Additional classes of shares that are of
32 the same rank, general description, and characteristics as
33 those currently registered may be added to a current
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1 registration under this Section upon the filing of an
2 amendment and the payment of the additional fees as
3 prescribed by the Secretary of State by rule or regulation.
4 Any change in organization or plans of operation shall be
5 disclosed to the Secretary of State by filing an amendment to
6 a current registration and the payment of the additional fees
7 as prescribed by the Secretary of State by rule or
8 regulation.
9 A. Registration of Investment Fund Shares by
10 Coordination.
11 (1) Investment fund shares which are being or have
12 been registered under the Federal 1933 Act and the
13 Federal 1940 Investment Company Act may be registered by
14 coordination in the manner provided in this subsection A,
15 if the effective date of the registration under the
16 Federal 1933 Act is not more than 30 days before the
17 filing with the Secretary of State.
18 (2) Investment fund shares may be registered by
19 coordination by the filing with the Secretary of State by
20 the issuer, by a controlling person or by a registered
21 dealer of:
22 (a) One copy of the registration statement
23 (without exhibits) descriptive of the investment
24 fund shares on file with the Securities and Exchange
25 Commission in its most recent form as of the date of
26 the initial filing under this subsection A;
27 (b) An application, in such form and executed,
28 verified, or authenticated by such person as the
29 Secretary of State shall by rule or regulation
30 prescribe, setting forth the title of the investment
31 fund shares to be offered in this State under this
32 subsection A and, if the applicant is electing the
33 date of effectiveness of a post-effective amendment
34 as its effective date as provided in Section 2.13 of
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1 this Act, specifying such date as the effective date
2 for purposes of registration under this subsection
3 A; and
4 (c) An undertaking to forward to the Secretary
5 of State, in writing (which may be by electronic
6 telegraphic or facsimile transmission), any and all
7 subsequent amendments of and supplements to the
8 registration statement not later than the 7th day
9 after the forwarding thereof to the Securities and
10 Exchange Commission, or such longer period as the
11 Secretary of State may permit by rule, regulation or
12 order; and
13 (d) if the applicant is not a registered
14 dealer, the name of at least one registered dealer
15 for the investment fund shares being registered
16 under this subsection A or a written statement
17 setting forth the method of offer and sale in this
18 State of the investment fund shares being registered
19 in compliance with Section 8 of this Act.
20 (3) Registration of investment fund shares by
21 coordination shall take effect automatically as of the
22 effective date of the registration statement (or
23 post-effective amendment) filed under the Federal 1933
24 Act, provided that on the effective date, the information
25 required by sub-paragraphs (a), (b), and (d) and the
26 undertaking required by sub-paragraph (c) of paragraph
27 (2) of this subsection A have been on file with the
28 Secretary of State for at least 10 business days, or such
29 shorter period as the Secretary of State may permit by
30 rule, regulation or order. If, however, the time period
31 referred to in the preceding sentence shall not have
32 expired on the effective date of the registration
33 statement (or post-effective amendment) filed under the
34 Federal 1933 Act, registration of such investment fund
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1 shares by coordination shall, upon the expiration of such
2 time period, take effect automatically as of the
3 effective date of the registration statement (or
4 post-effective amendment) filed under the Federal 1933
5 Act.
6 (4) If the information required by sub-paragraphs
7 (a), (b), and (d) and the undertaking required by
8 sub-paragraph (c) of paragraph (2) of this subsection A
9 are not filed with the Secretary of State prior to the
10 effective date of the registration statement (or
11 post-effective amendment) filed under the Federal 1933
12 Act, any registration of investment fund shares by
13 coordination under this subsection A shall take effect
14 automatically as soon as all of the following conditions
15 have been satisfied:
16 (a) the information required by sub-paragraphs
17 (a), (b), and (d) and the undertaking required by
18 sub-paragraph (c) of paragraph (2) of this
19 subsection A have been on file with the Secretary of
20 State for 10 business days, or for such shorter
21 period as the Secretary of State may permit by rule,
22 regulation or order;
23 (b) the registration statement or
24 post-effective amendment filed under the Federal
25 1933 Act is then in effect; and
26 (c) the prospectus then on file with the
27 Secretary of State satisfies the requirements of
28 Section 10(a)(3) of the Federal 1933 Act.
29 (5) The applicant shall furnish to the Secretary of
30 State written notice (which may be by electronic,
31 telegraphic, or facsimile transmission) confirming the
32 date of effectiveness and the title of the investment
33 fund shares registered under the Federal 1933 Act, no
34 later than the close of business on the second business
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1 day following the date on which registration statement
2 becomes effective under the Federal 1933 Act.
3 (6) No action by the Secretary of State shall be
4 necessary to evidence the effectiveness of the
5 registration by coordination under this subsection A.
6 The Secretary of State may, at his or her discretion,
7 provide a statement attesting to such registration, which
8 statement shall be in such form as the Secretary of State
9 may deem appropriate.
10 (7) Notwithstanding the foregoing, the issuer,
11 controlling person or registered dealer who filed the
12 application set forth in subparagraph (b) of paragraph
13 (2) of this subsection A may request, in writing (which
14 may be by electronic, telegraphic, or facsimile
15 transmission) prior to or upon notice of effectiveness
16 under the Federal 1933 Act, a waiver of automatic
17 effectiveness of the registration of investment fund
18 shares and the Secretary of State may, at his or her
19 discretion, grant such waiver of automatic effectiveness.
20 Upon the grant by the Secretary of State of the request
21 of waiver of automatic effectiveness, such registration
22 of investment fund shares shall become effective
23 automatically on the date that the issuer, controlling
24 person or registered dealer who filed the application set
25 forth in subparagraph (b) of paragraph (2) of this
26 subsection A notifies the Secretary of State in writing.
27 B. Registration of Investment Fund Shares by
28 Qualification. Investment fund shares may be registered by
29 qualification in the manner provided in this subsection B.
30 (1) An application for registration by
31 qualification shall be made by the issuer, by a
32 controlling person or by a registered dealer together
33 with the examination fee established pursuant to Section
34 11a of the Act, which shall not be returnable in any
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1 event. Such application shall be signed, verified, or
2 authenticated by the applicant and filed with the
3 Secretary of State. The application shall set forth:
4 (a) The name and address of the issuer;
5 (b) The title of the investment fund shares;
6 and
7 (c) The names and addresses of the persons
8 creating or sponsoring the investment fund shares.
9 (2) If the issuer, dealer, or controlling person
10 has not filed a registration statement or post-effective
11 amendment which is then in effect under the Federal 1933
12 Act, there shall be filed with the application:
13 (a) A specimen copy of the investment fund
14 shares, if any, or a copy of the form of the
15 instrument to evidence the investment fund shares,
16 if any;
17 (b) (Blank); If the issuer is a corporation, a
18 copy of its charter or articles of incorporation and
19 all amendments thereto, unless then on file in the
20 office of the Secretary of State; or, if other than
21 a corporation, a copy of all instruments, if any, by
22 which the investment trust or fund was created and
23 all amendments thereto;
24 (c) (Blank); A copy of the by-laws or other
25 code of regulations, if any, of the issuer;
26 (d) An opinion of counsel as to the legality
27 of the investment fund shares;
28 (e) An undertaking to file promptly (not later
29 than 2 business days after the occurrence of any
30 event which requires a material change in the
31 prospectus) with the Secretary of State any and all
32 amendments of and supplements to the prospectus as
33 theretofore filed under this subsection B, together
34 with any additional information, document or
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1 undertaking which the Secretary of State, at his or
2 her discretion, deems material, accompanied by the
3 amendment filing fee established pursuant to Section
4 11a of this Act or, in lieu thereof, a notification
5 in writing that all offers and sales of the
6 investment fund shares have been suspended pending
7 the filing with the Secretary of State of the
8 amendment of or supplement to the prospectus;
9 (f) A written statement setting forth the name
10 of at least one registered dealer for the investment
11 fund shares being registered under this subsection B
12 or an application for registration of a salesperson
13 or a written statement setting forth the method of
14 offer and sale in this State of the investment fund
15 shares being registered in compliance with Section 8
16 of this Act.
17 (3) In addition, there shall be filed with the
18 application such additional information and material in
19 such form as the Secretary of State may by rule,
20 regulation or order prescribe and a prospectus which
21 contains, but is not limited to the following:
22 (a) The date and form of organization of the
23 fund or trust;
24 (b) The authorized and issued capitalization
25 of the fund or trust and a description of the
26 investment fund shares being registered and of all
27 authorized securities;
28 (c) A schedule of the types of deductions
29 which may be made from the trust or corporate or
30 fund assets and the income therefrom or the avails
31 thereof as charges prior to distribution to holders
32 of the investment fund shares;
33 (d) The names and addresses of all of the
34 fund's or trust's officers and directors, or persons
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1 performing similar functions, their business
2 experience during the preceding 5 years and the
3 remuneration paid to each by the fund or trust or
4 any affiliate thereof during the fiscal year last
5 past and proposed to be paid for the then current
6 fiscal year;
7 (e) A brief description of any pending
8 material legal proceeding, and of any material legal
9 proceeding known to be contemplated by governmental
10 authorities involving the fund or trust;
11 (f) A statement of the plan of operation,
12 management policies and provisions and restrictions
13 in respect of investment and reinvestment of
14 principal funds and undistributed income therefrom;
15 (g) A statement of the plan and intention in
16 respect of distributions of ordinary income and
17 capital gains, which statement shall disclose the
18 taking of adequate measures for specific separation
19 and identification of distributions arising from
20 ordinary income and those arising from profits
21 realized from the disposition of securities;
22 (h) Specimen computations illustrating typical
23 applications of the formulae to be used in
24 determining asset value, offering price and
25 liquidating price of the investment fund shares; and
26 (i) The following financial statements in
27 respect of the issuer if the investment fund shares
28 represent shares of an issuing corporation, or in
29 respect of the trust fund, if the investment fund
30 shares represent beneficial interests in a trust
31 fund:
32 (i) a balance sheet as of a date within
33 135 days prior to the date of submitting the
34 application. If such balance sheet is not
-69- LRB9004729SMdvam02
1 certified by an independent certified public
2 accountant, the prospectus shall also contain a
3 balance sheet certified by an independent
4 certified public accountant as of the close of
5 the fund's last fiscal year, unless such fiscal
6 year ended within 135 days prior to the time of
7 filing the application, in which case the
8 certified balance sheet may be as of the end of
9 the preceding fiscal year;
10 (ii) a detailed statement of income and
11 expenses and of profits realized and losses
12 sustained from the sale of securities for each
13 of the three fiscal years (or for the period of
14 existence of the issuer if less than 3 years)
15 next preceding the date of the certified
16 balance sheet and for the period, if any,
17 between the date of the certified balance sheet
18 and the date of the most recent balance sheet.
19 Such statements shall be certified by an
20 independent certified public accountant for the
21 periods ending with the date of the certified
22 balance sheet;
23 (iii) an analysis of each surplus account
24 (or, in lieu thereof, a statement of changes in
25 net assets) for each period for which a
26 statement of income and expenses is filed,
27 certified by an independent certified public
28 accountant for the periods for which certified
29 statements of income and expenses are
30 submitted; and
31 (iv) such other financial statements and
32 supporting schedules as the Secretary of State
33 may by rule or regulation prescribe.
34 (4) The Secretary of State may make or cause to be
-70- LRB9004729SMdvam02
1 made an examination of matters pertaining to the
2 investment fund shares as to which registration is sought
3 under this subsection B and the persons creating,
4 sponsoring or having general charge of the distribution
5 of the investment fund shares, or any of them, and may
6 require the applicant to advance sufficient funds to
7 defray all actual expenses of such examination. An
8 itemized statement of such expenses shall be furnished to
9 the applicant.
10 (5) No investment fund shares shall be registered
11 under this subsection B unless the underlying securities
12 or cash are and are to be deposited and held under an
13 appropriate agreement for the benefit of the holders of
14 the investment fund shares with and by a trustee or
15 custodian which is a clearing corporation, bank, trust
16 company or member of a national securities exchange
17 registered under the Federal 1934 Act, provided that any
18 such bank or trust company shall have an aggregate
19 capital, surplus and undivided profits of at least
20 $2,000,000 and any such member of a national securities
21 exchange shall have capital stock, additional paid-in
22 capital and retained earnings of at least $2,000,000 if a
23 corporation or partnership capital of at least $2,000,000
24 if a partnership and further provided that any such
25 member of a national securities exchange shall comply
26 with the provisions of the Federal 1940 Investment
27 Company Act and the rules and regulations of the
28 Securities and Exchange Commission promulgated under that
29 Act relating to the custody of the underlying securities
30 of investment funds.
31 (6) The Secretary of State shall within a
32 reasonable time examine the application and documents
33 filed with him or her and may make such additional
34 examination pursuant to paragraph (4) of this subsection
-71- LRB9004729SMdvam02
1 B as he or she may deem appropriate, and unless the
2 Secretary of State makes a determination that the
3 application and documents so filed do not conform to the
4 requirements of this subsection B, or there is a
5 proceeding pending under Section 11 of this Act, the
6 Secretary of State shall register the investment fund
7 shares for offer and sale in this State under this
8 subsection B.
9 C. Pending Application and Filing Fee. No application
10 for registration of investment fund shares shall be deemed to
11 be filed or pending and no investment fund shares covered by
12 such application shall be deemed to be registered under
13 subsection A of this Section 7 unless a filing fee in the
14 amount established pursuant to Section 11a of this Act has
15 been paid, which fee shall not be returnable in any event. No
16 application shall be deemed to be filed or pending and no
17 investment fund shares covered by such application shall be
18 deemed to be registered under subsection B of this Section 7
19 unless the examination fee and filing fee established
20 pursuant to Section 11a of this Act have been paid, which
21 fees shall not be returnable in any event.
22 D. Amendatory statements and required fees. The
23 Secretary of State may by rule or regulation require the
24 filing of an amendatory statement and prescribe its form and
25 content. The fee for filing the statement shall be
26 established pursuant to Section 11a of this Act. The fee
27 shall not be returnable in any event.
28 E. Discontinuance of Registration. An amendatory
29 statement or statements may be submitted by the applicant at
30 any time, and from time to time, when it is desired to
31 discontinue registration in respect of one or more classes,
32 series, or portfolios and if the Secretary of State shall
33 find that such discontinuance is not against the public
34 interest, such amendatory statement or statements shall be
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1 filed by the Secretary of State without charge, but such
2 discontinuance of registration shall not entitle the
3 applicant to any refund of any fees previously paid in
4 respect of such discontinued class or classes, series, or
5 portfolios.
6 F. Effective Period and Sales Reports.
7 (1) A registration of investment fund shares under
8 this Section 7, unless sooner terminated by the voluntary
9 action of the applicant or by action of the Secretary of
10 State under Section 11 hereof, shall continue in force
11 and 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 or order), without limitation as to
15 number of shares or aggregate amount; provided, however,
16 that in the case of investment fund shares registered
17 under subsection B of this Section 7, the issuer which
18 has no registration statement then in effect under the
19 Federal 1933 Act and the Federal 1940 Investment Company
20 Act shall promptly file with the Secretary of State
21 throughout such registration period, one copy of each
22 monthly, quarterly, semi-annual, annual or other periodic
23 report and financial statement sent to holders of its
24 outstanding investment fund shares, and one copy of each
25 statement and report relating to such investment fund
26 shares filed with any regulatory authority or agency of
27 the Federal Government.
28 (2) The Secretary of State may, at his or her
29 discretion, require each issuer, controlling person or
30 registered dealer on whose behalf a registration of
31 investment fund shares is effected under this Section 7
32 to file a report, in such form and of such content and
33 for such time period as the Secretary of State may by
34 rule or regulation prescribe, stating the aggregate
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1 dollar amount of investment fund shares sold to Illinois
2 residents. The civil remedies provided for in subsection
3 A 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
6 in subsection I of Section 11 and in subsections F and G
7 of Section 13 of this Act and the civil remedies of
8 restitution, damages and disgorgement of profits provided
9 for in subsection I of Section 11 of this Act shall not
10 be available against any person by reason of the failure
11 to file any such report or on account of the contents of
12 any such report.
13 G. Renewal of Registration. A registration of
14 investment fund shares in effect under subsection A or B of
15 this Section 7 may be renewed by the issuer by filing an
16 application for renewal of registration with the Secretary of
17 State no later than 10 business days prior to the date upon
18 which such registration would otherwise expire or such lesser
19 period as the Secretary of State may prescribe by rule or
20 regulation, in such form and executed, verified, or
21 authenticated by such person as the Secretary of State shall
22 prescribe by rule or regulation. Such application shall be
23 accompanied by a prospectus in its most current form together
24 with a renewal fee established pursuant to Section 11a of
25 this Act, which shall not be returnable in any event. A
26 renewal of registration of securities shall take effect as of
27 the date and time that the prior registration under
28 subsection A of this Section 7 or prior renewal under this
29 paragraph (1) would otherwise have expired (or such
30 alternative date as the Secretary of State may prescribe by
31 rule or regulation) and thereafter shall be deemed to be a
32 new registration of the investment fund shares covered
33 thereby. The Secretary of State may by rule or regulation
34 prescribe an additional fee for the failure to file timely an
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1 application for renewal and limit the number of times a
2 registration may be renewed.
3 H. The applicant or registrant shall notify the
4 Secretary of State, by written notice (which may be by
5 electronic, telegraphic, or facsimile transmission), within 2
6 business days after its receipt of any stop order, denial,
7 order to show cause, suspension or revocation order,
8 injunction or restraining order, or similar order entered or
9 issued by any state, federal or other regulatory authority or
10 by any court, concerning the investment fund shares which are
11 being or have been registered in this State or any other
12 securities of the issuer currently being or proposed to be
13 offered to the public, if the matter which is the subject of,
14 or the failure to disclose the existence of, such order would
15 in this State constitute a violation of subsection E, F, G,
16 H, I or J of Section 12 of this Act. The obligation
17 contained in this subsection H shall continue until such time
18 as offers and sales of the investment fund shares registered
19 under this Section 7 are no longer being made in this State
20 by the applicant or registrant.
21 I. Any document being filed pursuant to this Section 7
22 shall be deemed filed, and any fee being paid pursuant to
23 this Section 7 shall be deemed paid, upon the date of actual
24 receipt thereof by the Secretary of State.
25 J. The Secretary of State may require by rule or
26 regulation the payment of an additional fee for the filing of
27 information or documents required to be filed by this Section
28 7 which have not been filed in a timely manner. Such fees
29 shall be deposited into the Securities Investors Education
30 Fund and use to promote public awareness of the dangers of
31 securities fraud.
32 (Source: P.A. 89-209, eff. 1-1-96; 89-626, eff. 8-9-96.)
33 (815 ILCS 5/8) (from Ch. 121 1/2, par. 137.8)
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1 Sec. 8. Registration of dealers, limited Canadian
2 dealers, salespersons, and investment advisers, and
3 investment adviser representatives.
4 A. Except as otherwise provided in this subsection A,
5 every dealer, limited Canadian dealer, salesperson, and
6 investment adviser, and investment adviser representative
7 shall be registered as such with the Secretary of State. No
8 dealer or salesperson need be registered as such when
9 offering or selling securities in transactions believed in
10 good faith to be exempted by subsection A, B, C, D, E, G, H,
11 I, J, K, M, O, P, Q, R or S of Section 4 of this Act,
12 provided that such dealer or salesperson is not regularly
13 engaged in the business of offering or selling securities in
14 reliance upon the exemption set forth in subsection G or M of
15 Section 4 of this Act. No dealer, issuer or controlling
16 person shall employ a salesperson unless such salesperson is
17 registered as such with the Secretary of State or is employed
18 for the purpose of offering or selling securities solely in
19 transactions believed in good faith to be exempted by
20 subsection A, B, C, D, E, G, H, I, J, K, L, M, O, P, Q, R or
21 S of Section 4 of this Act; provided that such salesperson
22 need not be registered when effecting transactions in this
23 State limited to those transactions described in Section
24 15(h)(2) of the Federal 1934 Act or engaging engaged in the
25 offer or sale of securities in respect of which he or she has
26 beneficial ownership and is a controlling person. The
27 Secretary of State may, by rule, regulation or order and
28 subject to such terms, conditions as fees as may be
29 prescribed in such rule, regulation or order, exempt from the
30 registration requirements of this Section 8 any investment
31 adviser, if the Secretary of State shall find that such
32 registration is not necessary in the public interest by
33 reason of the small number of clients or otherwise limited
34 character of operation of such investment adviser.
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1 B. An application for registration as a dealer or
2 limited Canadian dealer, executed, verified, or authenticated
3 by or on behalf of the applicant, shall be filed with the
4 Secretary of State, in such form as the Secretary of State
5 may by rule, regulation or order prescribe, setting forth or
6 accompanied by:
7 (1) The name and address of the applicant, the
8 location of its principal business office and all branch
9 offices, if any, and the date of its organization;
10 (2) A statement of any other Federal or state
11 licenses or registrations which have been granted the
12 applicant and whether any such licenses or registrations
13 have ever been refused, cancelled, suspended, revoked or
14 withdrawn;
15 (3) The assets and all liabilities, including
16 contingent liabilities of the applicant, as of a date not
17 more than 60 days prior to the filing of the application;
18 (4) (a) A brief description of any civil or
19 criminal proceeding of which fraud is an essential
20 element pending against the applicant and whether the
21 applicant has ever been convicted of a felony, or of any
22 misdemeanor of which fraud is an essential element;
23 (b) A list setting forth the name, residence and
24 business address and a 10 year occupational statement of
25 each principal of the applicant and a statement
26 describing briefly any civil or criminal proceedings of
27 which fraud is an essential element pending against any
28 such principal and the facts concerning any conviction of
29 any such principal of a felony, or of any misdemeanor of
30 which fraud is an essential element;
31 (5) If the applicant is a corporation: a copy of
32 its articles of incorporation in their most current form,
33 unless they are already on file in the office of the
34 Secretary of State; a list of its officers and directors
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1 setting forth the residence and business address of each;
2 a 10-year occupational statement of each such officer or
3 director; and a statement describing briefly any civil or
4 criminal proceedings of which fraud is an essential
5 element pending against each such officer or director and
6 the facts concerning any conviction of any officer or
7 director of a felony, or of any misdemeanor of which
8 fraud is an essential element;
9 (6) If the applicant is a sole proprietorship, a
10 partnership, limited liability company, an unincorporated
11 association or any similar form of business organization:
12 the name, residence and business address of the
13 proprietor or of each partner, member, officer, director,
14 trustee or manager; the limitations, if any, of the
15 liability of each such individual; a 10-year occupational
16 statement of each such individual; a statement describing
17 briefly any civil or criminal proceedings of which fraud
18 is an essential element pending against each such
19 individual and the facts concerning any conviction of any
20 such individual of a felony, or of any misdemeanor of
21 which fraud is an essential element;
22 (7) Such additional information as the Secretary of
23 State may by rule or regulation prescribe as necessary to
24 determine the applicant's financial responsibility,
25 business repute and qualification to act as a dealer.
