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91_HB3944
LRB9111259STsb
1 AN ACT to amend the various Acts concerning business
2 organizations.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Illinois Securities Law of 1953 is
6 amended by changing Sections 2.5a, 2.9, 2.12b, 3, 4, 8, 11,
7 and 12 as follows:
8 (815 ILCS 5/2.5a) (from Ch. 121 1/2, par. 137.2-5a)
9 Sec. 2.5a. Offer. "