26 (8) (a) No applicant shall be registered or
27 re-registered as a dealer or limited Canadian dealer
28 under this Section unless and until each principal of the
29 dealer has passed an examination conducted by the
30 Secretary of State or a self-regulatory organization of
31 securities dealers or similar person, which examination
32 has been designated by the Secretary of State by rule,
33 regulation or order to be satisfactory for purposes of
34 determining whether the applicant has sufficient
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1 knowledge of the securities business and laws relating
2 thereto to act as a registered dealer. Any dealer who was
3 registered on September 30, 1963, and has continued to be
4 so registered; and any principal of any registered
5 dealer, who was acting in such capacity on and
6 continuously since September 30, 1963; and any individual
7 who has previously passed a securities dealer examination
8 administered by the Secretary of State or any examination
9 designated by the Secretary of State to be satisfactory
10 for purposes of determining whether the applicant has
11 sufficient knowledge of the securities business and laws
12 relating thereto to act as a registered dealer by rule,
13 regulation or order, shall not be required to pass an
14 examination in order to continue to act in such capacity.
15 The Secretary of State may by order waive the examination
16 requirement for any principal of an applicant for
17 registration under this subsection B who has had such
18 experience or education relating to the securities
19 business as may be determined by the Secretary of State
20 to be the equivalent of such examination. Any request
21 for such a waiver shall be filed with the Secretary of
22 State in such form as may be prescribed by rule or
23 regulation.
24 (b) Unless an applicant is a member of the body
25 corporate known as the Securities Investor Protection
26 Corporation established pursuant to the Act of Congress
27 of the United States known as the Securities Investor
28 Protection Act of 1970, as amended, or a member of an
29 association of dealers registered as a national
30 securities association pursuant to Section 15A of the
31 Federal 1934 Act, or a member of a self-regulatory
32 organization or stock exchange in Canada which the
33 Secretary of State has designated by rule or order, an
34 applicant shall not be registered or re-registered unless
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1 and until there is filed with the Secretary of State
2 evidence that such applicant has in effect insurance or
3 other equivalent protection for each client's cash or
4 securities held by such applicant, and an undertaking
5 that such applicant will continually maintain such
6 insurance or other protection during the period of
7 registration or re-registration. Such insurance or other
8 protection shall be in a form and amount reasonably
9 prescribed by the Secretary of State by rule or
10 regulation.
11 (9) The application for the registration of a
12 dealer or limited Canadian dealer shall be accompanied
13 by a filing fee and a fee for each branch office in this
14 State, in each case in the amount established pursuant to
15 Section 11a of this Act, which fees shall not be
16 returnable in any event.
17 (10) The Secretary of State shall notify the dealer
18 or limited Canadian dealer by written notice (which may
19 be by electronic, telegraphic, or facsimile transmission)
20 of the effectiveness of the registration as a dealer in
21 this State.
22 (11) Any change which renders no longer accurate
23 any information contained in any application for
24 registration or re-registration of a dealer or limited
25 Canadian dealer shall be reported to the Secretary of
26 State within 10 business days after the occurrence of
27 such change; but in respect to assets and liabilities
28 only materially adverse changes need be reported.
29 C. Any registered dealer, limited Canadian dealer,
30 issuer, or controlling person desiring to register a
31 salesperson shall file an application with the Secretary of
32 State, in such form as the Secretary of State may by rule or
33 regulation prescribe, which the salesperson is required by
34 this Section to provide to the dealer, issuer, or controlling
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1 person, executed, verified, or authenticated by the
2 salesperson setting forth or accompanied by:
3 (1) The name, residence and business address of the
4 salesperson;
5 (2) Whether any federal or State license or
6 registration as dealer, limited Canadian dealer, or
7 salesperson has ever been refused the salesperson or
8 cancelled, suspended, revoked, or withdrawn;
9 (3) The nature of employment with, and names and
10 addresses of, employers of the salesperson for the 10
11 years immediately preceding the date of application;
12 (4) A brief description of any civil or criminal
13 proceedings of which fraud is an essential element
14 pending against the salesperson, and whether the
15 salesperson has ever been convicted of a felony, or of
16 any misdemeanor of which fraud is an essential element;
17 (5) Such additional information as the Secretary of
18 State may by rule, regulation or order prescribe as
19 necessary to determine the salesperson's business repute
20 and qualification to act as a salesperson; and
21 (6) No individual shall be registered or
22 re-registered as a salesperson under this Section unless
23 and until such individual has passed an examination
24 conducted by the Secretary of State or a self-regulatory
25 organization of securities dealers or similar person,
26 which examination has been designated by the Secretary of
27 State by rule, regulation or order to be satisfactory for
28 purposes of determining whether the applicant has
29 sufficient knowledge of the securities business and laws
30 relating thereto to act as a registered salesperson.
31 Any salesperson who was registered prior to
32 September 30, 1963, and has continued to be so
33 registered, and any individual who has passed a
34 securities salesperson examination administered by the
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1 Secretary of State or an examination designated by the
2 Secretary of State by rule, regulation or order to be
3 satisfactory for purposes of determining whether the
4 applicant has sufficient knowledge of the securities
5 business and laws relating thereto to act as a registered
6 salesperson, shall not be required to pass an examination
7 in order to continue to act as a salesperson. The
8 Secretary of State may by order waive the examination
9 requirement for any applicant for registration under this
10 subsection C who has had such experience or education
11 relating to the securities business as may be determined
12 by the Secretary of State to be the equivalent of such
13 examination. Any request for such a waiver shall be
14 filed with the Secretary of State in such form as may be
15 prescribed by rule, regulation or order.
16 (7) The application for registration of a
17 salesperson shall be accompanied by a filing fee and a
18 Securities Audit and Enforcement Fund fee, each in the
19 amount established pursuant to Section 11a of this Act,
20 which shall not be returnable in any event.
21 (8) Any change which renders no longer accurate any
22 information contained in any application for registration
23 or re-registration as a salesperson shall be reported to
24 the Secretary of State within 10 business days after the
25 occurrence of such change. If the activities are
26 terminated which rendered an individual a salesperson for
27 the dealer, issuer or controlling person, the dealer,
28 issuer or controlling person, as the case may be, shall
29 notify the Secretary of State, in writing, within 30 days
30 of the salesperson's cessation of activities, using the
31 appropriate termination notice form.
32 (9) A registered salesperson may transfer his or
33 her registration under this Section 8 for the unexpired
34 term thereof from one registered dealer or limited
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1 Canadian dealer to another by the giving of notice of the
2 transfer by the new registered dealer or limited Canadian
3 dealer to the Secretary of State in such form and subject
4 to such conditions as the Secretary of State shall by
5 rule or regulation prescribe. The new registered dealer
6 or limited Canadian dealer shall promptly file an
7 application for registration of such salesperson as
8 provided in this subsection C, accompanied by the filing
9 fee prescribed by paragraph (7) of this subsection C.
10 C-5. Except with respect to federal covered investment
11 advisers whose only clients are investment companies as
12 defined in the Federal 1940 Act, other investment advisers,
13 federal covered investment advisers, or any similar person
14 which the Secretary of State may prescribe by rule or order,
15 a federal covered investment adviser shall file with the
16 Secretary of State, prior to acting as a federal covered
17 investment adviser in this State, such documents as have been
18 filed with the Securities and Exchange Commission as the
19 Secretary of State by rule or order may prescribe. The
20 notification of a federal covered investment adviser shall be
21 accompanied by a notification filing fee established pursuant
22 to Section 11a of this Act, which shall not be returnable in
23 any event. Every person acting as a federal covered
24 investment adviser in this State shall file a notification
25 filing and pay an annual notification filing fee established
26 pursuant to Section 11a of this Act, which is not returnable
27 in any event. The failure to file any such notification
28 shall constitute a violation of subsection D of Section 12 of
29 this Act, subject to the penalties enumerated in Section 14
30 of this Act. Until October 10, 1999 or other date as may be
31 legally permissible, a federal covered investment adviser who
32 fails to file the notification or refuses to pay the fees as
33 required by this subsection shall register as an investment
34 adviser with the Secretary of State under Section 8 of this
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1 Act. The civil remedies provided for in subsection A of
2 Section 13 of this Act and the civil remedies of rescission
3 and appointment of receiver, conservator, ancillary receiver,
4 or ancillary conservator provided for in subsection F of
5 Section 13 of this Act shall not be available against any
6 person by reason of the failure to file any such notification
7 or to pay the notification fee or on account of the contents
8 of any such notification.
9 D. An application for registration as an investment
10 adviser, executed, verified, or authenticated by or on behalf
11 of the applicant, shall be filed with the Secretary of State,
12 in such form as the Secretary of State may by rule or
13 regulation prescribe, setting forth or accompanied by:
14 (1) The name and form of organization under which
15 the investment adviser engages or intends to engage in
16 business; the state or country and date of its
17 organization; the location of the adviser's principal
18 business office and branch offices, if any; the names and
19 addresses of the adviser's principal, partners, officers,
20 directors, and persons performing similar functions or,
21 if the investment adviser is an individual, of the
22 individual; and the number of the adviser's employees who
23 perform investment advisory functions;
24 (2) The education, the business affiliations for
25 the past 10 years, and the present business affiliations
26 of the investment adviser and of the adviser's principal,
27 partners, officers, directors, and persons performing
28 similar functions and of any person controlling the
29 investment adviser;
30 (3) The nature of the business of the investment
31 adviser, including the manner of giving advice and
32 rendering analyses or reports;
33 (4) The nature and scope of the authority of the
34 investment adviser with respect to clients' funds and
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1 accounts;
2 (5) The basis or bases upon which the investment
3 adviser is compensated;
4 (6) Whether the investment adviser or any
5 principal, partner, officer, director, person performing
6 similar functions or person controlling the investment
7 adviser (i) within 10 years of the filing of the
8 application has been convicted of a felony, or of any
9 misdemeanor of which fraud is an essential element, or
10 (ii) is permanently or temporarily enjoined by order or
11 judgment from acting as an investment adviser,
12 underwriter, dealer, principal or salesperson, or from
13 engaging in or continuing any conduct or practice in
14 connection with any such activity or in connection with
15 the purchase or sale of any security, and in each case
16 the facts relating to the conviction, order or judgment;
17 (7) (a) A statement as to whether the investment
18 adviser is engaged or is to engage primarily in the
19 business of rendering investment supervisory services;
20 and
21 (b) A statement that the investment adviser will
22 furnish his, her, or its clients with such information as
23 the Secretary of State deems necessary in the form
24 prescribed by the Secretary of State by rule or
25 regulation;
26 (8) Such additional information as the Secretary of
27 State may, by rule, regulation or order prescribe as
28 necessary to determine the applicant's financial
29 responsibility, business repute and qualification to act
30 as an investment adviser.
31 (9) No applicant shall be registered or
32 re-registered as an investment adviser under this Section
33 unless and until each principal of the applicant who is
34 actively engaged in the conduct and management of the
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1 applicant's advisory business in this State has passed an
2 examination or completed an educational program conducted
3 by the Secretary of State or an association of investment
4 advisers or similar person, which examination or
5 educational program has been designated by the Secretary
6 of State by rule, regulation or order to be satisfactory
7 for purposes of determining whether the applicant has
8 sufficient knowledge of the securities business and laws
9 relating thereto to conduct the business of a registered
10 investment adviser.
11 Any person who was a registered investment adviser
12 prior to September 30, 1963, and has continued to be so
13 registered, and any individual who has passed an
14 investment adviser examination administered by the
15 Secretary of State, or passed an examination or completed
16 an educational program designated by the Secretary of
17 State by rule, regulation or order to be satisfactory for
18 purposes of determining whether the applicant has
19 sufficient knowledge of the securities business and laws
20 relating thereto to conduct the business of a registered
21 investment adviser, shall not be required to pass an
22 examination or complete an educational program in order
23 to continue to act as an investment adviser. The
24 Secretary of State may by order waive the examination or
25 educational program requirement for any applicant for
26 registration under this subsection D if the principal of
27 the applicant who is actively engaged in the conduct and
28 management of the applicant's advisory business in this
29 State has had such experience or education relating to
30 the securities business as may be determined by the
31 Secretary of State to be the equivalent of the
32 examination or educational program. Any request for a
33 waiver shall be filed with the Secretary of State in such
34 form as may be prescribed by rule or regulation.
-86- LRB9004729SMdvam02
1 (10) No applicant shall be registered or
2 re-registered as an investment adviser under this Section
3 8 unless (i) the application for registration or
4 re-registration is accompanied by an application for
5 registration or re-registration for each person a list of
6 all persons acting as an investment adviser
7 representative representatives on behalf of the adviser
8 and (ii) a Securities Audit and Enforcement Fund fee that
9 shall not be returnable in any event is paid with respect
10 to each investment adviser representative. No fee,
11 however, shall be required under this paragraph if the
12 investment adviser representative is also registered as a
13 salesperson and the Securities Audit and Enforcement Fund
14 fee required under subsection C or subsection H of this
15 Section has been paid to the Secretary of State.
16 (11) The application for registration of an
17 investment adviser shall be accompanied by a filing fee
18 and a fee for each branch office in this State, in each
19 case in the amount established pursuant to Section 11a of
20 this Act, which fees shall not be returnable in any
21 event.
22 (12) The Secretary of State shall notify the
23 investment adviser by written notice (which may be by
24 electronic, telegraphic, or facsimile transmission) of
25 the effectiveness of the registration as an investment
26 adviser in this State.
27 (13) Any change which renders no longer accurate
28 any information contained in any application for
29 registration or re-registration of an investment adviser
30 shall be reported to the Secretary of State within 10
31 business days after the occurrence of the change. In
32 respect to assets and liabilities of an investment
33 adviser that retains custody of clients' cash or
34 securities or accepts pre-payment of fees in excess of
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1 $500 per client and 6 or more months in advance only
2 materially adverse changes need be reported by written
3 notice (which may be by electronic telegraphic or
4 facsimile transmission) no later than the close of
5 business on the second business day following the
6 discovery thereof.
7 (14) Each application for registration as an
8 investment adviser shall become effective automatically
9 on the 45th day following the filing of the application,
10 required documents or information, and payment of the
11 required fee unless (i) the Secretary of State has
12 registered the investment adviser prior to that date or
13 (ii) an action with respect to the applicant is pending
14 under Section 11 of this Act.
15 D-5. A registered investment adviser or federal covered
16 investment adviser desiring to register an investment
17 adviser representative shall file an application with the
18 Secretary of State, in the form as the Secretary of State may
19 by rule or order prescribe, which the investment adviser
20 representative is required by this Section to provide to the
21 investment adviser, executed, verified, or authenticated by
22 the investment adviser representative and setting forth or
23 accompanied by:
24 (1) The name, residence, and business address of
25 the investment adviser representative;
26 (2) A statement whether any federal or state
27 license or registration as a dealer, salesperson,
28 investment adviser, or investment adviser representative
29 has ever been refused, canceled, suspended, revoked or
30 withdrawn;
31 (3) The nature of employment with, and names and
32 addresses of, employers of the investment adviser
33 representative for the 10 years immediately preceding the
34 date of application;
-88- LRB9004729SMdvam02
1 (4) A brief description of any civil or criminal
2 proceedings, of which fraud is an essential element,
3 pending against the investment adviser representative and
4 whether the investment adviser representative has ever
5 been convicted of a felony or of any misdemeanor of which
6 fraud is an essential element;
7 (5) Such additional information as the Secretary of
8 State may by rule or order prescribe as necessary to
9 determine the investment adviser representative's
10 business repute or qualification to act as an investment
11 adviser representative;
12 (6) Documentation that the individual has passed an
13 examination conducted by the Secretary of State, an
14 organization of investment advisers, or similar person,
15 which examination has been designated by the Secretary of
16 State by rule or order to be satisfactory for purposes of
17 determining whether the applicant has sufficient
18 knowledge of the investment advisory or securities
19 business and laws relating to that business to act as a
20 registered investment adviser representative; and
21 (7) A Securities Audit and Enforcement Fund fee
22 established under Section 11a of this Act, which shall
23 not be returnable in any event.
24 The Secretary of State may by order waive the examination
25 requirement for an applicant for registration under this
26 subsection D-5 who has had the experience or education
27 relating to the investment advisory or securities business as
28 may be determined by the Secretary of State to be the
29 equivalent of the examination. A request for a waiver shall
30 be filed with the Secretary of State in the form as may be
31 prescribed by rule or order.
32 A change that renders no longer accurate any information
33 contained in any application for registration or
34 re-registration as an investment adviser representative must
-89- LRB9004729SMdvam02
1 be reported to the Secretary of State within 10 business days
2 after the occurrence of the change. If the activities that
3 rendered an individual an investment adviser representative
4 for the investment adviser are terminated, the investment
5 adviser shall notify the Secretary of State in writing (which
6 may be by electronic or facsimile transmission), within 30
7 days of the investment adviser representative's termination,
8 using the appropriate termination notice form as the
9 Secretary of State may prescribe by rule or order.
10 A registered investment adviser representative may
11 transfer his or her registration under this Section 8 for the
12 unexpired term of the registration from one registered
13 investment adviser to another by the giving of notice of the
14 transfer by the new investment adviser to the Secretary of
15 State in the form and subject to the conditions as the
16 Secretary of State shall prescribe. The new registered
17 investment adviser shall promptly file an application for
18 registration of the investment adviser representative as
19 provided in this subsection, accompanied by the Securities
20 Audit and Enforcement Fund fee prescribed by paragraph (7) of
21 this subsection D-5.
22 E. (1) Subject to the provisions of subsection F of
23 Section 11 of this Act, the registration of a dealer, limited
24 Canadian dealer, salesperson, or investment adviser, or
25 investment adviser representative may be denied, suspended or
26 revoked if the Secretary of State finds that the dealer,
27 limited Canadian dealer, salesperson, or investment adviser,
28 or investment adviser representative or any principal
29 officer, director, partner, member, trustee, manager or any
30 person who performs a similar function of the dealer, limited
31 Canadian dealer, or investment adviser:
32 (a) Has been convicted of any felony during the 10
33 year period preceding the date of filing of any
34 application for registration or at any time thereafter,
-90- LRB9004729SMdvam02
1 or of any misdemeanor of which fraud is an essential
2 element;
3 (b) Has engaged in any inequitable practice in the
4 offer or sale of securities or in any fraudulent business
5 practice;
6 (c) Has failed to account for any money or
7 property, or has failed to deliver any security, to any
8 person entitled thereto when due or within a reasonable
9 time thereafter;
10 (d) In the case of a dealer, limited Canadian
11 dealer, or investment adviser, is insolvent;
12 (e) In the case of a dealer or limited Canadian
13 dealer, (i) has failed reasonably to supervise the
14 securities activities of any of its salespersons and the
15 failure has permitted or facilitated a violation of
16 Section 12 of this Act or (ii) is offering or selling or
17 has offered or sold securities in this State through a
18 salesperson other than a registered salesperson, or, in
19 the case of a salesperson, is selling or has sold
20 securities in this State for a dealer, limited Canadian
21 dealer, issuer or controlling person with knowledge that
22 the dealer, limited Canadian dealer, issuer or
23 controlling person has not complied with the provisions
24 of this Act;
25 (f) In the case of an investment adviser, has
26 failed reasonably to supervise the advisory activities of
27 any of its investment adviser representatives or
28 employees and the failure has permitted or facilitated a
29 violation of Section 12 of this Act;
30 (g) Has violated any of the provisions of this Act;
31 (h) Has made any material misrepresentation to the
32 Secretary of State in connection with any information
33 deemed necessary by the Secretary of State to determine a
34 dealer's, limited Canadian dealer's, or investment
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1 adviser's financial responsibility or a dealer's, limited
2 Canadian dealer's, investment adviser's, or
3 salesperson's, or investment adviser representative's
4 business repute or qualifications, or has refused to
5 furnish any such information requested by the Secretary
6 of State;
7 (i) Has had a license or registration under any
8 Federal or State law regulating the offer or sale of
9 securities or commodity futures contracts, refused,
10 cancelled, suspended or withdrawn;
11 (j) Has been suspended or expelled from or refused
12 membership in or association with or limited in any
13 capacity by any self-regulatory organization registered
14 under the Federal 1934 Act or the Federal 1974 Act
15 arising from any fraudulent or deceptive act or a
16 practice in violation of any rule, regulation or standard
17 duly promulgated by the self-regulatory organization;
18 (k) Has had any order entered against it after
19 notice and opportunity for hearing by a securities agency
20 of any state, any foreign government or agency thereof,
21 the Securities and Exchange Commission, or the Federal
22 Commodities Futures Trading Commission arising from any
23 fraudulent or deceptive act or a practice in violation of
24 any statute, rule or regulation administered or
25 promulgated by the agency or commission;
26 (l) In the case of a dealer or limited Canadian
27 dealer, fails to maintain a minimum net capital in an
28 amount which the Secretary of State may by rule or
29 regulation require;
30 (m) Has conducted a continuing course of dealing of
31 such nature as to demonstrate an inability to properly
32 conduct the business of the dealer, limited Canadian
33 dealer, salesperson, or investment adviser, or investment
34 adviser representative;
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1 (n) Has had, after notice and opportunity for
2 hearing, any injunction or order entered against it or
3 license or registration refused, cancelled, suspended,
4 revoked, withdrawn or limited by any state or federal
5 body, agency or commission regulating banking, insurance,
6 finance or small loan companies, real estate or mortgage
7 brokers or companies, if the action resulted from any act
8 found by the body, agency or commission to be a
9 fraudulent or deceptive act or practice in violation of
10 any statute, rule or regulation registration administered
11 or promulgated by the body, agency or commission;
12 (o) Has failed to file a return, or to pay the tax,
13 penalty or interest shown in a filed return, or to pay
14 any final assessment of tax, penalty or interest, as
15 required by any tax Act administered by the Illinois
16 Department of Revenue, until such time as the
17 requirements of that tax Act are satisfied;
18 (p) In the case of a natural person who is a
19 dealer, limited Canadian dealer, salesperson, or
20 investment adviser, or investment adviser representative,
21 has defaulted on an educational loan guaranteed by the
22 Illinois Student Assistance Commission, until the natural
23 person has established a satisfactory repayment record as
24 determined by the Illinois Student Assistance Commission;
25 (q) Has failed to maintain the books and records
26 required under this Act or rules or regulations
27 promulgated under this Act within a reasonable time after
28 receiving notice of any deficiency;
29 (r) Has refused to allow or otherwise impeded
30 designees of the Secretary of State from conducting an
31 audit, examination, inspection, or investigation provided
32 for under Section 8 or 11 of this Act;
33 (s) Has failed to maintain any minimum net capital
34 or bond requirement set forth in this Act or any rule or
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1 regulation promulgated under this Act;
2 (t) Has refused the Secretary of State or his or
3 her designee access to any office or location within an
4 office to conduct an investigation, audit, examination,
5 or inspection.
6 (2) If the Secretary of State finds that any registrant
7 or applicant for registration is no longer in existence or
8 has ceased to do business as a dealer, limited Canadian
9 dealer, salesperson, or investment adviser, or investment
10 adviser representative, or is subject to an adjudication as a
11 person under legal disability or to the control of a
12 guardian, or cannot be located after reasonable search, or
13 has failed after written notice to pay to the Secretary of
14 State any additional fee prescribed by this Section or
15 specified by rule or regulation, or if a natural person, has
16 defaulted on an educational loan guaranteed by the Illinois
17 Student Assistance Commission, the Secretary of State may by
18 order cancel the registration or application.
19 (3) Withdrawal of an application for registration or
20 withdrawal from registration as a dealer, limited Canadian
21 dealer, salesperson, or investment adviser, or investment
22 adviser representative becomes effective 30 days after
23 receipt of an application to withdraw or within such shorter
24 period of time as the Secretary of State may determine,
25 unless any proceeding is pending under Section 11 of this Act
26 when the application is filed or a proceeding is instituted
27 within 30 days after the application is filed. If a
28 proceeding is pending or instituted, withdrawal becomes
29 effective at such time and upon such conditions as the
30 Secretary of State by order determines. If no proceeding is
31 pending or instituted and withdrawal automatically becomes
32 effective, the Secretary of State may nevertheless institute
33 a revocation or suspension proceeding within one year after
34 withdrawal became effective and enter a revocation or
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1 suspension order as of the last date on which registration
2 was effective.
3 F. The Secretary of State shall make available upon
4 request the date that each dealer, investment adviser, or
5 salesperson, or investment adviser representative was granted
6 registration, together with the name and address of the
7 dealer, limited Canadian dealer, or issuer on whose behalf
8 the salesperson is registered, and all orders of the
9 Secretary of State denying or abandoning an application, or
10 suspending or revoking registration, or censuring the
11 persons. The Secretary of State may designate by rule,
12 regulation or order the statements, information or reports
13 submitted to or filed with him or her pursuant to this
14 Section 8 which the Secretary of State determines are of a
15 sensitive nature and therefore should be exempt from public
16 disclosure. Any such statement, information or report shall
17 be deemed confidential and shall not be disclosed to the
18 public except upon the consent of the person filing or
19 submitting the statement, information or report or by order
20 of court or in court proceedings.
21 G. The registration or re-registration of a dealer or
22 limited Canadian dealer and of all salespersons registered
23 upon application of the dealer or limited Canadian dealer
24 shall expire on the next succeeding anniversary date of the
25 registration or re-registration of the dealer; and the
26 registration or re-registration of an investment adviser and
27 of all investment adviser representatives registered upon
28 application of the investment adviser shall expire on the
29 next succeeding anniversary date of the registration of the
30 investment adviser; provided, that the Secretary of State may
31 by rule or regulation prescribe an alternate date which any
32 dealer registered under the Federal 1934 Act or a member of
33 any self-regulatory association approved pursuant thereto, a
34 member of a self-regulatory organization or stock exchange in
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1 Canada, or any investment adviser registered under the
2 Federal 1940 Investment Advisers Act may elect as the
3 expiration date of its dealer or limited Canadian dealer and
4 salesperson registrations, or the expiration date of its
5 investment adviser registration, as the case may be. A
6 registration of a salesperson registered upon application of
7 an issuer or controlling person shall expire on the next
8 succeeding anniversary date of the registration, or upon
9 termination or expiration of the registration of the
10 securities, if any, designated in the application for his or
11 her registration or the alternative date as the Secretary may
12 prescribe by rule or regulation. Subject to paragraph (9) of
13 subsection C of this Section 8, a salesperson's registration
14 also shall terminate upon cessation of his or her employment,
15 or termination of his or her appointment or authorization, in
16 each case by the person who applied for the salesperson's
17 registration, provided that the Secretary of State may by
18 rule or regulation prescribe an alternate date for the
19 expiration of the registration.
20 H. Applications for re-registration of dealers, limited
21 Canadian dealers, salespersons, and investment advisers, and
22 investment adviser representatives shall be filed with the
23 Secretary of State prior to not less than 7 days preceding
24 the expiration of the then current registration and shall
25 contain such information as may be required by the Secretary
26 of State upon initial application with such omission
27 therefrom or addition thereto as the Secretary of State may
28 authorize or prescribe. Each application for re-registration
29 of a dealer, limited Canadian dealer, or investment adviser
30 shall be accompanied by a filing fee, and each application
31 for re-registration as a salesperson shall be accompanied by
32 a filing fee and a Securities Audit and Enforcement Fund fee
33 established pursuant to Section 11a of this Act, and each
34 application for re-registration as an investment adviser
-96- LRB9004729SMdvam02
1 representative shall be accompanied by a Securities Audit and
2 Enforcement Fund fee established under Section 11a of this
3 Act, which shall not be returnable in any event.
4 Notwithstanding the foregoing, (1) applications for
5 re-registration of dealers and investment advisers may be
6 filed within the 6 days next preceding the expiration of the
7 then current registration provided that the applicant pays
8 the annual registration fee for the year with respect to
9 which the re-registration is applicable together with an
10 additional amount equal to the annual registration fee; and
11 (2) applications for re-registration of dealers, limited
12 Canadian dealers, and investment advisers may be filed within
13 30 days following the expiration of the registration provided
14 that the applicant pays the annual registration fee together
15 with an additional amount equal to 2 times the annual
16 registration fee and files any other information or documents
17 that the Secretary of State may prescribe by rule or
18 regulation or order. Any application filed within 30 days
19 following the expiration of the registration shall be
20 automatically effective as of the time of the earlier
21 expiration provided that the proper fee has been paid to the
22 Secretary of State.
23 Each registered dealer, limited Canadian dealer, or
24 investment adviser shall continue to be registered if the
25 registrant changes his, her, or its form of organization
26 provided that the dealer or investment adviser files an
27 amendment to his, her, or its application not later than 30
28 days following the occurrence of the change and pays the
29 Secretary of State a fee in the amount established under
30 Section 11a of this Act.
31 I. (1) Every registered dealer, limited Canadian dealer,
32 and investment adviser shall make and keep for such periods,
33 such accounts, correspondence, memoranda, papers, books and
34 records as the Secretary of State may by rule or regulation
-97- LRB9004729SMdvam02
1 prescribe. All records so required shall be preserved for 3
2 years unless the Secretary of State by rule, regulation or
3 order prescribes otherwise for particular types of records.
4 (2) Every registered dealer, limited Canadian dealer,
5 and investment adviser shall file such financial reports as
6 the Secretary of State may by rule or regulation prescribe.
7 (3) All the books and records referred to in paragraph
8 (1) of this subsection I are subject at any time or from time
9 to time to such reasonable periodic, special or other audits,
10 examinations, or inspections by representatives of the
11 Secretary of State, within or without this State, as the
12 Secretary of State deems necessary or appropriate in the
13 public interest or for the protection of investors.
14 (4) At the time of an audit, examination, or inspection,
15 the Secretary of State, by his or her designees, may conduct
16 an interview of any person employed or appointed by or
17 affiliated with a registered dealer, limited Canadian dealer,
18 or investment advisor, provided that the dealer, limited
19 Canadian dealer, or investment advisor shall be given
20 reasonable notice of the time and place for the interview.
21 At the option of the dealer, limited Canadian dealer, or
22 investment advisor, a representative of the dealer or
23 investment advisor with supervisory responsibility over the
24 individual being interviewed may be present at the interview.
25 J. The Secretary of State may require by rule or
26 regulation the payment of an additional fee for the filing of
27 information or documents required to be filed by this Section
28 which have not been filed in a timely manner. The Secretary
29 of State may also require by rule or regulation the payment
30 of an examination fee for administering any examination which
31 it may conduct pursuant to subsection B, C, or D, or D-5 of
32 this Section 8.
33 K. The Secretary of State may declare any application
34 for registration or limited registration under this Section 8
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1 abandoned by order if the applicant fails to pay any fee or
2 file any information or document required under this Section
3 8 or by rule or regulation for more than 30 days after the
4 required payment or filing date. The applicant may petition
5 the Secretary of State for a hearing within 15 days after the
6 applicant's receipt of the order of abandonment, provided
7 that the petition sets forth the grounds upon which the
8 applicant seeks a hearing.
9 L. Any document being filed pursuant to this Section 8
10 shall be deemed filed, and any fee being paid pursuant to
11 this Section 8 shall be deemed paid, upon the date of actual
12 receipt thereof by the Secretary of State or his or her
13 designee.
14 M. The Secretary of State shall provide to the Illinois
15 Student Assistance Commission annually or at mutually agreed
16 periodic intervals the names and social security numbers of
17 natural persons registered under subsections B, C, D, and D-5
18 E of this Section. The Illinois Student Assistance
19 Commission shall determine if any student loan defaulter is
20 registered as a dealer, limited Canadian dealer, salesperson,
21 or investment adviser under this Act and report its
22 determination to the Secretary of State or his or her
23 designee.
24 (Source: P.A. 88-494; 89-209, eff. 1-1-96; 89-626, eff.
25 8-9-96.)
26 (815 ILCS 5/9) (from Ch. 121 1/2, par. 137.9)
27 Sec. 9. Advertising. The Secretary of State may by rule
28 or regulation require the filing with him or her of any
29 prospectus, pamphlet, circular, form letter, advertisement or
30 other sales literature or advertising communication addressed
31 or intended for distribution or dissemination in this State
32 to prospective investors, including clients or prospective
33 clients of an investment adviser; provided, that no such
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1 filing may be required with respect to:
2 (1) securities exempt from registration pursuant to the
3 provisions of Section 3 of this Act or sold solely in
4 transactions of the nature set forth in Section 4 of this
5 Act;
6 (2) securities registered under both the Federal 1933
7 Act and subsection A or B of Section 5, 6 or 7 of this Act;
8 or
9 (2.5) federal covered securities; or
10 (3) advertisements appearing in newspapers, magazines or
11 periodicals of regular publication and established paid
12 circulation, other than an advertisement which constitutes an
13 offer of securities which is not covered by any of the
14 exemptions set forth in Section 4 of this Act, and which
15 securities are not exempt from registration pursuant to the
16 provisions of Section 3 of this Act.
17 (Source: P.A. 89-209, eff. 1-1-96; 89-626, eff. 8-9-96.)
18 (815 ILCS 5/10) (from Ch. 121 1/2, par. 137.10)
19 Sec. 10. Service of process.
20 A. A consent to service of process shall be in the form
21 prescribed by the Secretary of State, shall be irrevocable,
22 and shall provide that actions arising out of or founded upon
23 the offer or sale of any securities in alleged violation of
24 this Act may be commenced against the person executing the
25 consent in any circuit court within this State, by the
26 service of process upon the Secretary of State.
27 Service of any process or pleading in any action against
28 a person who has filed under this Act a consent to service of
29 process upon the Secretary of State shall, if made on the
30 Secretary of State, be by duplicate copies, one of which
31 shall be filed in the office of the Secretary of State and
32 the other immediately forwarded by the Secretary of State by
33 registered mail or certified mail, return receipt requested,
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1 to the person at his or her latest address on file in the
2 office of the Secretary of State. The filing fee for service
3 of process under this subsection A shall be as established
4 pursuant to Section 11a of this Act, and shall not be
5 returnable in any event.
6 B. (1) The filing of a notice filing under Section 2a of
7 this Act or of an application for registration under Section
8 5, 6, 7, or 8 of this Act, or the offer, sale or delivery of
9 securities in this State, whether effected by mail or
10 otherwise, by any person (unless the securities are exempt
11 from registration under subsection A or B of Section 3 of
12 this Act) shall be equivalent to and shall constitute an
13 appointment of the Secretary of State, or his or her
14 successors in office, by the person and the issuer of the
15 securities to be the true and lawful attorney for the person
16 upon whom may be served all lawful process in any action or
17 proceeding against the person, arising out of the offer or
18 sale of the securities.
19 (2) Service of process under this subsection B shall be
20 made by serving a copy upon the Secretary of State or any
21 employee in his or her office designated by the Secretary of
22 State to accept such service for him or her, provided notice
23 of such and a copy of the process are, within 10 days
24 thereafter, sent by registered mail or certified mail, return
25 receipt requested, by the plaintiff to the defendant, at the
26 last known address of the defendant. The filing fee for
27 service of process under this subsection B 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 keep a record of all such processes which shall show the day
31 of the service.
32 C. Notwithstanding the foregoing, the filing of an
33 application by an issuer, controlling person, or registered
34 dealer, or limited Canadian dealer for the registration of a
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1 salesperson shall also constitute the appointment by the
2 salesperson of the issuer, controlling person, or registered
3 dealer, or limited Canadian dealer to be the true and lawful
4 attorney for the person upon whom may be served all lawful
5 process against the person, arising under subsection J of
6 Section 8 or Section 11 of this Act. Following any service
7 in the foregoing manner, the Secretary of State shall, as
8 soon thereafter as reasonably practical, serve a copy of the
9 lawful process to the person by registered mail or certified
10 mail, return receipt requested, at his, or her, or its last
11 known address.
12 (Source: P.A. 89-209, eff. 1-1-96; 89-626, eff. 8-9-96.)
13 (815 ILCS 5/11) (from Ch. 121 1/2, par. 137.11)
14 Sec. 11. Duties and powers of the Secretary of State.
15 A. (1) The administration of this Act is vested in the
16 Secretary of State, who may from time to time make, amend and
17 rescind such rules and regulations as may be necessary to
18 carry out this Act, including rules and regulations governing
19 procedures of registration, statements, applications and
20 reports for various classes of securities, persons and
21 matters within his or her jurisdiction and defining any
22 terms, whether or not used in this Act, insofar as the
23 definitions are not inconsistent with this Act. The rules
24 and regulations adopted by the Secretary of State under this
25 Act shall be effective in the manner provided for in the
26 Illinois Administrative Procedure Act.
27 (2) Among other things, the Secretary of State shall
28 have authority, for the purposes of this Act, to prescribe
29 the form or forms in which required information shall be set
30 forth, accounting practices, the items or details to be shown
31 in balance sheets and earning statements, and the methods to
32 be followed in the preparation of accounts, in the appraisal
33 or valuation of assets and liabilities, in the determination
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1 of depreciation and depletion, in the differentiation of
2 recurring and non-recurring income, in the differentiation of
3 investment and operating income, and in the preparation of
4 consolidated balance sheets or income accounts of any person,
5 directly or indirectly, controlling or controlled by the
6 issuer, or any person under direct or indirect common control
7 with the issuer.
8 (3) No provision of this Act imposing any liability
9 shall apply to any act done or omitted in good faith in
10 conformity with any rule or regulation of the Secretary of
11 State under this Act, notwithstanding that the rule or
12 regulation may, after the act or omission, be amended or
13 rescinded or be determined by judicial or other authority to
14 be invalid for any reason.
15 (4) The Securities Department of the Office of the
16 Secretary of State shall be deemed a criminal justice agency
17 for purposes of all federal and state laws and regulations
18 and, in that capacity, shall be entitled to access to any
19 information available to criminal justice agencies.
20 (5) The Secretary of State, by rule, may conditionally
21 or unconditionally exempt any person, security, or
22 transaction, or any class or classes of persons, securities,
23 or transactions from any provision or provisions of this Act
24 or of any rule issued under this Act, to the extent that such
25 exemption is necessary or appropriate in the public interest,
26 and is consistent with the protection of investors.
27 B. The Secretary of State may, anything in this Act to
28 the contrary notwithstanding, require financial statements
29 and reports of the issuer, dealer, salesperson, or investment
30 adviser as often as circumstances may warrant. In addition,
31 the Secretary of State may secure information or books and
32 records from or through others and may make or cause to be
33 made investigations respecting the business, affairs, and
34 property of the issuer of securities, any person involved in
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1 the sale or offer for sale, purchase or offer to purchase of
2 any mineral investment contract, mineral deferred delivery
3 contract, or security and of dealers, salespersons, and
4 investment advisers that are registered or are the subject of
5 an application for registration under this Act. The costs of
6 an investigation shall be borne by the registrant or the
7 applicant, provided that the registrant or applicant shall
8 not be obligated to pay the costs without his, her or its
9 consent in advance.
10 C. Whenever it shall appear to the Secretary of State,
11 either upon complaint or otherwise, that this Act, or any
12 rule or regulation prescribed under authority thereof, has
13 been or is about to be violated, he or she may, in his or her
14 discretion, do one or both of the following:
15 (1) require or permit the person to file with the
16 Secretary of State a statement in writing under oath, or
17 otherwise, as to all the facts and circumstances
18 concerning the subject matter which the Secretary of
19 State believes to be in the public interest to
20 investigate, audit, examine, or inspect; and
21 (2) conduct an investigation, audit, examination,
22 or inspection as necessary or advisable for the
23 protection of the interests of the public.
24 D. (1) For the purpose of all investigations, audits,
25 examinations, or inspections which in the opinion of the
26 Secretary of State are necessary and proper for the
27 enforcement of this Act, the Secretary of State or a person
28 designated by him or her is empowered to administer oaths and
29 affirmations, subpoena witnesses, take evidence, and require
30 the production of any books and records, papers, or other
31 documents which the Secretary of State or a person designated
32 by him or her deems relevant or material to the inquiry.
33 (2) The Secretary of State or a person designated by him
34 or her is further empowered to administer oaths and
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1 affirmations, subpoena witnesses, take evidence, and require
2 the production of any books and records, papers, or other
3 documents in this State at the request of a securities agency
4 of another state, if the activities constituting the alleged
5 violation for which the information is sought would be in
6 violation of Section 12 of this Act if the activities had
7 occurred in this State.
8 (3) The Circuit Court of any County of this State, upon
9 application of the Secretary of State or a person designated
10 by him or her may order the attendance of witnesses, the
11 production of books and records, papers, accounts and
12 documents and the giving of testimony before the Secretary of
13 State or a person designated by him or her; and any failure
14 to obey the order may be punished by the Circuit Court as a
15 contempt thereof.
16 (4) The fees of subpoenaed witnesses under this Act for
17 attendance and travel shall be the same as fees of witnesses
18 before the Circuit Courts of this State, to be paid when the
19 witness is excused from further attendance, provided, the
20 witness is subpoenaed at the instance of the Secretary of
21 State; and payment of the fees shall be made and audited in
22 the same manner as other expenses of the Secretary of State.
23 (5) Whenever a subpoena is issued at the request of a
24 complainant or respondent as the case may be, the Secretary
25 of State may require that the cost of service and the fee of
26 the witness shall be borne by the party at whose instance the
27 witness is summoned.
28 (6) The Secretary of State shall have power at his or
29 her discretion, to require a deposit to cover the cost of the
30 service and witness fees and the payment of the legal witness
31 fee and mileage to the witness served with subpoena.
32 (7) A subpoena issued under this Act shall be served in
33 the same manner as a subpoena issued out of a circuit court.
34 (8) The Secretary of State may in any investigation,
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1 audits, examinations, or inspections cause the taking of
2 depositions of persons residing within or without this State
3 in the manner provided in civil actions under the laws of
4 this State.
5 E. Anything in this Act to the contrary notwithstanding:
6 (1) If the Secretary of State shall find that the
7 offer or sale or proposed offer or sale or method of
8 offer or sale of any securities by any person, whether
9 exempt or not, except the offer or sale of securities as
10 defined in subsection A of Section 3, in this State, is
11 fraudulent, or would work or tend to work a fraud or
12 deceit, or is being offered or sold in violation of
13 Section 12, or there has been a failure or refusal to
14 submit any notification filing or fee required under this
15 Act, the Secretary of State may by written order prohibit
16 or suspend the offer or sale of securities by that person
17 or deny or revoke the registration of the securities or
18 the exemption from registration for the securities.
19 (2) If the Secretary of State shall find that any
20 person has violated subsection C, D, E, F, G, H, I, J, or
21 K of Section 12 of this Act, the Secretary of State may
22 by written order temporarily or permanently prohibit or
23 suspend the person from offering or selling any
24 securities, any mineral investment contract, or any
25 mineral deferred delivery contract in this State,
26 provided that any person who is the subject of an order
27 of permanent prohibition may petition the Secretary of
28 State for a hearing to present evidence of rehabilitation
29 or change in circumstances justifying the amendment or
30 termination of the order of permanent prohibition.
31 (3) If the Secretary of State shall find that any
32 person is engaging or has engaged in the business of
33 selling or offering for sale securities as a dealer or
34 salesperson or is acting or has acted as an investment
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1 adviser or federal covered investment adviser, without
2 prior thereto and at the time thereof having complied
3 with the registration or notice filing requirements of
4 this Act, the Secretary of State may by written order
5 prohibit or suspend the person from engaging in the
6 business of selling or offering for sale securities, or
7 acting as an investment adviser or federal covered
8 investment adviser, in this State.
9 (4) In addition to any other sanction or remedy
10 contained in this subsection E, the Secretary of State,
11 after finding that any provision of this Act has been
12 violated, may impose a fine as provided by rule,
13 regulation or order against the violator not to exceed
14 $10,000 for each violation of this Act, and may issue an
15 order of public censure against the violator.
16 F. (1) The Secretary of State shall not deny, suspend or
17 revoke the registration of securities, suspend or revoke the
18 registration of a dealer, salesperson or investment adviser,
19 prohibit or suspend the offer or sale of any securities,
20 prohibit or suspend any person from offering or selling any
21 securities in this State, prohibit or suspend a dealer or
22 salesperson from engaging in the business of selling or
23 offering for sale securities, prohibit or suspend a person
24 from acting as an investment adviser or federal covered
25 investment adviser, impose any fine for violation of this
26 Act, issue an order of public censure, or enter into an
27 agreed settlement except after an opportunity for hearing
28 upon not less than 10 days notice given by personal service
29 or registered mail or certified mail, return receipt
30 requested, to the person or persons concerned. Such notice
31 shall state the date and time and place of the hearing and
32 shall contain a brief statement of the proposed action of the
33 Secretary of State and the grounds for the proposed action.
34 A failure to appear at the hearing or otherwise respond to
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1 the allegations set forth in the notice of hearing shall
2 constitute an admission of any facts alleged therein and
3 shall constitute sufficient basis to enter an order.
4 (2) Anything herein contained to the contrary
5 notwithstanding, the Secretary of State may temporarily
6 prohibit or suspend, for a maximum period of 60 days, by an
7 order effective immediately, the offer or sale or
8 registration of securities, the registration of a dealer,
9 salesperson or investment adviser, or the offer or sale of
10 securities by any person, or the business of rendering
11 investment advice, without the notice and prior hearing in
12 this subsection prescribed, if the Secretary of State shall
13 in his or her opinion, based on credible evidence, deem it
14 necessary to prevent an imminent violation of this Act or to
15 prevent losses to investors which the Secretary of State
16 reasonably believes will occur as a result of a prior
17 violation of this Act. Immediately after taking action
18 without such notice and hearing, the Secretary of State shall
19 deliver a copy of the temporary order to the respondent named
20 therein by personal service or registered mail or certified
21 mail, return receipt requested. The temporary order shall
22 set forth the grounds for the action and shall advise that
23 the respondent may request a hearing as soon as reasonably
24 practicable, that the request for a hearing will not stop the
25 effectiveness of the temporary order and that respondent's
26 failure to request a hearing within 30 days after the date of
27 the entry of the temporary order shall constitute an
28 admission of any facts alleged therein and shall constitute
29 sufficient basis to make the temporary order final. Any
30 provision of this paragraph (2) to the contrary
31 notwithstanding, the Secretary of State may not pursuant to
32 the provisions of this paragraph (2) suspend the registration
33 of a dealer, limited Canadian dealer, salesperson, or
34 investment adviser, or investment adviser representative
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1 based upon sub-paragraph (n) of paragraph (l) of subsection E
2 of Section 8 of this Act or revoke the registration of
3 securities or revoke the registration of any a dealer,
4 salesperson, investment adviser representative, or investment
5 adviser.
6 (3) The Secretary of State may issue a temporary order
7 suspending or delaying the effectiveness of any registration
8 of securities under subsection A or B of Section 5, 6 or 7 of
9 this Act subsequent to and upon the basis of the issuance of
10 any stop, suspension or similar order by the Securities and
11 Exchange Commission with respect to the securities which are
12 the subject of the registration under subsection A or B of
13 Section 5, 6 or 7 of this Act, and the order shall become
14 effective as of the date and time of effectiveness of the
15 Securities and Exchange Commission order and shall be vacated
16 automatically at such time as the order of the Securities and
17 Exchange Commission is no longer in effect.
18 (4) When the Secretary of State finds that an
19 application for registration as a dealer, salesperson or
20 investment adviser should be denied, the Secretary of State
21 may enter an order denying the registration. Immediately
22 after taking such action, the Secretary of State shall
23 deliver a copy of the order to the respondent named therein
24 by personal service or registered mail or certified mail,
25 return receipt requested. The order shall state the grounds
26 for the action and that the matter will be set for hearing
27 upon written request filed with the Secretary of State within
28 30 days after the receipt of the request by the respondent.
29 The respondent's failure to request a hearing within 30 days
30 after receipt of the order shall constitute an admission of
31 any facts alleged therein and shall make the order final. If
32 a hearing is held, the Secretary of State shall affirm,
33 vacate, or modify the order.
34 (5) The findings and decision of the Secretary of State
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1 upon the conclusion of each final hearing held pursuant to
2 this subsection shall be set forth in a written order signed
3 on behalf of the Secretary of State by his or her designee
4 and shall be filed as a public record. All hearings shall be
5 held before a person designated by the Secretary of State,
6 and appropriate records thereof shall be kept.
7 (6) Notwithstanding the foregoing, the Secretary of
8 State, after notice and opportunity for hearing, may at his
9 or her discretion enter into an agreed settlement,
10 stipulation or consent order with a respondent in accordance
11 with the provisions of the Illinois Administrative Procedure
12 Act. The provisions of the agreed settlement, stipulation or
13 consent order shall have the full force and effect of an
14 order issued by the Secretary of State.
15 (7) Anything in this Act to the contrary
16 notwithstanding, whenever the Secretary of State finds that a
17 person is currently expelled from, refused membership in or
18 association with, or limited in any material capacity by a
19 self-regulatory organization registered under the Federal
20 1934 Act or the Federal 1974 Act because of a fraudulent or
21 deceptive act or a practice in violation of a rule,
22 regulation, or standard duly promulgated by the
23 self-regulatory organization, the Secretary of State may, at
24 his or her discretion, enter a Summary Order of Prohibition,
25 which shall prohibit the offer or sale of any securities,
26 mineral investment contract, or mineral deferred delivery
27 contract by the person in this State. The order shall take
28 effect immediately upon its entry. Immediately after taking
29 the action the Secretary of State shall deliver a copy of the
30 order to the named Respondent by personal service or
31 registered mail or certified mail, return receipt requested.
32 A person who is the subject of an Order of Prohibition may
33 petition the Secretary of State for a hearing to present
34 evidence of rehabilitation or change in circumstances
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1 justifying the amendment or termination of the Order of
2 Prohibition.
3 G. No administrative action shall be brought by the
4 Secretary of State for relief under this Act or upon or
5 because of any of the matters for which relief is granted by
6 this Act after the earlier to occur of (i) 3 years from the
7 date upon which the Secretary of State had notice of facts
8 which in the exercise of reasonable diligence would lead to
9 actual knowledge of the alleged violation of the Act, or (ii)
10 5 years from the date on which the alleged violation
11 occurred.
12 H. The action of the Secretary of State in denying,
13 suspending, or revoking the registration of a dealer, limited
14 Canadian dealer, salesperson, or investment adviser, or
15 investment adviser representative, in prohibiting any person
16 from engaging in the business of offering or selling
17 securities as a dealer, limited Canadian dealer, or
18 salesperson, in prohibiting or suspending the offer or sale
19 of securities by any person, in prohibiting a person from
20 acting as an investment adviser, federal covered investment
21 adviser, or investment adviser representative, in denying,
22 suspending, or revoking the registration of securities, in
23 prohibiting or suspending the offer or sale or proposed offer
24 or sale of securities, in imposing any fine for violation of
25 this Act, or in issuing any order shall be subject to
26 judicial review in the Circuit Court of any county in this
27 State. The Administrative Review Law shall apply to and
28 govern every action for the judicial review of final actions
29 or decisions of the Secretary of State under this Act.
30 I. Notwithstanding any other provisions of this Act to
31 the contrary, whenever it shall appear to the Secretary of
32 State that any person is engaged or about to engage in any
33 acts or practices which constitute or will constitute a
34 violation of this Act or of any rule or regulation prescribed
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1 under authority of this Act, the Secretary of State may at
2 his or 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 bond, to enforce this Act; and
7 (2) file a complaint and apply for a preliminary or
8 permanent injunction, and, after notice and a 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 sales or
12 purchases of securities, mineral investment contracts, or
13 mineral deferred delivery contracts determined by the
14 court to be unlawful under this Act.
15 The court shall further have jurisdiction and authority,
16 in addition to the penalties and other remedies in this Act
17 provided, to enter an order for the appointment of the court
18 or a person as a receiver, conservator, ancillary receiver or
19 ancillary conservator for the defendant or the defendant's
20 assets located in this State, or to require restitution,
21 damages or disgorgement of profits on behalf of the person or
22 persons injured by the act or practice constituting the
23 subject matter of the action, and may assess costs against
24 the defendant for the use of the State; provided, however,
25 that the civil remedies of rescission and appointment of a
26 receiver, conservator, ancillary receiver or ancillary
27 conservator shall not be available against any person by
28 reason of the failure to file with the Secretary of State, or
29 on account of the contents of, any report of sale provided
30 for in subsection G or P of Section 4, paragraph (2) of
31 subsection D of Sections 5 and 6, or paragraph (2) of
32 subsection F of Section 7 of this Act. Appeals may be taken
33 as in other civil cases.
34 J. 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 this
2 Act, incur any official or personal liability by instituting
3 an injunction or other proceeding or by denying, suspending
4 or revoking the registration of a dealer or salesperson, or
5 by denying, suspending or revoking the registration of
6 securities or prohibiting the offer or sale of securities, or
7 by suspending or prohibiting any person from acting as a
8 dealer, limited Canadian dealer, salesperson, or investment
9 adviser, or investment adviser representative or from
10 offering or selling securities.
11 K. No provision of this Act shall be construed to
12 require or to authorize the Secretary of State to require any
13 investment adviser or federal covered investment adviser
14 engaged in rendering investment supervisory services to
15 disclose the identity, investments, or affairs of any client
16 of the investment adviser or federal covered investment
17 adviser, except insofar as the disclosure may be necessary or
18 appropriate in a particular proceeding or investigation
19 having as its object the enforcement of this Act.
20 L. Whenever, after an examination, investigation or
21 hearing, the Secretary of State deems it of public interest
22 or advantage, he or she may certify a record to the State's
23 Attorney of the county in which the act complained of,
24 examined or investigated occurred. The State's Attorney of
25 that county within 90 days after receipt of the record shall
26 file a written statement at the Office of the Secretary of
27 State, which statement shall set forth the action taken upon
28 the record, or if no action has been taken upon the record
29 that fact, together with the reasons therefor, shall be
30 stated.
31 M. The Secretary of State may initiate, take, pursue, or
32 prosecute any action authorized or permitted under Section 6d
33 of the Federal 1974 1936 Act.
34 N. (1) Notwithstanding any provision of this Act to the
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1 contrary, to encourage uniform interpretation,
2 administration, and enforcement of the provisions of this
3 Act, the Secretary of State may cooperate with the securities
4 agencies or administrators of one or more states, Canadian
5 provinces or territories, or another country, the Securities
6 and Exchange Commission, the Commodity Futures Trading
7 Commission, the Securities Investor Protection Corporation,
8 any self-regulatory organization, and any governmental law
9 enforcement or regulatory agency.
10 (2) The cooperation authorized by paragraph (1) of this
11 subsection includes, but is not limited to, the following:
12 (a) establishing or participating in a central
13 depository or depositories for registration under this
14 Act and for documents or records required under this Act;
15 (b) making a joint audit, inspection, examination,
16 or investigation;
17 (c) holding a joint administrative hearing;
18 (d) filing and prosecuting a joint civil or
19 criminal proceeding;
20 (e) sharing and exchanging personnel;
21 (f) sharing and exchanging information and
22 documents; or
23 (g) issuing any joint statement or policy.
24 (Source: P.A. 88-279; 89-209, eff. 1-1-96; 89-626, eff.
25 8-9-96.)
26 (815 ILCS 5/11a) (from Ch. 121 1/2, par. 137.11a)
27 Sec. 11a. Fees.
28 (1) The Secretary of State shall by rule or regulation
29 impose and shall collect reasonable fees necessary for the
30 administration of this Act including, but not limited to,
31 fees for the following purposes:
32 (a) Filing an application pursuant to paragraph (2)
33 of subsection F of Section 4 of this Act;
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1 (b) Examining an application and report pursuant to
2 paragraph (2) of subsection F of Section 4 of this Act;
3 (c) Filing a report pursuant to subsection G of
4 Section 4 of this Act, determined in accordance with
5 paragraph (4) of subsection G of Section 4 of this Act;
6 (d) Examining an offering sheet pursuant to
7 subsection P of Section 4 of this Act;
8 (e) Filing a report pursuant to subsection P of
9 Section 4, determined in accordance with subsection P of
10 Section 4 of this Act;
11 (f) Examining an application to register securities
12 under subsection B of Section 5 of this Act;
13 (g) Examining an amended or supplemental prospectus
14 filed pursuant to the undertaking required by
15 sub-paragraph (i) of paragraph (2) of subsection B of
16 Section 5 of this Act;
17 (h) Registering or renewing registration of
18 securities under Section 5, determined in accordance with
19 subsection C of Section 5 of this Act;
20 (i) Registering securities in excess of the amount
21 initially registered, determined in accordance with
22 paragraph (2) of subsection C of Section 5 of this Act;
23 (j) Failure to file timely an application for
24 renewal under subsection E of Section 5 of this Act;
25 (k) Failure to file timely any document or
26 information required under Section 5 of this Act;
27 (l) Examining an application to register face
28 amount certificate contracts under subsection B of
29 Section 6 of this Act;
30 (m) Examining an amended or supplemental prospectus
31 filed pursuant to the undertaking required by
32 sub-paragraph (f) of paragraph (2) of subsection B of
33 Section 6 of this Act;
34 (n) Registering or renewing registration of face
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1 amount certificate contracts under Section 6 of this Act;
2 (o) Amending a registration of face amount
3 certificate contracts pursuant to subsection E of Section
4 6 of this Act to add any additional series, type or class
5 of contract;
6 (p) Failure to file timely an application for
7 renewal under subsection F of Section 6 of this Act;
8 (q) Adding to or withdrawing from deposits with
9 respect to face amount certificate contracts pursuant to
10 subsection H of Section 6, a transaction charge payable
11 at the times and in the manner specified in subsection H
12 of Section 6 (which transaction charge shall be in
13 addition to the annual fee called for by subsection H of
14 Section 6 of this Act);
15 (r) Failure to file timely any document or
16 information required under Section 6 of this Act;
17 (s) Examining an application to register investment
18 fund shares under subsection B of Section 7 of this Act;
19 (t) Examining an amended or supplemental prospectus
20 filed pursuant to the undertaking required by
21 sub-paragraph (f) of paragraph (2) of subsection B of
22 Section 7 of this Act;
23 (u) Registering or renewing registration of
24 investment fund shares under Section 7 of this Act;
25 (v) Amending a registration of investment fund
26 shares pursuant to subsection D of Section 7 of this Act
27 to register an additional class or classes of investment
28 fund shares;
29 (w) Failure to file timely an application for
30 renewal under paragraph (l) of subsection G of Section 7
31 of this Act;
32 (x) Examining an application for renewal of
33 registration of investment fund shares under paragraph
34 (2) of subsection G of Section 7 of this Act;
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1 (y) Failure to file timely any document or
2 information required under Section 7 of this Act;
3 (z) Filing an application for registration or
4 re-registration of a dealer or limited Canadian dealer
5 under Section 8 of this Act for each office in this
6 State;
7 (aa) In connection with an application for the
8 registration or re-registration of a salesperson under
9 Section 8 or this Act, for the following purposes:
10 (i) filing an application; and
11 (ii) a Securities Audit and Enforcement Fund
12 fee; and
13 (iii) a notification filing of federal covered
14 investment advisers.
15 (bb) In connection with an application for the
16 registration or re-registration of an investment adviser
17 under Section 8 of this Act;, for the following purposes:
18 (i) filing an application;
19 (ii) for reporting investment adviser
20 representatives; and
21 (iii) a fee for each office in this State;
22 (cc) Failure to file timely any document or
23 information required under Section 8 of this Act;
24 (dd) Filing a consent to service of process under
25 Section 10 of this Act;
26 (ee) Issuing a certificate pursuant to subsection B
27 of Section 15 of this Act;
28 (ff) Issuing a certified copy pursuant to
29 subsection C of Section 15 of this Act;
30 (gg) Issuing a non-binding statement pursuant to
31 Section 15a of this Act.
32 (hh) Filings by Notification under Section 2a;
33 (ii) Notification filing of federal Regulation D,
34 Section 506 offering under the Federal 1933 Act;
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1 (jj) Notification filing of securities and
2 closed-end investment company securities;
3 (kk) Notification filing of face amount certificate
4 contracts;
5 (ll) Notification filing of open-end investment
6 company securities;
7 (mm) Filing a report pursuant to subsection D of
8 Section 4 of this Act;
9 (nn) In connection with the filing of an
10 application for registration or re-registration of an
11 investment adviser representative under subsection D of
12 Section 8 of this Act;
13 (2) The Secretary of State may, by rule or regulation,
14 raise or lower any fee imposed by, and which he or she is
15 authorized by law to collect under, this Act.
16 (Source: P.A. 87-463.)
17 (815 ILCS 5/12) (from Ch. 121 1/2, par. 137.12)
18 Sec. 12. Violation. It shall be a violation of the
19 provisions of this Act for any person:
20 A. To offer or sell any security except in accordance
21 with the provisions of this Act.
22 B. To deliver to a purchaser any security required to be
23 registered under Section 5, Section 6 or Section 7 hereof
24 unless accompanied or preceded by a prospectus that meets the
25 requirements of the pertinent subsection of Section 5 or of
26 Section 6 or of Section 7.
27 C. To act as a dealer, salesperson or investment adviser
28 unless registered as such, where such registration is
29 required, under the provisions of this Act.
30 D. To fail to file with the Secretary of State any
31 application, report or document required to be filed under
32 the provisions of this Act or any rule or regulation made by
33 the Secretary of State pursuant to this Act or to fail to
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1 comply with the terms of any order of the Secretary of State
2 issued pursuant to Section 11 hereof.
3 E. To make, or cause to be made, (1) in any application,
4 report or document filed under this Act or any rule or
5 regulation made by the Secretary of State pursuant to this
6 Act, any statement which was false or misleading with respect
7 to any material fact or (2) any statement to the effect that
8 a security (other than a security issued by the State of
9 Illinois) has been in any way endorsed or approved by the
10 Secretary of State or the State of Illinois.
11 F. To engage in any transaction, practice or course of
12 business in connection with the sale or purchase of
13 securities which works or tends to work a fraud or deceit
14 upon the purchaser or seller thereof.
15 G. To obtain money or property through the sale of
16 securities by means of any untrue statement of a material
17 fact or any omission to state a material fact necessary in
18 order to make the statements made, in the light of the
19 circumstances under which they were made, not misleading.
20 H. To sign or circulate any statement, prospectus, or
21 other paper or document required by any provision of this Act
22 knowing or having reasonable grounds to know any material
23 representation therein contained to be false or untrue.
24 I. To employ any device, scheme or artifice to defraud
25 in connection with the sale or purchase of any security,
26 directly or indirectly.
27 J. When acting as an investment adviser, investment
28 adviser representative, or federal covered investment
29 adviser, by any means or instrumentality, directly or
30 indirectly:
31 (1) To employ any device, scheme or artifice to
32 defraud any client or prospective client;
33 (2) To engage in any transaction, practice, or
34 course of business which operates as a fraud or deceit
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1 upon any client or prospective client; or
2 (3) To engage in any act, practice, or course of
3 business which is fraudulent, deceptive or manipulative.
4 The Secretary of State shall for the purposes of this
5 paragraph (3), by rules and regulations, define and
6 prescribe means reasonably designed to prevent such acts,
7 practices, and courses of business as are fraudulent,
8 deceptive, or manipulative.
9 K. When offering or selling any mineral investment
10 contract or mineral deferred delivery contract:
11 (1) To employ any device, scheme, or artifice to
12 defraud any customer, prospective customer, or offeree;
13 (2) To engage in any transaction, practice, or
14 course of business that operates as a fraud or deceit
15 upon any customer, prospective customer, or offeree; or
16 (3) To engage in any act, practice, or course of
17 business that is fraudulent, deceptive, or manipulative.
18 The Secretary of State shall for the purposes of this
19 paragraph (3), by rules and regulations, define and
20 prescribe means reasonably designed to prevent acts,
21 practices, and courses of business as are fraudulent,
22 deceptive, or manipulative.
23 (Source: P.A. 87-463.)
24 (815 ILCS 5/13) (from Ch. 121 1/2, par. 137.13)
25 Sec. 13. Private and other civil remedies; securities.
26 A. Every sale of a security made in violation of the
27 provisions of this Act shall be voidable at the election of
28 the purchaser exercised as provided in subsection B of this
29 Section; and the issuer, controlling person, underwriter,
30 dealer or other person by or on behalf of whom said sale was
31 made, and each underwriter, dealer or salesperson who shall
32 have participated or aided in any way in making the sale, and
33 in case the issuer, controlling person, underwriter or dealer
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1 is a corporation or unincorporated association or
2 organization, each of its officers and directors (or persons
3 performing similar functions) who shall have participated or
4 aided in making the sale, shall be jointly and severally
5 liable to the purchaser as follows:
6 (1) for the full amount paid, together with
7 interest from the date of payment for the securities sold
8 at the rate of the interest or dividend stipulated in the
9 securities sold (or if no rate is stipulated, then at the
10 rate of 10% per annum) less any income or other amounts
11 received by the purchaser on the securities, upon offer
12 to tender to the seller or tender into court of the
13 securities sold or, where the securities were not
14 received, of any contract made in respect of the sale; or
15 (2) if the purchaser no longer owns the securities,
16 for the amounts set forth in clause (1) of this
17 subsection A less any amounts received by the purchaser
18 for or on account of the disposition of the securities.
19 If the purchaser shall prevail in any action brought to
20 enforce any of the remedies provided in this subsection, the
21 court shall assess costs together with the reasonable fees
22 and expenses of the purchaser's attorney against the
23 defendant. Any provision of this subsection A to the contrary
24 notwithstanding, the civil remedies provided in this
25 subsection A shall not be available against any person by
26 reason of the failure to file with the Secretary of State, or
27 on account of the content of, any report of sale provided for
28 in subsection G or P of Section 4, paragraph (2) of
29 subsection D of Sections 5 and 6, or paragraph (2) of
30 subsection F of Section 7 of this Act.
31 B. Notice of any election provided for in subsection A
32 of this Section shall be given by the purchaser within 6
33 months after the purchaser shall have knowledge that the sale
34 of the securities to him or her is voidable, to each person
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1 from whom recovery will be sought, by registered mail or
2 certified mail, return receipt requested, addressed to the
3 person to be notified at his or her last known address with
4 proper postage affixed, or by personal service.
5 C. No purchaser shall have any right or remedy under
6 this Section who shall fail, within 15 days from the date of
7 receipt thereof, to accept an offer to repurchase the
8 securities purchased by him or her for a price equal to the
9 full amount paid therefor plus interest thereon and less any
10 income thereon as set forth in subsection A of this Section.
11 Every offer of repurchase provided for in this subsection
12 shall be in writing, shall be delivered to the purchaser or
13 sent by registered mail or certified mail, return receipt
14 requested, addressed to the purchaser at his or her last
15 known address, and shall offer to repurchase the securities
16 sold for a price equal to the full amount paid therefor plus
17 interest thereon and less any income thereon as set forth in
18 subsection A of this Section. Such offer shall continue in
19 force for 15 days from the date on which it was received by
20 the purchaser, shall advise the purchaser of his or her
21 rights and the period of time limited for acceptance thereof,
22 and shall contain such further information, if any, as the
23 Secretary of State may prescribe. Any agreement not to
24 accept or refusing or waiving any such offer made during or
25 prior to said 15 days shall be void.
26 D. No action shall be brought for relief under this
27 Section or upon or because of any of the matters for which
28 relief is granted by this Section after 3 years from the date
29 of sale; provided, that if the party bringing the action
30 neither knew nor in the exercise of reasonable diligence
31 should have known of any alleged violation of subsection E,
32 F, G, H, I or J of Section 12 of this Act which is the basis
33 for the action, the 3 year period provided herein shall begin
34 to run upon the earlier of:
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1 (1) the date upon which the party bringing the
2 action has actual knowledge of the alleged violation of
3 this Act; or
4 (2) the date upon which the party bringing the
5 action has notice of facts which in the exercise of
6 reasonable diligence would lead to actual knowledge of
7 the alleged violation of this Act; but in no event shall
8 the period of limitation so extended be more than 2
9 years beyond the expiration of the 3 year period
10 otherwise applicable.
11 E. The term purchaser as used in this Section shall
12 include the personal representative or representatives of the
13 purchaser.
14 F. Anything in this Act to the contrary notwithstanding
15 and in addition to all other remedies, the Secretary of State
16 through the Office of the Attorney General may bring an
17 action in any circuit court of the State of Illinois in the
18 name and on behalf of the State of Illinois against any
19 person or persons participating in or about to participate in
20 a violation of this Act to enjoin those persons who are
21 continuing or doing any act in violation of this Act or to
22 enforce compliance with this Act. Upon a proper showing the
23 court may grant a permanent or preliminary injunction or
24 temporary restraining order without bond, and may order the
25 defendant to make an offer of rescission of any sales or
26 purchases of securities determined by the court to be
27 unlawful under this Act. The court shall further have
28 jurisdiction and authority, in addition to the other
29 penalties and remedies in this Act provided, to act or
30 appoint another person as a receiver, conservator, ancillary
31 receiver or ancillary conservator for the defendant or the
32 defendant's assets located in this State and may assess costs
33 against the defendant for the use of the State.
34 G. (1) Whenever any person has engaged or is about to
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1 engage in any act or practice constituting a violation of
2 this Act, any party in interest may bring an action in the
3 circuit court of the county in which the party in interest
4 resides, or where the person has his, her or its principal
5 office or registered office or where any part of the
6 transaction has or will take place, to enjoin that person
7 from continuing or doing any act in violation of or to
8 enforce compliance with this Act. Upon a proper showing, the
9 court shall grant a permanent or preliminary injunction or
10 temporary restraining order or rescission of any sales or
11 purchases of securities determined to be unlawful under this
12 Act, and may assess costs of the proceedings against the
13 defendant.
14 (2) A copy of the complaint shall be served upon the
15 Secretary of State within one business day of filing in the
16 form and manner prescribed by the Secretary of State by rule
17 or regulation; provided, that the failure to comply with this
18 provision shall not invalidate the action which is the
19 subject of the complaint.
20 H. Any provision of this Section 13 to the contrary
21 notwithstanding, neither the civil remedies provided in
22 subsection A of this Section 13 nor the remedies of
23 rescission and appointment of a receiver, conservator,
24 ancillary receiver or ancillary conservator provided in
25 subsection I of Section 11 of this Act and in subsections F
26 and G of this Section 13 of this Act nor the remedies of
27 restitution, damages or disgorgement of profits provided in
28 subsection I of Section 11 of this Act shall be available
29 against any person by reason of the failure to file with the
30 Secretary of State, or on account of the contents of, any
31 notice filing under Section 2a of this Act or subsection C-5
32 of Section 8 of this Act or any report of sale provided for
33 in subsection G or P of Section 4, paragraph (2) of
34 subsection D of Sections 5 and 6, or paragraph (2) of
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1 subsection F of Section 7 of this Act.
2 (Source: P.A. 89-209, eff. 1-1-96; 89-626, eff. 8-9-96.)
3 Section 10. The Illinois Loan Brokers Act of 1995 is
4 amended by changing Sections 15-15, 15-30, 15-35, 15-40,
5 15-45, 15-55, 15-60, and 15-80, and by adding Sections
6 15-5.03, 15-30.5, and 15-100 as follows:
7 (815 ILCS 175/15-5.03 new)
8 Sec. 15-5.03. Borrower. "Borrower" means any person who
9 has signed an agreement with a loan broker that provides for
10 the services described in Section 15-5.15, for compensation.
11 (815 ILCS 175/15-15)
12 Sec. 15-15. Application for registration, contents,
13 bond, issuance, effective date, and consent to Secretary of
14 State as process agent.
15 (a) In order to be registered under this Act a loan
16 broker shall file an application for registration with the
17 Secretary of State. The application for registration shall
18 contain:
19 (1) The disclosure document required under
20 subsection (b) of Section 15-30 of this Act and the form
21 of disclosure statement proposed to be used under item
22 (1) of subsection (b) of Section 15-30 of this Act.
23 (2) Consent to service of process under subsection
24 (e) of this Section;
25 (3) Evidence of the bond required in subsection (b)
26 of this Section;
27 (4) A fee in the amount as specified in subsection
28 (a) of Section 15-25 of this Act, and shall not be
29 returnable in any event.
30 (b) A loan broker who engages in any loan brokerage
31 transactions where the loan is subject to the
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1 Truth-in-Lending Act must maintain a bond satisfactory to the
2 Secretary of State in the amount of $25,000, which shall be
3 in favor of the State.
4 (c) Whenever the provisions of this Law 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 loan brokering.
8 (d) An application for registration becomes effective 30
9 days after it is filed, unless a certificate an order of the
10 Secretary of State establishes an earlier effective date.
11 Every registration is effective until January 1 of the year
12 after it goes into effect.
13 (e) 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 lawful process in any noncriminal
18 suit, action or proceeding against the applicant arising from
19 the violation of any provision of this Act.
20 (f) An application shall be considered filed when all
21 required documentation and fees are received by the Office of
22 the Secretary of State.
23 (Source: P.A. 89-209, eff. 1-1-96.)
24 (815 ILCS 175/15-30)
25 Sec. 15-30. Disclosure document to be provided by loan
26 broker.
27 (a) At least 7 days before the time any person signs a
28 contract for the services of a loan broker, or at the time 7
29 days before the loan broker receives any consideration upon
30 the contract, whichever occurs first, the loan broker must
31 provide to the contracting person a written disclosure
32 document that meets the requirements set forth in subsection
33 (b) of this Section.
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1 (b) A written disclosure statement shall contain the
2 following information:
3 (1) A disclosure statement which shall be the cover
4 sheet and shall be entitled in at least 10-point boldface
5 capital letters "DISCLOSURES REQUIRED BY LAW". Under
6 this title shall appear the statement in at least
7 10-point type that "THE SECRETARY OF STATE HAS NOT
8 REVIEWED AND DOES NOT APPROVE, RECOMMEND, ENDORSE OR
9 SPONSOR ANY LOAN BROKERAGE CONTRACT. THE INFORMATION
10 CONTAINED IN THIS DISCLOSURE HAS NOT BEEN VERIFIED BY THE
11 SECRETARY OF STATE. IF YOU HAVE ANY QUESTIONS SEE AN
12 ATTORNEY BEFORE YOU SIGN A CONTRACT OR AGREEMENT."
13 Nothing except the title and the required statement shall
14 appear on the cover sheet.
15 (2) The name and form of organization of the
16 broker, the names under which the broker has done, is
17 doing, or intends to do business, and the name of any
18 parent organization or affiliate of the broker.
19 (3) The names, addresses and titles of the broker's
20 officers, directors, trustees, general partners, general
21 managers, principal executives and any other person
22 performing similar duties.
23 (4) The length of time the broker has conducted
24 business as a loan broker.
25 (5) A full and detailed description of the actual
26 services that the loan broker undertakes to perform for
27 the prospective borrower.
28 (6) A specific statement of the circumstances under
29 which the broker will be entitled to obtain or retain
30 consideration from the party with whom the broker
31 contracts.
32 (7) Any other information the Secretary of State
33 may require by rule or regulation.
34 (b-5) The information in subdivisions b(5) and b(6) of
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1 this Section need not be set out on the disclosure document
2 if the loan broker's contract is provided with the disclosure
3 document.
4 (c) A loan broker shall amend the disclosure document
5 required by subsection (b) of this Section whenever necessary
6 to prevent it from containing any false or misleading
7 statement of a material fact and shall deliver a copy of the
8 amended disclosure document to the Secretary of State on or
9 before the date of the amendment.
10 (d) A loan broker shall deliver to any person who
11 proposes to become obligated for a loan an estimated
12 disclosure document if the creditor is would be required to
13 deliver to the person a disclosure document under the
14 Truth-in-Lending Law, 15 U.S.C. 1601-1667e, for the
15 transaction. The estimated disclosure document shall:
16 (1) Be delivered to the person before the person
17 becomes contractually obligated on the loan; or
18 (2) Be delivered or placed in the mail to the
19 person not later than 3 business days after the person
20 enters into an agreement with the loan broker whichever
21 occurs first. The estimated disclosure document must
22 contain all the information and be in the form required
23 by the Truth-in-Lending Law, 15 U.S.C. 1601-1667e, and
24 regulations under that Law. However, the annual
25 percentage rate, finance charge, total of payments and
26 other matters required under the Truth-in-Lending Law, 15
27 U.S.C. 1601-1667e, shall be adjusted to reflect the
28 amount of all fees and charges of the loan broker that
29 the creditor could exclude from an estimated disclosure
30 document. The estimated disclosure document must state
31 at the top in at least 10 point type: "THE FOLLOWING IS
32 AN ESTIMATED DISCLOSURE DOCUMENT SHOWING YOUR LOAN
33 TRANSACTION AS IF THE FEES AND CHARGES YOU ARE SCHEDULED
34 TO PAY US WERE CHARGED TO YOU DIRECTLY BY THE CREDITOR."
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1 After the estimated disclosure document is delivered to
2 any person, the loan broker shall deliver to the person
3 an additional statement redisclosing all items if the
4 actual annual percentage rate will vary from the annual
5 percentage rate contained in the original estimated
6 disclosure document by more than 0.125%. Any required
7 additional disclosure document shall be delivered or
8 placed in the mail before consummation of the loan or no
9 later than 3 days from when the information that requires
10 redisclosure becomes available, whichever occurs first.
11 (e) If none of the exemptions in Section 10-30.5 apply,
12 then for a period of 7 days after the time the borrower signs
13 a contract for the services, the borrower shall have the
14 right to rescind the contract for services with the loan
15 broker and receive all fees actually paid thereon; provided,
16 however, that the client who has rescinded the contract may
17 not use or disclose any confidential or non-public
18 information provided to the client by the loan broker.
19 (Source: P.A. 89-209, eff. 1-1-96.)
20 (815 ILCS 175/15-30.5 new)
21 Sec. 15-30.5. Exemption from disclosure requirement.
22 The disclosure requirement of Section 15-30 shall not apply
23 where the borrower to be represented by the loan broker:
24 (a) Is a natural person who has, or is reasonably
25 believed by the loan broker relying upon this Section to
26 have, a net worth or joint net worth with that person's
27 spouse in excess of $1,000,000 at the time of the execution
28 of the loan broker agreement;
29 (b) Is a natural person who has, or is reasonably
30 believed by the loan broker relying upon this Section to
31 have, an income or joint income with that person's spouse in
32 excess of $200,000 in the most recent applicable fiscal year;
33 (c) Is a person who is not a natural person who has, or
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1 is reasonably believed by the loan broker relying upon this
2 Section to have, total assets having a value of $1,000,000
3 and has been in existence for at least nine months and was
4 not formed for the purposes of the transaction;
5 (d) Is a person who is not a natural person who has, or
6 is reasonably believed by the loan broker relying upon this
7 Section to have, gross revenue in excess of $200,000 in the
8 most recent applicable fiscal year and has been in existence
9 for at least nine months and was not formed for the purposes
10 of this transaction;
11 (e) Is a person who is not a natural person in which at
12 least 90% of the equity interest is owned, or is reasonably
13 believed by the loan broker relying upon this Section to be
14 owned, by persons who meet any of the tests set forth in this
15 subsection; or
16 (f) Has had an attorney review the loan broker's
17 contract.
18 A loan broker may rely upon a statement signed by the
19 borrower that such borrower is any of the categories
20 enumerated above.
21 (815 ILCS 175/15-35)
22 Sec. 15-35. Contracts required to be in writing;
23 retention of copy by borrowing party. To be enforceable,
24 every contract for the services of a loan broker shall be in
25 writing and signed by all contracting parties. The borrowing
26 party and loan broker shall retain a copy of the signed
27 contract at the time it is signed. The loan broker shall
28 retain a copy of the contract for a period of 6 years.
29 (Source: P.A. 89-209, eff. 1-1-96.)
30 (815 ILCS 175/15-40)
31 Sec. 15-40. Denial, suspension or revocation of
32 registration; orders and hearing.
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1 (a) The Secretary of State may deny, suspend or revoke
2 the registration of a loan broker if the loan broker:
3 (1) Fails to maintain the bond required under
4 subsection (b) of Section 15-15 of this Act.
5 (2) Is insolvent.
6 (3) Has violated any provision of this Act.
7 (4) Has filed with the Secretary of State any
8 document or statement containing any false representation
9 of a material fact or omitting to state a material fact.
10 (5) Has been convicted, within 10 years before the
11 date of the application, renewal or review, of any crime
12 involving fraud or deceit.
13 (b) The Secretary of State may not enter a final order
14 denying, suspending or revoking the registration of a loan
15 broker without prior notice to all interested parties,
16 opportunity for a hearing and written findings of fact and
17 conclusions of law. The Secretary of State may by summary
18 order deny, suspend or revoke a registration pending final
19 determination of any proceeding under this Section. Upon the
20 entry of a summary order, the Secretary of State shall
21 promptly notify all interested parties that it has been
22 entered, of the reasons for the summary order and, that upon
23 receipt by the Secretary of State of a written request from a
24 party, the matter will be set for hearing which shall be
25 conducted in accordance with the provisions of the Illinois
26 Administrative Procedure Act. If no hearing is requested
27 within 30 days of the entry of the order and none is ordered
28 by the Secretary of State, the order remains in effect until
29 it is modified vacated, or superseded by a final order. A
30 final order may be entered by the Secretary of State against
31 any party who fails to request a hearing within 30 days of
32 the entry of the summary order or vacated by the Secretary of
33 State. If a hearing is requested or ordered, the Secretary
34 of State, after notice of the hearing has been given to all
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1 interested persons and the hearing has been held, may modify
2 or vacate the order, or extend it until final determination,
3 or issue a final order.
4 (Source: P.A. 89-209, eff. 1-1-96.)
5 (815 ILCS 175/15-45)
6 Sec. 15-45. Powers of Secretary of State; privilege
7 against self-incrimination; admissibility into evidence.
8 (a) The Secretary of State may do the following:
9 (1) Adopt rules and regulations to implement this
10 Act.
11 (2) Make investigations and examinations:
12 (A) In connection with any application for
13 registration of any loan broker or any registration
14 already granted; or
15 (B) Whenever it appears to the Secretary of
16 State, upon the basis of a complaint or information,
17 that reasonable grounds exist for the belief that an
18 investigation or examination is necessary or
19 advisable for the more complete protection of the
20 interests of the public.
21 (3) Charge as costs of investigation or examination
22 all reasonable expenses, including a per diem prorated
23 upon the salary of any employee and actual traveling and
24 hotel expenses. All reasonable expenses are to be paid
25 by the party or parties under investigation or
26 examination.
27 (4) Issue notices and orders, including cease and
28 desist notices and orders, after making an investigation
29 or examination under item (2) of subsection (a) of this
30 Section. The Secretary of State may also bring an action
31 to prohibit a person from violating this Act. The
32 Secretary of State shall notify the person that an order
33 or notice has been issued, the reasons for it and that a
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1 hearing will be set in accordance with the provisions of
2 the Illinois Administrative Procedure Act after the
3 Secretary of State receives a written request from the
4 person requesting a hearing.
5 (5) Sign all orders, official certifications,
6 documents or papers issued under this Law or delegate the
7 authority to sign any of those items to his or her
8 designee.
9 (6) Hold and conduct hearings.
10 (7) Hear evidence.
11 (8) Conduct inquiries with or without hearings.
12 Inquiries shall include oral and written requests for
13 information. A failure to respond to a written request
14 for information may be deemed a violation of this Act
15 and the Secretary of State may issue notices and orders,
16 including cease and desist notices and orders, against
17 the violators.
18 (9) Receive reports of investigators or other
19 officers or employees of the State of Illinois or any
20 municipal corporation or governmental subdivision within
21 the State.
22 (10) Administer oaths or cause them to be
23 administered.
24 (11) Subpoena witnesses and compel them to attend
25 and testify.
26 (12) Compel the production of books, records and
27 other documents.
28 (13) Order depositions to be taken of any witness
29 residing within or without the State. The depositions
30 shall be taken in the manner prescribed by law for
31 depositions in civil actions and made returnable to the
32 Secretary of State.
33 (b) If any person refuses to obey a subpoena issued
34 under this Act, the Secretary of State may make application
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1 to any court of competent jurisdiction to order the person to
2 appear before the Secretary of State and produce documentary
3 evidence or give evidence as directed in the subpoena. The
4 failure to obey the order of the court shall be subject to
5 punishment by the court as contempt of court.
6 (c) No person shall be excused from complying with a
7 subpoena on the ground that the testimony or evidence
8 required may tend to incriminate the person or subject the
9 person to a penalty or forfeiture. No individual may be
10 prosecuted or subject to any penalty or forfeiture for or on
11 account of any transaction, matter or thing which the
12 individual is compelled to testify or produce evidence, after
13 claiming the privilege against self-incrimination. However,
14 the individual so testifying shall not be exempt from
15 prosecution and punishment for perjury committed in so
16 testifying.
17 (d) In any prosecution, action, suit or proceeding based
18 upon or arising out of this Act, the Secretary of State may
19 sign a certificate showing compliance or non-compliance with
20 this Act by any loan broker. This shall constitute prima
21 facie evidence of compliance or non-compliance with this Act
22 and shall be admissible in evidence in any court.
23 (e) Whenever it shall appear to the Secretary of State
24 that any person is engaged or about to engage in any acts or
25 practices which constitute or will constitute a violation of
26 this Act, or of any rule or regulation prescribed under
27 authority of this Act, the Secretary of State may at his or
28 her discretion, through the Attorney General:
29 (1) File a complaint and apply for a temporary
30 restraining order without notice, and upon a proper
31 showing the court may enter a temporary restraining order
32 without a bond, to enforce this Act.
33 (2) File a complaint and apply for a preliminary or
34 permanent injunction, and, after notice and hearing and
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1 upon a proper showing, the court may grant a preliminary
2 or permanent injunction and may order the defendant to
3 make an offer of rescission with respect to any contract
4 for loan brokerage services determined by the court to be
5 unlawful under this Act.
6 (f) The court shall further have jurisdiction and
7 authority, in addition to the penalties and other remedies in
8 this Act provided, to enter an order for the appointment of
9 the court or a person as a receiver, conservator, ancillary
10 receiver or ancillary conservator for the defendant or the
11 defendant's assets located in this State, or to require
12 restitution, damages or disgorgement of profits on behalf of
13 the person or persons injured by the act or practice
14 constituting the subject matter of the action, and may assess
15 costs and attorneys fees against the defendant for the use of
16 the State.
17 (Source: P.A. 89-209, eff. 1-1-96.)
18 (815 ILCS 175/15-55)
19 Sec. 15-55. Violations; administrative fines;
20 enforcement.
21 (a) If the Secretary of State determines, after notice
22 and opportunity for a hearing, that a person has violated
23 this Act, the Secretary of State may in addition to all other
24 remedies, impose an administrative fine upon the person in an
25 amount not to exceed $10,000 for each violation.
26 (b) The Secretary of State may bring an action in the
27 circuit court of Sangamon or Cook county to enforce payment
28 of fines imposed under this Section.
29 (c) If the Secretary of State shall find that any person
30 has violated any provision of this Act, the Secretary of
31 State may, by written order temporarily or permanently
32 prohibit or suspend such person from acting as a loan broker.
33 (d) If the Secretary of State shall find that any person
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1 is acting or has acted as a loan broker as defined in Section
2 15-5.15 15-5.10 of this Act, without prior thereto or at the
3 time thereof having complied with the registration
4 requirements of this Act, the Secretary of State may by
5 written order prohibit such person from acting as a loan
6 broker in this State.
7 (e) Anything herein contained to the contrary
8 notwithstanding, the Secretary of State may temporarily
9 prohibit or suspend, for a maximum period of 90 days, by an
10 order effective immediately, any individual or entity acting
11 as a loan broker or engaging in the registration of a loan
12 broker or the business of providing loan brokerage services,
13 without notice and prior hearing, if the Secretary of State
14 shall in his or her opinion, based upon credible evidence,
15 deems it necessary to prevent an imminent violation of this
16 Act or to prevent losses to clients which the Secretary of
17 State reasonably believes will occur as a result of a prior
18 violation of this Act. Immediately after taking action
19 without such notice and hearing, the Secretary of State shall
20 deliver a copy of the temporary order to the respondent named
21 therein by personal service or registered mail or certified
22 mail, return receipt requested. The temporary order shall
23 set forth the grounds for the action and shall advise that
24 the respondent may request a hearing to be held as soon as
25 reasonably practicable, that the request for a hearing will
26 not stop the effectiveness of the temporary order and that
27 respondent's failure to request a hearing within 30 days
28 after the date of the entry of the temporary order, shall
29 constitute an admission of any facts alleged therein and
30 shall constitute sufficient basis to make the temporary order
31 final.
32 (f) The Secretary of State may issue a temporary order
33 suspending or delaying the effectiveness of any registration
34 of a loan broker under this Act subsequent to and upon the
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1 basis of the issuance of any stop, suspension or similar
2 order by any agency of the United States regulating loan
3 brokers or any state or federal courts with respect to the
4 person who is the subject of the registration under this Act,
5 and such order shall become effective as of the date and time
6 of effectiveness of the agency or court order and shall be
7 vacated automatically at such time as the order of the agency
8 or court order is no longer in effect.
9 (Source: P.A. 89-209, eff. 1-1-96.)
10 (815 ILCS 175/15-60)
11 Sec. 15-60. Violations; liability of loan broker to
12 damaged parties; rights of prospective borrower. A person
13 who violates this Act, in connection with a contract for the
14 services of a loan broker, is liable to any person damaged by
15 the violation, for the amount of the actual damages suffered,
16 interest at the legal rate, and attorney fees. If a loan
17 broker violates any provision of this Act, in connection
18 with a contract for loan brokering services, the contract is
19 void, and the prospective borrower is entitled to receive
20 from the loan broker all sums paid to the loan broker, with
21 interest and any attorney's fee required to enforce this
22 Section. Any provision of this Section to the contrary
23 notwithstanding, the civil remedies of this Section shall not
24 be available against any person by reason of failure to
25 comply with the requirements of Section 15-75 of this Act.
26 (Source: P.A. 89-209, eff. 1-1-96.)
27 (815 ILCS 175/15-80)
28 Sec. 15-80. Persons exempt from registration and other
29 duties; burden of proof thereof.
30 (a) The following persons are exempt from the
31 registration and bonding requirements of this Act:
32 (1) Any attorney while engaging in the practice of
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1 law.
2 (2) Any certified public accountant licensed to
3 practice in Illinois, while engaged in practice as a
4 certified public accountant and whose service in relation
5 to procurement of a loan is incidental to his or her
6 practice.
7 (3) Any person licensed to engage in business as a
8 real estate broker or salesperson in Illinois while
9 rendering services in the ordinary course of a
10 transaction in which a license as a real estate broker or
11 salesperson is required.
12 (4) Any dealer, salesperson or investment adviser
13 registered under the Illinois Securities Law of 1953, or
14 an investment advisor, representative, or any person who
15 is regularly engaged in the business of offering or
16 selling securities in a transaction exempted under
17 subsection C, H, M, R, Q, or S of Section 4 of the
18 Illinois Securities Law of 1953 or subsection G of
19 Section 4 of the Illinois Securities Law of 1953 provided
20 that such person is registered under the federal
21 securities law.
22 (4.1) An associated person described in subdivision
23 (h)(2) of Section 15 of the Federal 1934 Act.
24 (4.2) An investment adviser registered pursuant to
25 Section 203 of the Federal 1940 Investment Advisors Act.
26 (4.3) A person described in subdivision (a)(11) of
27 Section 202 of the Federal 1940 Investment Advisors Act.
28 (5) Any person whose fee is wholly contingent on
29 the successful procurement of a loan from a third party
30 and to whom no fee, other than a bona fide third party
31 fee, is paid before the procurement.
32 (6) Any person who is a creditor, or proposed to be
33 a creditor, for any loan.
34 (7) (Blank). Any person authorized to conduct
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1 business under the Residential Mortgage License Act of
2 1987.
3 (8) Any person regulated by the Department of
4 Financial Institutions or the Office of Banks and Real
5 Estate, or any insurance producer or company authorized
6 to do business in this State, any dealer, salesperson or
7 investment adviser registered under the Illinois
8 Securities Law of 1953, or any investment adviser
9 representative, or any person who is regularly engaged in
10 the business of offering or selling securities in a
11 transaction exempted under subsection C, H, M, R, Q, or S
12 of Section 4 of the Illinois Securities Law of 1953 or
13 subsection G of Section 4 of the Illinois Securities Law
14 of 1953 provided that such person is registered under the
15 federal securities law.
16 (b) As used in this Section, "bona fide third party fee"
17 includes fees for:
18 (1) Credit reports, appraisals and investigations.
19 (2) If the loan is to be secured by real property,
20 title examinations, an abstract of title, title
21 insurance, a property survey and similar purposes.
22 (c) As used in this Section, "successful procurement of
23 a loan" means that a binding commitment from a creditor to
24 advance money has been received and accepted by the borrower.
25 (d) The burden of proof of any exemption provided in
26 this Act shall be on the party claiming the exemption.
27 (Source: P.A. 89-209, eff. 1-1-96; 89-508, eff. 7-3-96.)
28 (815 ILCS 175/15-100 new)
29 Sec. 15-100. Immunity for official acts. In no case
30 shall the Secretary of State or any of his or her employees
31 or agents, in the administration of this Act, incur any
32 official or personal liability while acting in accordance
33 with their official duties or authority.
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1 Section 15. The Illinois Business Brokers Act of 1995 is
2 amended by changing Sections 10-5.10, 10-10, 10-25, 10-30,
3 10-35, 10-40, 10-45, 10-55, 10-60, 10-75, 10-80, and 10-85,
4 and by adding Sections 10-5.16, 10-5.17, 10-5.18, 10-5.25,
5 10-5.30, 10-30.5, 10-95, 10-100, 10-105, 10-110, and 10-115
6 as follows:
7 (815 ILCS 307/10-5.10)
8 Sec. 10-5.10. Business Broker. "Business Broker" means
9 any person who is required to register under Section 10-10 of
10 this Act and, in return for a fee, commission, or other
11 compensation:
12 (1) promises to procure a business for any person
13 or assists any person in procuring a business from any
14 third person;
15 (2) negotiates, offers, attempts or agrees to
16 negotiate the sale, exchange, or purchase of a business;
17 (3) buys, sells, offers to buy or sell or otherwise
18 deals in options on businesses;
19 (4) advertises or represents himself as a business
20 broker;
21 (5) assists or directs in the procuring of
22 prospects intended to result in the purchase, sale, or
23 exchange of a business;
24 (6) offers, promotes, lists or agrees to offer,
25 promote, or list a business for sale, lease, or exchange.
26 (Source: P.A. 89-209, eff. 1-1-96.)
27 (815 ILCS 307/10-5.16 new)
28 Sec. 10-5.16. Client. "Client" means any person who has
29 signed an agreement with a business broker that provides for
30 the services described in Section 10-5.10 for compensation.
31 (815 ILCS 307/10-5.17 new)
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1 Sec. 10-5.17. Insolvency. "Insolvency" means the
2 rendering of a business broker financially unable to perform
3 any contractual obligations of its business brokering duties.
4 (815 ILCS 307/10-5.18 new)
5 Sec. 10-5.18. Material. "Material", when used to qualify
6 a requirement for the furnishing of information as to any
7 subject, limits the information required to those matters as
8 to which there is a substantial likelihood that a reasonable
9 person would consider important.
10 (815 ILCS 307/10-5.25 new)
11 Sec. 10-5.25. Purchaser. "Purchaser" means a person who
12 enters into a contract or agreement for the acquisition of a
13 business or a person to whom an offer to sell a business is
14 directed.
15 (815 ILCS 307/10-5.30 new)
16 Sec. 10-5.30. Seller. "Seller" means a person who sells
17 or offers to sell a business or any agent who directly or
18 indirectly acts on behalf of such person, except that a
19 person acting as a business broker is neither a seller nor
20 purchaser.
21 (815 ILCS 307/10-10)
22 Sec. 10-10. Registration of business brokers. Every
23 person engaging in the business of business brokering shall
24 be registered with the Office of the Secretary of State
25 pursuant to the provisions of this Act. Persons employed,
26 contracted by, or working on behalf of other persons who are
27 registered under this Act need not register separately;
28 provided that such non-registered employed or contracted
29 persons working for a business broker have been identified in
30 the registration submitted and proper fees, if any, are paid.
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1 (a) In order to be registered under this Act, a business
2 broker shall file an application for registration with the
3 Secretary of State. The application for registration shall
4 contain, to the extent reasonably available to the applicant:
5 (1) The disclosure document required under
6 subsection (b) of Section 10-30 of this Act and the form
7 of disclosure statement proposed to be used under
8 subsection (b)(1) of Section 10-30 of this Act.
9 (2) Consent to service of process under subsection
10 (d) of this Section;
11 (3) A fee in the amount as provided for specified
12 in subsection (a) of Section 10-25 of this Act, and shall
13 not be returnable in any event; and
14 (4) Any other information deemed necessary by the
15 Secretary of State as prescribed by rule or regulation.
16 (b) Whenever the provisions of this Act have been
17 complied with, the Secretary of State shall issue a
18 certificate of registration to the applicant, authorizing the
19 applicant to engage in the business of business brokering.
20 (c) An application for registration becomes effective 30
21 days after it is filed, unless an order of the Secretary of
22 State establishes an earlier effective date. Every
23 registration is effective until January 1 of the year after
24 it goes into effect.
25 (d) Every applicant for registration shall file with the
26 Secretary of State, in such form as the Secretary of State
27 may prescribe by rule or regulation, an irrevocable consent
28 appointing the Secretary of State to be the applicant's agent
29 to receive service of any process in any noncriminal suit,
30 action, or proceeding against the applicant arising from the
31 violation of any provision of this Act.
32 (e) The Secretary of State shall maintain a record,
33 which shall be open for public inspection, upon which shall
34 be entered the name and address of each business broker and
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1 all orders of the Secretary of State denying, suspending, or
2 revoking registration. The Secretary of State may designate
3 by rule or order any statements, information, or reports
4 submitted to or filed with him or her pursuant to this Act
5 which the Secretary of State determines are of a sensitive
6 nature and therefore should be exempt from public disclosure.
7 Any statement, information, or reports determined by the
8 Secretary of State to be of a sensitive nature shall not be
9 disclosed to the public except upon consent of the person
10 filing or submitting the statement, information, or reports
11 or by order of a court or in court proceedings.
12 (Source: P.A. 89-209, eff. 1-1-96.)
13 (815 ILCS 307/10-25)
14 Sec. 10-25. Fees and funds. All fees and funds accruing
15 for the administration of this Act shall be accounted for by
16 the Secretary of State and shall be deposited with the State
17 Treasurer who shall deposit them in the Securities Audit and
18 Enforcement Fund.
19 (a) The Secretary of State shall, by rule or regulation,
20 impose and collect fees necessary for the administration of
21 this Act, including but not limited to, fees for the
22 following purposes:
23 (1) Filing an application pursuant to Section 10-10
24 of this Act;
25 (2) Examining an application pursuant to Sections
26 10-10 and 10-20 of this Act;
27 (3) Registering a business broker under Section
28 10-10 of this Act;
29 (4) Renewing registration of a business broker
30 pursuant to Section 10-20 of this Act;
31 (5) Failure to file or file timely any document or
32 information required under this Act;
33 (6) Filing a notice of lien pursuant to Section
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1 10-115 of this Act.
2 (b) The Secretary of State may, by rule or regulation,
3 raise or lower any fee imposed by, and which he or she is
4 authorized by law to collect under, this Act.
5 (Source: P.A. 89-209, eff. 1-1-96.)
6 (815 ILCS 307/10-30)
7 Sec. 10-30. Disclosure document to be provided by
8 business broker.
9 (a) A business broker must provide a written disclosure
10 document that meets the requirements set forth in subsection
11 (b) of this Section to a client at the time or before the
12 client signs a contract for the services of a business broker
13 or at the time or before the business broker receives any
14 consideration upon the contract. Any person who signs a
15 contract for the services of a business broker shall have 7
16 days from the date of signing of the contract to rescind the
17 contract and receive a refund of all payments, if any, made
18 by that person. At least 7 days before the time any person
19 signs a contract for the services of a business broker, or 7
20 days before the business broker receives any consideration
21 upon the contract, whichever occurs first, the business
22 broker must provide to the contracting person a written
23 disclosure document that meets the requirements set forth in
24 subsection (b) of this Section.
25 (b) A written disclosure document statement shall
26 contain the following information:
27 (1) A disclosure statement which shall be the cover
28 sheet and shall be entitled, in at least 10-point
29 boldface capital letters "DISCLOSURES REQUIRED BY LAW".
30 Under this title shall appear the statement, in at least
31 10 point type that "THE SECRETARY OF STATE HAS NOT
32 REVIEWED AND DOES NOT APPROVE, RECOMMEND, ENDORSE, OR
33 SPONSOR ANY BUSINESS BROKERAGE CONTRACT. THE INFORMATION
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1 CONTAINED IN THIS DISCLOSURE HAS NOT BEEN VERIFIED BY THE
2 SECRETARY OF STATE. IF YOU HAVE ANY QUESTIONS, SEE AN
3 ATTORNEY BEFORE YOU SIGN A CONTRACT OR AGREEMENT."
4 Nothing except the title and the required statement shall
5 appear on the cover sheet, except that the name of the
6 business broker, address, telephone number, facsimile
7 number, and any other information as authorized by the
8 Secretary of State by rule may appear on the cover sheet.
9 (2) The name and form of organization of the
10 business broker, the names under which the business
11 broker has done or, is doing, or intends to do business,
12 and the name of any parent organization or affiliate of
13 the business broker.
14 (3) The names, addresses, and titles of the
15 business broker's officers, directors, trustees, general
16 partners, general managers, principal executives, and any
17 other person performing similar duties.
18 (4) A full and detailed description of the actual
19 services that the business broker undertakes to perform
20 for the prospective client.
21 (5) A specific statement of the circumstances under
22 which the business broker will be entitled to obtain or
23 retain consideration from the party with whom the
24 business broker contracts.
25 (6) Any other information the Secretary of State
26 may require by rule or regulation.
27 (c) A business broker shall amend the disclosure
28 document required by subsection (b) of this Section whenever
29 necessary to prevent it from containing any false or
30 misleading statement of a material fact and shall deliver a
31 copy of the amended disclosure document to the Secretary of
32 State on or before the date of the amendment.
33 (d) The information in subdivisions (b)(4) and (b)(5) of
34 this Section need not be set out on the disclosure document
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1 if the business broker's contract contains the information
2 required in subdivisions (b)(4) and (b)(5) of this Section
3 and is provided with the disclosure document.
4 (Source: P.A. 89-209, eff. 1-1-96.)
5 (815 ILCS 307/10-30.5 new)
6 Sec. 10-30.5. Exemptions from disclosure requirements.
7 Section 10-30 shall not apply if:
8 (a) the client to be represented by the business broker
9 is:
10 (1) a natural person who has, or is reasonably
11 believed by the business broker relying upon this
12 Section to have, a net worth or joint net worth with that
13 person's spouse in excess of $1,000,000 at the time of
14 the execution of the business broker agreement or
15 contract;
16 (2) a natural person who has, or is reasonably
17 believed by the business broker relying upon this
18 Section to have, an income or joint income with that
19 person's spouse in excess of $200,000 in the most recent
20 fiscal year;
21 (3) a company, business, or other non-natural
22 person that has, or is reasonably believed by the
23 business broker relying upon this Section to have, a
24 total asset value in excess of $1,000,000 and has been in
25 existence for at least nine months and was not formed for
26 the purpose of the subject transaction;
27 (4) a company, business, or other non-natural
28 person that has, or is reasonably believed by the
29 business broker relying upon this Section to have, gross
30 revenues or gross sales in excess of $200,000 in the most
31 recent fiscal year and has been in existence for at least
32 nine months and was not formed for the purposes of the
33 subject transaction; or
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1 (5) a company, business, or other non-natural
2 person in which at least 90% of the equity interest is
3 owned, or is reasonably believed by the business broker
4 relying upon this Section to be owned, by persons who
5 meet any of the tests set forth in subdivisions (a)(1),
6 (a)(2), (a)(3), (a)(4), or (a)(5) of this Section; or
7 (b) the client to be represented by the business broker
8 has had an attorney review the business broker's contract for
9 the client.
10 (815 ILCS 307/10-35)
11 Sec. 10-35. Contracts required to be in writing;
12 retention of copy by client. To be enforceable, every
13 contract for the services of a business broker shall be in
14 writing and signed by all contracting parties. The client
15 shall have the right to retain a copy of the signed contract
16 for the services of a business broker. The client's copy of
17 the contract shall be provided to the client when the
18 contract is signed, if that is reasonably feasible and the
19 client so requests. Otherwise, the contract shall be mailed
20 or otherwise sent to the client within one week of execution.
21 No account number, as referred to in Section 10-75 of this
22 Act, is required on the client's copy of the contract at the
23 time it is signed.
24 (Source: P.A. 89-209, eff. 1-1-96.)
25 (815 ILCS 307/10-40)
26 Sec. 10-40. Denial, suspension or revocation of
27 registration; orders and hearing.
28 (a) The Secretary of State may deny, suspend or revoke
29 the registration of a business broker if the business broker:
30 (1) Is insolvent.
31 (2) Has violated any provision of this Act.
32 (3) Has filed with the Secretary of State any
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1 document or statement containing any false representation
2 of a material fact or omitting to state a material fact.
3 (4) Has been convicted, within 10 years before the
4 date of the application, renewal or review, of any crime
5 involving fraud or deceit.
6 (5) Has been found by any court or agency, within
7 10 years before the date of the application, renewal, or
8 review, to have engaged in any activity involving fraud
9 or deceit.
10 (b) The Secretary of State may not enter a final order
11 denying, suspending, or revoking the registration of a
12 business broker without prior notice to all interested
13 parties, opportunity for a hearing and written findings of
14 fact and conclusions of law. The Secretary of State may by
15 summary order deny, suspend, or revoke a registration pending
16 final determination of any proceeding under this Section.
17 Upon the entry of a summary order, the Secretary of State
18 shall promptly notify all interested parties that it has been
19 entered, of the reasons for the summary order and, that upon
20 receipt by the Secretary of State of a written request from a
21 party, the matter will be set for hearing which shall be
22 conducted in accordance with the provisions of the Illinois
23 Administrative Procedure Act. If no hearing is requested and
24 none is ordered by the Secretary of State, the order remains
25 in effect until it is modified or vacated by the Secretary of
26 State. If a hearing is requested or ordered, the Secretary
27 of State, after notice of the hearing has been given to all
28 interested persons and the hearing has been held, may modify
29 or vacate the order or extend it until final determination.
30 (Source: P.A. 89-209, eff. 1-1-96.)
31 (815 ILCS 307/10-45)
32 Sec. 10-45. Powers of Secretary of State; privilege
33 against self-incrimination; admissibility into evidence.
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1 (a) The Secretary of State may do the following:
2 (1) Adopt rules and regulations to implement this
3 Act.
4 (2) Conduct investigations and examinations:
5 (A) In connection with any application for
6 registration of any business broker or any
7 registration already granted; or
8 (B) Whenever it appears to the Secretary of
9 State, upon the basis of a complaint or information,
10 that reasonable grounds exist for the belief that an
11 investigation or examination is necessary or
12 advisable for the more complete protection of the
13 interests of the public.
14 (3) Charge as costs of investigation or examination
15 all reasonable expenses, including a per diem prorated
16 upon the salary of any employee and actual traveling and
17 hotel expenses. All reasonable expenses are to be paid
18 by the party or parties under investigation or
19 examination.
20 (4) Issue notices and orders, including cease and
21 desist notices and orders, after making an investigation
22 or examination under paragraph (2) of subsection (a) of
23 this Section. The Secretary of State may also bring an
24 action to prohibit a person from violating this Act. The
25 Secretary of State shall notify the person that an order
26 or notice has been issued, the reasons for it and that a
27 hearing will be set in accordance with the provisions of
28 the Illinois Administrative Procedure Act after the
29 Secretary of State receives a written request from the
30 person requesting a hearing.
31 (5) Sign all orders, official certifications,
32 documents or papers issued under this Act or delegate the
33 authority to sign any of those items to his or her
34 designee.
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1 (6) Hold and conduct hearings.
2 (7) Hear evidence.
3 (8) Conduct inquiries with or without hearings.
4 (9) Receive reports of investigators or other
5 officers or employees of the State of Illinois or any
6 municipal corporation or governmental subdivision within
7 the State.
8 (10) Administer oaths or cause them to be
9 administered.
10 (11) Subpoena witnesses and compel them to attend
11 and testify.
12 (12) Compel the production of books, records and
13 other documents.
14 (13) Order depositions to be taken of any witness
15 residing within or without the State. The depositions
16 shall be taken in the manner prescribed by law for
17 depositions in civil actions and made returnable to the
18 Secretary of State.
19 (b) If any person refuses to obey a subpoena issued
20 under this Act, the Secretary of State may make application
21 to any court of competent jurisdiction to order the person to
22 appear before the Secretary of State and produce documentary
23 evidence or give evidence as directed in the subpoena. The
24 failure to obey the order of the court shall be subject to
25 punishment by the court as contempt of court.
26 (c) No person shall be excused from complying with a
27 subpoena on the ground that the testimony or evidence
28 required may tend to incriminate the person or subject the
29 person to a penalty or forfeiture. No individual may be
30 prosecuted or subject to any penalty or forfeiture for or on
31 account of any transaction, matter or thing which the
32 individual is compelled to testify or produce evidence, after
33 claiming the privilege against self-incrimination. However,
34 the individual so testifying shall not be exempt from
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1 prosecution and punishment for perjury committed in so
2 testifying.
3 (d) In any prosecution, action, suit or proceeding based
4 upon or arising out of this Act, the Secretary of State may
5 sign a certificate showing compliance or non-compliance with
6 this Act by any business broker. This shall constitute prima
7 facie evidence of compliance or non-compliance with this Act
8 and shall be admissible in evidence in any court to enforce
9 this Act.
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 business brokerage services determined by the court
26 to be 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 or damages on behalf of the person or persons
34 injured by the act or practice constituting the subject
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1 matter of the action, and may assess costs against the
2 defendant for the use of the State.
3 (g) No provision of this Act imposing liability shall
4 apply to any act done or omitted in good faith in conformity
5 with any rule of the Secretary of State under this Act,
6 notwithstanding that such rule may, after such act or
7 omission, be amended or rescinded or be determined by
8 judicial or other authority to be invalid for any reason.
9 (Source: P.A. 89-209, eff. 1-1-96.)
10 (815 ILCS 307/10-55)
11 Sec. 10-55. Violations; administrative fines;
12 enforcement.
13 (a) If the Secretary of State determines, after notice
14 and opportunity for a hearing, that a person has violated
15 this Act, the Secretary of State may in addition to all other
16 remedies, impose an administrative fine upon the person in an
17 amount not to exceed $10,000 for each violation.
18 (b) The Secretary of State may bring an action in the
19 circuit court of Sangamon or Cook county to enforce payment
20 of fines imposed under this Section.
21 (c) If the Secretary of State shall find that any person
22 has violated any provision of this Act, the Secretary of
23 State may, by written order temporarily or permanently
24 prohibit or suspend such person from acting as a business
25 broker.
26 (d) If the Secretary of State shall find, after notice
27 and opportunity for hearing, that any person is acting or has
28 acted as a business broker as defined in Section 10-5.10 of
29 this Act, without prior thereto or at the time thereof having
30 complied with the registration requirements of this Act, the
31 Secretary of State may by written order prohibit or suspend
32 such person from acting as a business broker in this State.
33 (e) Anything herein contained to the contrary
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1 notwithstanding, the Secretary of State may temporarily
2 prohibit or suspend, for a maximum period of 90 days, by an
3 order effective immediately, the registration of a business
4 broker or the business of providing business brokerage
5 services, without notice and prior hearing, if the Secretary
6 of State shall in his or her opinion, based upon credible
7 evidence, deem it necessary to prevent an imminent violation
8 of this Act Law or to prevent losses to clients which the
9 Secretary of State reasonably believes will occur as a result
10 of a prior violation of this Act. Immediately after taking
11 action without such notice and hearing, the Secretary of
12 State shall deliver a copy of the temporary order to the
13 respondent named therein by personal service or registered
14 mail or certified mail, return receipt requested. The
15 temporary order shall set forth the grounds for the action
16 and shall advise that the respondent may request a hearing as
17 soon as reasonably practicable, that the request for a
18 hearing will not stop the effectiveness of the temporary
19 order and that respondent's failure to request a hearing
20 within 30 days after the date of the entry of the temporary
21 order, shall constitute an admission of any facts alleged
22 therein and shall make the temporary order final. A business
23 broker whose registration has been suspended pursuant to this
24 Section may request the Secretary of State permission to
25 continue to receive payment for any executory contracts at
26 the time of any suspension and to continue to perform its
27 obligation thereunder. The decision to grant or deny
28 permission to receive payment for any executory contracts or
29 perform any obligation thereunder shall be at the sole
30 discretion of the Secretary of State and shall not be subject
31 to review under the Administrative Review Law.
32 (f) The Secretary of State may issue a temporary order
33 suspending or delaying the effectiveness of any registration
34 of a business broker under this Act subsequent to and upon
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1 the basis of the issuance of any stop, suspension or similar
2 order by any agency of the United States regulating business
3 brokers or any state or federal courts with respect to the
4 person who is the subject of the registration under this Act,
5 and such order shall become effective as of the date and time
6 of effectiveness of the agency or court order and shall be
7 vacated automatically at such time as the order of the agency
8 or court order is no longer in effect.
9 (Source: P.A. 89-209, eff. 1-1-96.)
10 (815 ILCS 307/10-60)
11 Sec. 10-60. Violations; liability of business broker to
12 damaged parties; rights of prospective client. A person who
13 commits a material violation of violates this Act, in
14 connection with a contract for the services of a business
15 broker, is liable to any client person damaged by the
16 violation, for the amount of the actual damages suffered, but
17 not more than the fees actually paid by the client seeking
18 relief, together with interest at the legal rate, and
19 attorney fees. If a business broker commits a material
20 violation of Sections 10-10, 10-20, and 10-30 of this Act
21 violates any provision of this Act, in connection with a
22 contract for business brokering services, the contract is
23 void, and the prospective client is entitled to receive from
24 the business broker all sums paid to the business broker,
25 with interest and any attorney's fee required to enforce this
26 Section.
27 (Source: P.A. 89-209, eff. 1-1-96.)
28 (815 ILCS 307/10-75)
29 Sec. 10-75. Account numbers; retention and maintenance of
30 records.
31 (a) Each business broker agreement shall be given an
32 account number and all instruments executed taken in
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1 connection with that agreement must bear this number, except
2 as provided in Section 10-35 of this Act. Each business
3 broker shall keep and maintain the following records or their
4 equivalent:
5 (1) A business agreement register that consists of
6 a chronological listing of all business broker agreements
7 that have been entered into. For each business broker
8 agreement the register shall contain the following:
9 (A) The account number.
10 (B) The date of the agreement.
11 (C) The name of the client or any proposed
12 client.
13 (D) The amount of any fees charged.
14 (E) The cost and type of any insurance
15 required.
16 (2) A record file for each client or proposed
17 client shall contain the following:
18 (A) The name and address of the client or any
19 proposed client.
20 (B) A copy of the signed business broker
21 agreement.
22 (C) A copy of any other papers or instruments
23 used in connection with the business broker
24 agreement and signed by the client or any proposed
25 client, including a copy of the disclosure document
26 required by Section 10-30 of this Act, that contains
27 an acknowledged receipt by the client or any
28 proposed client.
29 (D) The amount of the business broker's fee
30 that the client has paid. If there is an unpaid
31 balance, the status of any collection efforts.
32 (3) All receipts from or for the account of clients
33 or any proposed clients and all disbursements to or for
34 the account of clients or any proposed clients, recorded
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1 so that the transactions are readily identifiable.
2 (4) (Blank). A general ledger that shall be posted
3 at least monthly, and a trial balance sheet and profit
4 and loss statement prepared within 30 days of the
5 Secretary of State's request for the information.
6 (5) A copy of:
7 (A) All advertisements, pamphlets, circulars,
8 letters, articles or communications published in any
9 newspaper, magazine or periodical.
10 (B) Scripts of any recording, radio or
11 television announcement.
12 (C) Any sales kits or literature to be used in
13 solicitation of clients.
14 (b) The records listed in subsection (a) of this Section
15 shall be kept for a period of 6 years in the business
16 broker's principal office and must be separate or readily
17 identifiable from the records of any other business that is
18 conducted in the office of the business broker. After a
19 period of 2 years, a copy of this information may be retained
20 on magnetic, digital, or other electronic medium in a form
21 that may be readily retrieved.
22 (c) The records listed in subsection (a) of this Section
23 need not be kept for a client where no fee, expense
24 reimbursement, retainer, or other charge was incurred and no
25 transaction was consummated.
26 (Source: P.A. 89-209, eff. 1-1-96.)
27 (815 ILCS 307/10-80)
28 Sec. 10-80. Persons exempt from registration and other
29 duties under law; burden of proof thereof.
30 (a) The following persons are exempt from the
31 requirements of this Act:
32 (1) Any attorney who is licensed to practice in
33 this State, while engaged engaging in the practice of law
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1 and whose service in relation to the business broker
2 transaction is incidental to the attorney's practice.
3 (2) Any person licensed as a real estate broker or
4 salesperson under the Illinois Real Estate License Act of
5 1983 who is primarily engaged in business activities for
6 which a license is required under that Act and who, on an
7 incidental basis, acts as a business broker.
8 (3) Any dealer, salesperson, or investment adviser
9 registered pursuant to under the Illinois Securities Law
10 of 1953 or any investment adviser representative, or any
11 person who is regularly engaged in the business of
12 offering or selling securities in a transaction exempted
13 under subsection C, H, M, R, Q, or S of Section 4 of the
14 Illinois Securities Law of 1953 or subsection G of
15 Section 4 of the Illinois Securities Law of 1953 provided
16 that such person is registered pursuant to under the
17 federal securities law.
18 (4) An associated person described in subdivision
19 (h)(2) of Section 15 of the Federal 1934 Act.
20 (5) An investment adviser registered pursuant to
21 Section 203 of the Federal 1940 Investment Advisors Act.
22 (6) A person described in subdivision (a)(11) of
23 Section 202 of the Federal 1940 Investment Advisors Act.
24 (7) Any person who is selling a business owned or
25 operated (in whole or in part) by that person in a one
26 time transaction.
27 (b) This Act shall not be deemed to apply in any manner,
28 directly or indirectly, to: (i) a State bank or national
29 bank, as those terms are defined in the Illinois Banking Act,
30 or any subsidiary of a State bank or national bank; (ii) a
31 bank holding company, as that term is defined in the Illinois
32 Bank Holding Company Act of 1957, or any subsidiary of a bank
33 holding company; (iii) a foreign banking corporation, as that
34 term is defined in the Foreign Banking Office Act, or any
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1 subsidiary of a foreign banking corporation; (iv) a
2 representative office, as that term is defined in the
3 Foreign Bank Representative Office Act; (v) a corporate
4 fiduciary, as that term is defined in the Corporate Fiduciary
5 Act, or any subsidiary of a corporate fiduciary; (vi) a
6 savings bank organized under the Savings Bank Act, or a
7 federal savings bank organized under federal law, or any
8 subsidiary of a savings bank or federal savings bank; (vii) a
9 savings bank holding company organized under the Savings Bank
10 Act, or any subsidiary of a savings bank holding company;
11 (viii) an association or federal association, as those terms
12 are defined in the Illinois Savings and Loan Act of 1985, or
13 any subsidiary of an association or federal association; (ix)
14 a foreign savings and loan association or foreign savings
15 bank subject to the Illinois Savings and Loan Act of 1985, or
16 any subsidiary of a foreign savings and loan association or
17 foreign savings bank; or (x) a savings and loan association
18 holding company, as that term is defined in the Illinois
19 Savings and Loan Act of 1985, or any subsidiary of a savings
20 and loan association holding company.
21 (b-1) Persons registered under the Illinois Franchise
22 Disclosure Act of 1987 (and their employees) are exempt from
23 the requirements of this Act as to: offers and sales in
24 connection with franchising activities; or assisting any of
25 their franchisees in the offer or sale of a franchise by any
26 such franchisee for the franchisee's own account regardless
27 of whether the sale is effected by or through the registered
28 persons.
29 (b-2) Any certified public accountant licensed to
30 practice in Illinois, while engaged in the practice as a
31 certified public accountant and whose service in relation to
32 the business broker transaction is incidental to his or her
33 practice, is exempt from the requirements of this Act.
34 (b-3) Any publisher, or regular employee of such
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1 publisher, of a bona fide newspaper or news magazine of
2 regular and established paid circulation who, in the routine
3 course of selling advertising, advertises businesses for sale
4 and in which no other related services are provided is exempt
5 from the requirements of this Act.
6 (c) The burden of proof of any exemption or
7 classification provided in this Act shall be on the party
8 claiming the exemption or classification.
9 (Source: P.A. 89-209, eff. 1-1-96; 89-665, eff. 8-14-96.)
10 (815 ILCS 307/10-85)
11 Sec. 10-85. Prohibited acts.
12 (a) A business broker shall not, in connection with a
13 contract for the services of a business broker, either
14 directly or indirectly, do any of the following:
15 (1) (a) Employ any device, scheme or article to
16 defraud.
17 (2) (b) Make any untrue statements of a material
18 fact or omit to state a material fact necessary in order
19 to make the statements made, in the light of
20 circumstances under which they are made, not misleading,
21 unless the statement is made in reasonable reliance on
22 information provided by the client.
23 (3) (c) Engage in any act, practice or course of
24 business that operates or would operate as a fraud or
25 deceit upon any person.
26 (b) A business broker shall not either directly or
27 indirectly do the following:
28 (1) Engage in the business of acting as a business
29 broker without registration under this Act unless exempt
30 under the Act.
31 (2) Fail to file with the Secretary of State any
32 application, report, document, or answer required to be
33 filed under the provisions of this Act or any rule made
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1 by the Secretary of State pursuant to this Act or fail to
2 comply with the terms of any order issued pursuant to
3 this Act or rule or made by the Secretary of State.
4 (3) Fail to maintain any records as required under
5 the provisions of this Act or any rule made by Secretary
6 of State pursuant to this Act.
7 (Source: P.A. 89-209, eff. 1-1-96.)
8 (815 ILCS 307/10-95 new)
9 Sec. 10-95. Miscellaneous provisions.
10 (a) The rights and remedies under this Act are in
11 addition to any other rights or remedies that may exist at
12 law or equity.
13 (b) Any condition, stipulation, or provision binding any
14 client of a business broker to waive compliance with or
15 relieve a person from any duty or liability imposed by or any
16 right provided by this Act or any rule or order pursuant to
17 this Act is void.
18 (c) If any provision of this Act or its application to
19 any person or circumstance is held invalid, the invalidity of
20 that provision or application does not effect other
21 provisions or applications of this Act that can be given
22 effect without the invalid provision or application.
23 (815 ILCS 307/10-100 new)
24 Sec. 10-100. Immunity for official acts. In no case
25 shall the Secretary of State, or any of his or her employees
26 or agents, in the administration of this Act, incur any
27 official or personal liability while acting in accordance
28 with their official duties or authority or both.
29 (815 ILCS 307/10-105 new)
30 Sec. 10-105. Scope of the Act. This Act shall apply
31 only when the person engaged or sought to be engaged by the
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1 business broker is domiciled in this State or when the
2 company or business sought to be sold has its principal place
3 of business in this State.
4 (815 ILCS 307/10-110 new)
5 Sec. 10-110. Previous and ongoing agreements or
6 contracts and transactions not affected. All business broker
7 agreements or contracts and transactions between a business
8 broker and its clients or proposed clients which do not
9 comply with the Act, if entered into prior to January 1,
10 1996, shall be deemed to be valid and enforceable,
11 notwithstanding this Act.
12 (815 ILCS 307/10-115 new)
13 Sec. 10-115 Business broker lien.
14 (a) Any business broker shall have a lien upon the
15 assets of a business that is the subject of a business
16 broker's contract and the proceeds from the sale of such
17 business in the amount that the broker is due.
18 (b) The lien shall be available to the business broker
19 named in the instrument signed by the seller or purchaser.
20 The lien arising under this Act shall be in addition to any
21 other rights that a business broker may have.
22 (c) The lien under this Act shall attach upon the
23 business broker being otherwise entitled to a fee or
24 commission under a written instrument signed by the seller or
25 purchaser or the seller or purchaser's duly authorized agent,
26 as applicable.
27 (d) When payment to a business broker is due in
28 installments, a portion of which is due only after the
29 conveyance or transfer of the business, any claim for lien
30 for those payments due after the transfer or conveyance may
31 be filed at any time subsequent to the transfer or conveyance
32 of the business and prior to the date on which the payment is
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1 due but shall only be effective as a lien against the
2 business or proceeds to the extent moneys are still owed to
3 the transferor by the transferee. The lien shall attach as of
4 the filing of the notice of lien and not relate back to the
5 date of the written agreement.
6 (e) If a business broker has a written agreement with a
7 prospective purchaser or seller, then the lien shall attach
8 upon the prospective purchaser or seller that is purchasing,
9 selling, or otherwise accepting a conveyance or transfer of
10 the business and the filing of a notice of lien by the
11 business broker in the Office of the Secretary of State
12 within 90 days after the purchase, sale, or other conveyance
13 or transfer of the business that is the subject of the
14 written agreement with the business broker. The lien shall
15 attach as of the date of the receipt of any consideration by
16 the seller of the business that is the subject of the written
17 agreement with the business broker.
18 (f) The business broker shall, within 10 days after
19 filing its notice of lien, mail a copy of the notice of lien
20 to the owner of the business by registered or certified mail,
21 with return receipt requested, or personally served on the
22 owner of record or his agent. If the lien is filed within 10
23 days prior to closing, the business broker is not required to
24 mail or personally serve a copy of the notice of lien.
25 Mailing of the copy of the notice of lien is effective if
26 mailed to the address of the business that is the subject of
27 the notice of lien, or to such other address as the seller or
28 purchaser has provided to the business broker in writing and
29 signed by the seller or purchaser. Mailing of the copy of
30 the notice of claim for lien is effective when deposited in a
31 United States mailbox with postage prepaid. The broker's
32 lien shall be unenforceable if mailing of the copy of the
33 notice of lien does not occur at the time and in the manner
34 required by this Act.
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1 (g) A business broker may bring suit to enforce a lien
2 in the circuit court in the county where the headquarters of
3 the business being sold is located, where the purchaser
4 resides (or maintains its headquarters) if the lien is being
5 filed against the purchaser, or where the seller resides (or
6 maintains its headquarters) if the lien is filed against the
7 seller, by filing a complaint and sworn affidavit that the
8 lien has been filed.
9 (h) The person claiming a lien shall, within 2 years
10 after filing the lien, commence proceedings by filing a
11 complaint. Failure to commence proceedings within 2 years
12 after filing the lien shall extinguish the lien. No
13 subsequent notice of lien may be given for the same claim nor
14 may that claim be asserted in any proceedings under this Act.
15 (i) A complaint under this Section shall contain a brief
16 statement of the contract or agreements on which the lien is
17 founded, the date when the contract or agreement was made, a
18 description of the services performed, the amount due and
19 unpaid, a description of the business that is, or the
20 proceeds from sale of which are, subject to the lien, and
21 other facts necessary for a full understanding of the rights
22 of the parties. The plaintiff shall make all interested
23 parties, of whose interest the plaintiff is notified or has
24 knowledge, defendants to the action and shall issue summons
25 and provide service as in other civil actions. When any
26 defendant resides or has gone out of the State, or on inquiry
27 cannot be found, or is concealed within this State so that
28 process cannot be served on that defendant, the plaintiff
29 shall cause a notice to be given to that defendant, or cause
30 a copy of the complaint to be served upon that defendant, in
31 the manner and upon the same conditions as in other civil
32 actions. Failure of the plaintiff to provide proper summons
33 or notice shall be grounds for judgment against the plaintiff
34 with prejudice.
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1 (j) The lien notice shall state the name of the
2 claimant, the name of the purchaser or seller whose property
3 or assets are subject to the lien, a description of the
4 business upon which or upon the proceeds from the sale of
5 which the lien is being claimed, the amount for which the
6 lien is claimed, and the registration number of the business
7 broker. The notice of lien shall recite that the information
8 contained in the notice is true and accurate to the knowledge
9 of the signatory. The notice of lien shall be signed by the
10 business broker or by a person authorized to sign on behalf
11 of the business broker and shall be verified.
12 (k) Whenever a claim for lien has been filed with the
13 Office of the Secretary of State and a condition occurs that
14 would preclude the business broker from receiving
15 compensation under the terms of the business broker's written
16 agreement, the business broker shall provide to the purchaser
17 of the business, if the lien is filed against the purchaser,
18 or the seller of the business, if the lien is filed against
19 the seller, within 10 days following demand by the owner of
20 record, a written release or satisfaction of the lien.
21 (l) Upon written demand of the owner, lienee, or other
22 authorized agent, served on the person claiming the lien
23 requiring suit to be commenced to enforce the lien or answer
24 to be filed in a pending suit, a suit shall be commenced or
25 answer filed within 30 days thereafter, or the lien shall be
26 extinguished. Service may be by registered or certified
27 mail, return receipt requested, or by personal service.
28 (m) If a claim for lien has been filed with the
29 Secretary of State and is paid, or if there is failure to
30 institute a suit to enforce the lien within the time provided
31 by this Act, the business broker shall acknowledge
32 satisfaction or release of the lien, in writing, on written
33 demand of the purchaser of the business, if the lien is filed
34 against the purchaser, or the seller of the business, if the
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1 lien is filed against the seller, within 5 days after payment
2 or expiration of the time in which to file the lien.
3 (n) The cost of proceedings asserting or defending a
4 business broker's claim of lien, including reasonable
5 attorneys' fees, costs, and prejudgment interests due to the
6 prevailing party, shall be borne by the nonprevailing party
7 or parties. When more than one party is responsible for
8 costs, fees, and prejudgment interest, the costs, fees, and
9 prejudgment interest shall be equitably apportioned by the
10 court among those responsible parties.
11 (o) Prior recorded liens and mortgages shall have
12 priority over a broker's lien. A prior recorded lien shall
13 include, without limitation, (i) a valid mechanic's lien
14 claim that is recorded subsequent to the broker's notice of
15 lien but which relates back to a date prior to the recording
16 date of the broker's notice of lien and (ii) prior recorded
17 liens securing revolving credit and future advances of
18 construction loans as described in Section 15-1302 of the
19 Code of Civil Procedure.
20 Section 20. The Business Opportunity Sales Law of 1995
21 is amended by changing Sections 5-5.10, 5-15, 5-35, 5-45,
22 5-55, 5-60, 5-65, 5-70, 5-75, 5-95, 5-115, and 5-130 as
23 follows:
24 (815 ILCS 602/5-5.10)
25 Sec. 5-5.10. Business opportunity.
26 (a) "Business opportunity" means a contract or
27 agreement, between a seller and purchaser, express or
28 implied, orally or in writing, wherein it is agreed that the
29 seller or a person recommended by the seller shall provide to
30 the purchaser any product, equipment, supplies or services
31 enabling the purchaser to start a business when the purchaser
32 is required to make a payment to the seller or a person
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1 recommended by the seller of more than $500 and the seller
2 represents directly or indirectly, orally or in writing,
3 that:
4 (1) The seller or a person recommended by the
5 seller will provide or assist the purchaser in finding
6 locations for the use or operation of vending machines,
7 racks, display cases or other similar devices, on
8 premises neither owned nor leased by the purchaser or
9 seller;
10 (2) The seller or a person recommended by the
11 seller will provide or assist the purchaser in finding
12 outlets or accounts for the purchaser's products or
13 services;
14 (3) The seller or a person specified by the seller
15 will purchase any or all products made, produced,
16 fabricated, grown, bred or modified by the purchaser;
17 (4) The seller guarantees that the purchaser will
18 derive income from the business which exceeds the price
19 paid to the seller;
20 (5) The seller will refund all or part of the price
21 paid to the seller, or repurchase any of the products,
22 equipment or supplies provided by the seller or a person
23 recommended by the seller, if the purchaser is
24 dissatisfied with the business; or
25 (6) The seller will provide a marketing plan,
26 provided that this Law shall not apply to the sale of a
27 marketing plan made in conjunction with the licensing of
28 a federally registered trademark or federally registered
29 service mark.
30 (b) "Business opportunity" does not include:
31 (1) Any offer or sale of an ongoing business
32 operated by the seller and to be sold in its entirety;
33 (2) Any offer or sale of a business opportunity to
34 an ongoing business where the seller will provide
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1 products, equipment, supplies or services which are
2 substantially similar to the products, equipment,
3 supplies or services sold by the purchaser in connection
4 with the purchaser's ongoing business;
5 (3) Any offer or sale of a business opportunity
6 which is a franchise as defined by the Franchise
7 Disclosure Act of 1987;
8 (4) Any offer or sale of a business opportunity
9 which is registered pursuant to the Illinois Securities
10 Law of 1953;
11 (5) Any offer or sale of a business opportunity
12 which involves a marketing plan made in conjunction with
13 the licensing of a federally registered trademark or
14 federally registered service mark provided that the
15 seller had a minimum net worth of $1,000,000 as
16 determined on the basis of the seller's most recent
17 audited financial statement prepared within 13 months of
18 the first offer in this State. Net worth may be
19 determined on a consolidated basis where the seller is at
20 least 80% owned by one person and that person expressly
21 guarantees the obligations of the seller with regard to
22 the offer or sale of any business opportunity claimed to
23 be excluded under this item; or
24 (6) Any offer or sale of a business opportunity by
25 an executor, administrator, sheriff, marshal, receiver,
26 trustee in bankruptcy, guardian or conservator or a
27 judicial offer or sale, of a business opportunity.
28 (7) Cash payments made by a purchaser not exceeding
29 $500 and the payment is made for the not-for-profit sale
30 of sales demonstration equipment, material or samples, or
31 the payment is made for product inventory sold to the
32 purchaser at a bona fide wholesale price.
33 (Source: P.A. 89-209, eff. 1-1-96.)
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1 (815 ILCS 602/5-15)
2 Sec. 5-15. Denial or revocation of exemptions.
3 (a) The Secretary of State may by order deny or revoke
4 any exemption specified in Section 5-10 of this Law with
5 respect to a particular offering of one or more business
6 opportunities. No such order may be entered without
7 appropriate prior notice to all interested parties,
8 opportunity for hearing, and written findings of fact and
9 conclusions of law.
10 (b) If the public interest or the protection of
11 purchasers so requires, the Secretary of State may by summary
12 order deny or revoke any of the specified exemptions pending
13 final determination of any proceedings under this Section.
14 Upon the entry of the order, the Secretary of State shall
15 promptly notify all interested parties that it has been
16 entered and of the reasons therefor and that the matter will
17 be set for hearing upon written request filed with the
18 Secretary of State within 30 days after the receipt of the
19 request by the respondent within 15 days of the receipt of a
20 written request the matter will be set down for hearing. If
21 no hearing is requested and none is ordered by the Secretary
22 of State, the order will remain in effect until it is
23 modified or vacated by the Secretary of State. If a hearing
24 is requested and none is ordered by the Secretary of State,
25 the order will remain in effect until it is modified or
26 vacated by the Secretary of State. If a hearing is requested
27 or ordered, the Secretary of State, after notice of an
28 opportunity for hearing to all interested persons, may modify
29 or vacate the order or extend it until final determination.
30 (c) No order under this Section may operate
31 retroactively.
32 (d) No person may be considered to have violated Section
33 5-25 by reason of any offer or sale effected after the entry
34 of an order under paragraph (1) of Section 5-65 of this Law
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1 if he or she sustains the burden of proof that he or she did
2 not know, and in the exercise of reasonable care could not
3 have known, of the order.
4 (e) Notwithstanding any provision to the contrary, this
5 Law shall not apply to (i) any dealer, salesperson, or
6 investment adviser registered under the Illinois Securities
7 Law of 1953 or any investment adviser representative, or any
8 person who is regularly engaged in the business of offering
9 or selling securities in a transaction exempted under
10 subsection C, H, M, R, Q, or S of Section 4 of the Illinois
11 Securities Law of 1953 or subsection G of Section 4 of the
12 Illinois Securities Law of 1953 provided that such person is
13 registered under the federal securities law, (ii) an
14 associated person described in subdivision (h)(2) of Section
15 15 of the Federal 1934 Act, (iii) an investment adviser
16 registered under Section 203 of the Federal 1940 Investment
17 Advisors Act, or (iv) a person described in subdivision
18 (a)(11) of Section 202 of the Federal 1940 Investment
19 Advisors Act.
20 (f) This Law shall not be deemed to apply in any manner,
21 directly or indirectly, to: (i) a State bank or national
22 bank, as those terms are defined in the Illinois Banking Act,
23 or any subsidiary of a State bank or national bank; (ii) a
24 bank holding company, as that term is defined in the Illinois
25 Bank Holding Company Act of 1957, or any subsidiary of a bank
26 holding company; (iii) a foreign banking corporation, as that
27 term is defined in the Foreign Banking Office Act, or any
28 subsidiary of a foreign banking corporation; (iv) a
29 representative office, as that term is defined in the
30 Foreign Bank Representative Office Act, (v) a corporate
31 fiduciary, as that term is defined in the Corporate Fiduciary
32 Act, or any subsidiary of a corporate fiduciary; (vi) a
33 savings bank organized under the Savings Bank Act, or a
34 federal savings bank organized under federal law, or any
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1 subsidiary of a savings bank or federal savings bank; (vii) a
2 savings bank holding company organized under the Savings Bank
3 Act, or any subsidiary of a savings bank holding company;
4 (viii) an association or federal association, as those terms
5 are defined in the Illinois Savings and Loan Act of 1985, or
6 any subsidiary of an association or federal association; (ix)
7 a foreign savings and loan association or foreign savings
8 bank subject to the Illinois Savings and Loan Act of 1985, or
9 any subsidiary of a foreign savings and loan association or
10 foreign savings bank; or (x) a savings and loan association
11 holding company, as that term is defined in the Illinois
12 Savings and Loan Act of 1985, or any subsidiary of a savings
13 and loan association holding company.
14 (Source: P.A. 89-209, eff. 1-1-96.)
15 (815 ILCS 602/5-35)
16 Sec. 5-35. Disclosure requirements.
17 (a) It shall be unlawful for any person to offer or,
18 sell any business opportunity required to be registered under
19 this Law unless a written disclosure document as filed under
20 subsection (a) of Section 5-30 of this Law is delivered to
21 each purchaser at least 10 business days prior to the
22 execution by a purchaser of any contract or agreement
23 imposing a binding legal obligation on the purchaser or the
24 payment by a purchaser of any consideration in connection
25 with the offer or sale of the business opportunity.
26 (b) The disclosure document shall have a cover sheet
27 which is entitled, in at least 10-point bold type,
28 "DISCLOSURE REQUIRED BY THE STATE OF ILLINOIS." Under the
29 title shall appear the statement in at least 10-point bold
30 type that "THE REGISTRATION OF THIS BUSINESS OPPORTUNITY DOES
31 NOT CONSTITUTE APPROVAL, RECOMMENDATION OR ENDORSEMENT
32 ENFORCEMENT BY THE STATE OF ILLINOIS. THE INFORMATION
33 CONTAINED IN THIS DISCLOSURE DOCUMENT HAS NOT BEEN VERIFIED
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1 BY THIS STATE. IF YOU HAVE ANY QUESTIONS OR CONCERNS ABOUT
2 THIS INVESTMENT, SEEK PROFESSIONAL ADVICE BEFORE YOU SIGN A
3 CONTRACT OR MAKE ANY PAYMENT. YOU ARE TO BE PROVIDED 10
4 BUSINESS DAYS TO REVIEW THIS DOCUMENT BEFORE SIGNING ANY
5 CONTRACT OR AGREEMENT OR MAKING ANY PAYMENT TO THE SELLER OR
6 THE SELLER'S REPRESENTATIVE". The seller's name and principal
7 business address, along with the date of the disclosure
8 document shall also be provided on the cover sheet. No other
9 information shall appear on the cover sheet. The disclosure
10 document shall contain the following information unless the
11 seller uses a disclosure document as provided in paragraph
12 (1) or (2) of subsection (a) of Section 5-30 of this Law:
13 (1) The names and residential addresses of those
14 salespersons who will engage in the offer or sale of the
15 business opportunity in this State.
16 (2) The name of the seller, whether the seller is
17 doing business as an individual, partnership or
18 corporation; the names under which the seller has
19 conducted, is conducting or intends to conduct business;
20 and the name of any parent or affiliated company that
21 will engage in business transactions with purchasers or
22 which will take responsibility for statements made by the
23 seller.
24 (3) The names, addresses and titles of the seller's
25 officers, directors, trustees, general managers,
26 principal executives, agents, and any other persons
27 charged with responsibility for the seller's business
28 activities relating to the sale of the business
29 opportunity.
30 (4) Prior business experience of the seller
31 relating to business opportunities including:
32 (A) The name, address, and a description of
33 any business opportunity previously offered by the
34 seller;
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1 (B) The length of time the seller has offered
2 each such business opportunity; and
3 (C) The length of time the seller has
4 conducted the business opportunity currently being
5 offered to the purchaser.
6 (5) With respect to persons identified in item (3)
7 of this subsection:
8 (A) A description of the persons' business
9 experience for the 10 year period preceding the
10 filing date of this disclosure document. The
11 description of business experience shall list
12 principal occupations and employers; and
13 (B) A listing of the persons' educational and
14 professional backgrounds including, the names of
15 schools attended and degrees received, and any other
16 information that will demonstrate sufficient
17 knowledge and experience to perform the services
18 proposed.
19 (6) Whether the seller or any person identified in
20 item (3) of this subsection:
21 (A) Has been convicted of any felony, or
22 pleaded nolo contendere to a felony charge, or has
23 been the subject of any criminal, civil or
24 administrative proceedings alleging the violation of
25 any business opportunity law, securities law,
26 commodities law, franchise law, fraud or deceit,
27 embezzlement, fraudulent conversion, restraint of
28 trade, unfair or deceptive practices,
29 misappropriation of property or comparable
30 allegations;
31 (B) Has filed in bankruptcy, been adjudged
32 bankrupt, been reorganized due to insolvency, or was
33 an owner, principal officer or general partner or
34 any other person that has so filed or was so
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1 adjudged or reorganized during or within the last 7
2 years.
3 (7) The name of the person identified in item (6)
4 of this subsection, nature of and parties to the action
5 or proceeding, court or other forum, date of the
6 institution of the action, docket references to the
7 action, current status of the action or proceeding, terms
8 and conditions or any order or decree, the penalties or
9 damages assessed and terms of settlement.
10 (8) The initial payment required, or when the exact
11 amount cannot be determined, a detailed estimate of the
12 amount of the initial payment to be made to the seller.
13 (9) A detailed description of the actual services
14 the seller agrees to perform for the purchaser.
15 (10) A detailed description of any training the
16 seller agrees to provide for the purchaser.
17 (11) A detailed description of services the seller
18 agrees to perform preform in connection with the
19 placement of equipment, products or supplies at a
20 location, as well as any agreement necessary in order to
21 locate or operate equipment, products or supplies on a
22 premises neither owned nor leased by the purchaser or
23 seller.
24 (12) A detailed description of any license or
25 permit that will be necessary in order for the purchaser
26 to engage in or operate the business opportunity.
27 (13) The business opportunity seller that is
28 required to secure a bond under Section 5-50 of this Law,
29 shall state in the disclosure document "As required by
30 the State of Illinois, the seller has secured a bond
31 issued by (insert name and address of surety company), a
32 surety company, authorized to do business in this State.
33 Before signing a contract or agreement to purchase this
34 business opportunity, you should check with the surety
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1 company to determine the bond's current status.".
2 (14) Any representations made by the seller to the
3 purchaser concerning sales or earnings that may be made
4 from this business opportunity, including, but not
5 limited to:
6 (A) The bases or assumptions for any actual,
7 average, projected or forecasted sales, profits,
8 income or earnings;
9 (B) The total number of purchasers who, within
10 a period of 3 years of the date of the disclosure
11 document, purchased a business opportunity involving
12 the product, equipment, supplies or services being
13 offered to the purchaser; and
14 (C) The total number of purchasers who, within
15 3 years of the date of the disclosure document,
16 purchased a business opportunity involving the
17 product, equipment, supplies or services being
18 offered to the purchaser who, to the seller's
19 knowledge, have actually received earnings in the
20 amount or range specified.
21 (15) Any seller who makes a guarantee to a
22 purchaser shall give a detailed description of the
23 elements of the guarantee. Such description shall
24 include, but shall not be limited to, the duration,
25 terms, scope, conditions and limitations of the
26 guarantee.
27 (16) A statement of:
28 (A) The total number of business opportunities
29 that are the same or similar in nature to those that
30 have been sold or organized by the seller;
31 (B) The names and addresses of purchasers who
32 have requested a refund or rescission from the
33 seller within the last 12 months and the number of
34 those who have received the refund or rescission;
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1 and
2 (C) The total number of business opportunities
3 the seller intends to sell in this State within the
4 next 12 months.
5 (17) A statement describing any contractual
6 restrictions, prohibitions or limitations on the
7 purchaser's conduct. Attach a copy of all business
8 opportunity and other contracts or agreements proposed
9 for use or in use in this State including, without
10 limitation, all lease agreements, option agreements, and
11 purchase agreements.
12 (18) The rights and obligations of the seller and
13 the purchaser regarding termination of the business
14 opportunity contract or agreement.
15 (19) A statement accurately describing the grounds
16 upon which the purchaser may initiate legal action to
17 terminate the business opportunity contract or agreement.
18 (20) A copy of the most recent audited financial
19 statement of the seller, prepared within 13 months of the
20 first offer in this State, together with a statement of
21 any material changes in the financial condition of the
22 seller from that date. The Secretary of State may allow
23 the seller to submit a limited review in order to satisfy
24 the requirements of this subsection.
25 (21) A list of the states in which this business
26 opportunity is registered.
27 (22) A list of the states in which this disclosure
28 document is on file.
29 (23) A list of the states which have denied,
30 suspended or revoked the registration of this business
31 opportunity.
32 (24) A section entitled "Risk Factors" containing a
33 series of short concise statements summarizing the
34 principal factors which make this business opportunity a
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1 high risk or one of a speculative nature. Each statement
2 shall include a cross-reference to the page on which
3 further information regarding that risk factor can be
4 found in the disclosure document.
5 (25) Any additional information as the Secretary of
6 State may require by rule, regulation, or order.
7 (Source: P.A. 89-209, eff. 1-1-96.)
8 (815 ILCS 602/5-45)
9 Sec. 5-45. Denial, suspension, or revocation of
10 registration.
11 (a) The Secretary of State may issue an order denying
12 effectiveness to, or suspending or revoking the effectiveness
13 of, a registration if the Secretary of State finds that the
14 order is in the public interest and that any of the following
15 exist:
16 (1) The registration as of its effective date or as
17 of any earlier date in the case of an order denying
18 effectiveness, or any amendment as of its effective date,
19 or any report is incomplete in any material respect or
20 contains any statement which was, in the light of the
21 circumstances under which it was made, false or
22 misleading with respect to any material fact.
23 (2) Any provision of this Law or any rule,
24 regulation, order, or condition lawfully imposed under
25 this Law has been willfully violated, in connection with
26 the business opportunity:
27 (A) by the person filing the registration; or
28 (B) by the seller, any partner, officer, or
29 director of the seller, any person occupying a
30 similar status or performing similar functions, or
31 any person directly or indirectly controlling or
32 controlled by the seller, but only if the person
33 filing the registration is directly or indirectly
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1 controlled by or acting for the seller.
2 (3) The business opportunity registered or sought
3 to be registered is the subject of an administrative
4 order denying, suspending or revoking a registration or a
5 permanent or temporary injunction or final order of any
6 court of competent jurisdiction; but the Secretary of
7 State:
8 (A) may not institute a proceeding against an
9 effective registration under this paragraph more
10 than one year from the date of the order or
11 injunction relied on; and
12 (B) may not enter an order under this
13 paragraph on the basis of an order or injunction
14 entered under any other state act unless that order
15 or injunction was based on facts which would
16 currently constitute a ground for an order under
17 this Section.
18 (4) The seller's enterprise or method of business,
19 or that of the business opportunity, includes or would
20 include activities which are illegal where performed.
21 (5) The business opportunity or the offering of a
22 business opportunity has worked or tended to work a fraud
23 upon purchasers or would so operate.
24 (6) There has been a failure to file any documents
25 or information required by Section 5-30 of this Law;
26 (7) The seller has failed to pay the proper filing
27 fee but the Secretary of State may enter only a denial
28 order under this paragraph and the Secretary of State
29 shall vacate any such order when the deficiency has been
30 corrected.
31 (8) The seller's literature or advertising is
32 misleading, incorrect, incomplete or deceptive.
33 (b) The Secretary of State may not institute a
34 proceeding under this Section against an effective
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1 registration on the basis of a fact or transaction known to
2 the Secretary of State when the registration became effective
3 unless the proceeding is instituted within the next 30 days.
4 (c) The Secretary of State may by summary order postpone
5 or suspend the effectiveness of the registration pending
6 final determination of any proceeding under this Section.
7 Upon the entry of the order, the Secretary of State shall
8 promptly notify the seller that the order has been entered
9 and of the reasons therefor and that within 15 days after the
10 receipt of a written request the matter will be set down for
11 hearing. The written request must be made within 30 days of
12 the entry of the order. If no hearing is requested and none
13 is ordered by the Secretary of State, the order will remain
14 in effect until it is modified or vacated by the Secretary of
15 State. If a hearing is requested or ordered, the Secretary of
16 State, after notice of an opportunity for hearing to the
17 seller, may modify or vacate the order or extend it until
18 final determination.
19 (d) No summary stop order may be entered under any part
20 of this Section, except the first sentence of subsection (c)
21 of this Section, without appropriate prior notice to the
22 seller, opportunity for hearing, and written findings of fact
23 and conclusions of law.
24 (e) The Secretary of State may vacate or modify an order
25 issued under this Section if the Secretary of State finds
26 that the conditions which prompted its entry have changed or
27 that it is otherwise in the public interest to do so.
28 (Source: P.A. 89-209, eff. 1-1-96.)
29 (815 ILCS 602/5-55)
30 Sec. 5-55. Administration of this Law.
31 (a) This Law shall be administered by the Secretary of
32 State.
33 (b) It is unlawful for the Secretary of State or any of
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1 his or her officers or employees to use for personal benefit
2 any information which is filed with or obtained by the
3 Secretary of State and which is not made public. No provision
4 of this Law authorizes the Secretary of State or any of the
5 Secretary of State's officers or employees to disclose any
6 such information except among themselves or when necessary or
7 appropriate in a proceeding or investigation under this Law.
8 No provision of this Law either creates or derogates from any
9 privilege which exists at common law or otherwise when
10 documentary or other evidence is sought under a subpoena
11 directed to the Secretary of State or any of the Secretary of
12 State's officers or employees.
13 (c) In no case shall the Secretary of State or any of
14 his or her employees or agents, in the administration of
15 this Law, incur any official or personal liability by
16 instituting an injunction or other proceeding, by denying,
17 suspending, or revoking the registration of any business
18 opportunity, by prohibiting the offer or sale of any
19 business opportunity, or by prohibiting any person from
20 offering or selling business opportunities.
21 (Source: P.A. 89-209, eff. 1-1-96.)
22 (815 ILCS 602/5-60)
23 Sec. 5-60. Investigations and subpoenas.
24 (a) The Secretary of State:
25 (1) may make such public or private investigations
26 within or outside of this State as the Secretary of State
27 deems necessary to determine whether any person has
28 violated or is about to violate any provision of this Law
29 or any rule, regulation, or order under this Law, or to
30 aid in the enforcement of this Law or in the prescribing
31 of rules and forms under this Law;
32 (2) may require or permit any person to file a
33 statement, under oath or otherwise as the Secretary of
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1 State determines, as to all the facts and circumstances
2 concerning the matter to be investigated; and
3 (3) may publish information concerning any
4 violation of this Law or any rule, regulation, or order
5 under this Law.
6 (b) For the purpose of any investigation or proceeding
7 under this Law, the Secretary of State or his or her designee
8 may administer oaths and affirmations, subpoena witnesses,
9 compel their attendance, take evidence and require the
10 production of any books, papers, correspondence, memoranda,
11 agreements, or other documents or records which the Secretary
12 of State deems relevant or material to the inquiry.
13 (c) In case of contumacy by, or refusal to obey a
14 subpoena issued to any person, through the Office of the
15 Attorney General may bring an appropriate action in any
16 circuit court of the State of Illinois for the purpose of
17 enforcing the subpoena.
18 (d) It shall be a violation of the provisions of this
19 Law for any person to fail to file with the Secretary of
20 State any report, document, or statement required to be filed
21 under the provisions of this Section or to fail to comply
22 with the terms of any order of the Secretary of State issued
23 pursuant to this Law.
24 (Source: P.A. 89-209, eff. 1-1-96.)
25 (815 ILCS 602/5-65)
26 Sec. 5-65. Remedies. Whenever it appears to the Secretary
27 of State that any person has engaged in or is about to engage
28 in any act or practice constituting a violation of any
29 provision of this Law or any rule, regulation, or order under
30 this Law, the Secretary of State may:
31 (1) Issue an order, anything contained in this Law
32 to the contrary notwithstanding, directing the person to
33 cease and desist from continuing the act or practice. Any
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1 person named in a cease and desist order issued by the
2 Secretary of State may, within 30 15 days after the date
3 receipt of the entry of the order, file a written request
4 for a hearing with the Secretary of State. If the
5 Secretary of State does not receive a written request for
6 a hearing within the time specified, the cease and desist
7 order will be permanent and the person named in the order
8 will be deemed to have waived all rights to a hearing.
9 If a hearing is requested, the order will remain in force
10 until it is modified, vacated, rescinded or expunged by
11 the Secretary of State.
12 (1.5) Prohibit or suspend the offer or sale of any
13 business opportunity, prohibit or suspend any person
14 from offering or selling any business opportunities,
15 impose any fine for violation of this Law, issue an order
16 of public censure, or enter into an agreed settlement or
17 stipulation. No such order may be entered without
18 appropriate prior notice to all interested parties,
19 opportunity for hearing, and written findings of fact and
20 conclusions of law.
21 (2) Bring an action in the circuit court of any
22 county to enjoin the acts or practices and to enforce
23 compliance with this Law or any rule, regulation, or
24 order under this Law. Upon a proper showing a permanent
25 or temporary injunction, restraining order, or writ of
26 mandamus shall be granted and a receiver or conservator
27 may be appointed for the defendant or the defendant's
28 assets or the court may order rescission, which shall
29 include restitution plus the legal interest rate, for any
30 sales of business opportunities determined to be unlawful
31 under this Law or any rule, regulation, or order under
32 this Law. The court shall not require the Secretary of
33 State to post a bond.
34 (3) The Secretary of State may refer such evidence
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1 as may be available concerning violations of this Law or
2 any rule, regulation, or order under this Law to the
3 Attorney General or the appropriate State's Attorney, who
4 may, with or without such a reference, institute the
5 appropriate proceedings under this Section.
6 (4) In addition to any other sanction or remedy
7 contained in this Section, the Secretary of State, after
8 finding that any provision of this Law has been violated,
9 may impose a fine as provided by rule or order against
10 the violator not to exceed $10,000 per violation, and
11 may issue an order of public censure against the
12 violator.
13 (5) Notwithstanding the foregoing, the Secretary of
14 State, after notice and opportunity for hearing, may at
15 his or her discretion enter into an agreed settlement,
16 stipulation, or consent order with a respondent in
17 accordance with the provisions of the Illinois
18 Administrative Procedure Act. The provisions of the
19 agreed settlement, stipulation, or consent order shall
20 have the full force and effect of an order issued by the
21 Secretary of State.
22 (6) The action of the Secretary of State in
23 denying, suspending, or revoking the registration of a
24 business opportunity, in prohibiting or suspending a
25 person from offering or selling business opportunities,
26 in prohibiting or suspending the offer or sale of
27 business opportunities, in imposing any fine for
28 violation of this Law, or in issuing any order shall be
29 subject to judicial review under the Administrative
30 Review Law which shall apply to and govern every action
31 for the judicial review of final actions or decisions of
32 the Secretary of State under this Law.
33 (Source: P.A. 89-209, eff. 1-1-96.)
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1 (815 ILCS 602/5-70)
2 Sec. 5-70. Rules, forms, orders and hearings.
3 (a) The Secretary of State may amend, modify, vacate,
4 and expunge orders and may make, amend and rescind rules and,
5 forms, and orders as are necessary to carry out the
6 provisions of this Law including rules and forms governing
7 disclosure documents, applications and reports, and defining
8 any terms, whether or not used in this Law insofar as the
9 definitions are not inconsistent with the provisions of this
10 Law. For the purpose of rules and forms, the Secretary of
11 State may classify business opportunities, persons, and
12 matters within his or her jurisdiction, and prescribe
13 different requirements for different classes.
14 (b) No rule, form, or order may be made, amended, or
15 rescinded unless the Secretary of State finds that the action
16 is necessary or appropriate in the public interest or for the
17 protection of the purchaser. In prescribing rules and forms
18 the Secretary of State may cooperate with the administrators
19 of other jurisdictions with a view to effectuating the policy
20 of this Law to achieve maximum uniformity in the form and
21 content of disclosure statements, applications, and reports
22 whenever practicable.
23 (c) No provision of this Law imposing any liability
24 applies to any act done or omitted in good faith in
25 conformity with any rule, form, or order of the Secretary of
26 State, notwithstanding that the rule, form, or order may
27 later be amended or rescinded or be determined by judicial or
28 other authority to be invalid for any reason.
29 (Source: P.A. 89-209, eff. 1-1-96.)
30 (815 ILCS 602/5-75)
31 Sec. 5-75. Administrative files and opinions.
32 (a) A document is filed with the Secretary of State
33 when all requirements of this Law with respect to filing have
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1 been complied with and the required fee has been paid when it
2 is received by the Secretary of State.
3 (b) The Secretary of State shall keep records of all
4 applications for registration and disclosure documents which
5 are or have been effective under this Law and all orders
6 which have been entered under this Law. The register shall be
7 open for public inspection.
8 (c) Unless otherwise provided by law, any registration
9 statement, filing, application, or report filed with the
10 Secretary of State shall be open for public inspection.
11 (d) The Secretary of State may honor written requests
12 from interested persons for non-binding opinions upon the
13 payment of a fee established pursuant to subsection (c) of
14 Section 5-30 of this Law, which shall not be returnable in
15 any event.
16 (Source: P.A. 89-209, eff. 1-1-96.)
17 (815 ILCS 602/5-95)
18 Sec. 5-95. Fraudulent practices. It is unlawful for any
19 person, in connection with the offer or sale of any business
20 opportunity in this State or any offer or sale pursuant to
21 the exemptions granted under subdivisions 5-10(a), (c), (d),
22 or (h), directly or indirectly:
23 (1) To employ any device, scheme or artifice to
24 defraud;
25 (2) To make any untrue statement of a material fact
26 or to omit to state a material fact necessary in order to
27 make the statements made, in the light of the
28 circumstances under which they are made, not misleading;
29 or
30 (3) To engage in any act, practice or course of
31 business which operates or would operate as a fraud or
32 deceit upon any person.
33 (Source: P.A. 89-209, eff. 1-1-96.)
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1 (815 ILCS 602/5-115)
2 Sec. 5-115. Criminal penalties.
3 (a) Any person who willfully violates Sections 5-25,
4 5-50, 5-95, 5-105, 5-110, subsection (a) of Section 5-35, or
5 subsection (a) of Section 5-40, or subsection (d) of Section
6 5-60 of this Law or who willfully violates any order of which
7 the person has notice, or who violates Section 5-100 of this
8 Law knowing that the statement made was false or misleading
9 in any material respect is guilty of a Class 3 felony for
10 each offense. Each of the acts specified shall constitute a
11 separate offense and a prosecution or conviction for any one
12 of such offenses shall not bar prosecution or conviction for
13 any other offense.
14 (b) No prosecution for any crime under this Law may be
15 commenced more than 5 years after the alleged violation.
16 (c) Nothing in this Law limits the power of the State to
17 punish any person for any conduct which constitutes a crime
18 under any other statute.
19 (d) The Secretary of State may refer such evidence as
20 may be available concerning violations of this Law or any
21 rule, regulation, or order under this Law to the Attorney
22 General or appropriate State's attorney, who may, with or
23 without such a reference, institute the appropriate criminal
24 proceedings under this Law.
25 (Source: P.A. 89-209, eff. 1-1-96.)
26 (815 ILCS 602/5-130)
27 Sec. 5-130. Miscellaneous provisions.
28 (a) No action shall be maintained under Section 5-120 of
29 this Law unless commenced before 3 years after the act or
30 transaction constituting the violation.
31 (a-5) No administrative action shall be brought by the
32 Secretary of State for relief under this Law after the
33 earlier to occur of (i) 3 years from the date upon which the
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1 Secretary of State had notice of facts which in the exercise
2 of reasonable diligence would lead to actual knowledge of
3 the alleged violation of the Act, or (ii) 5 years from the
4 date on which the alleged violation occurred.
5 (b) The rights and and remedies under this Law are in
6 addition to any other rights or remedies that may exist at
7 law or in equity.
8 (c) Any condition, stipulation or provision binding any
9 purchaser of a business opportunity to waive compliance with
10 or relieving a person from any duty or liability imposed by
11 or any right provided by this Law or any rule, regulation or
12 order issued pursuant to this Law is void.
13 (Source: P.A. 89-209, eff. 1-1-96.)
14 Section 99. Effective date. This Act takes effect July
15 1, 1997.".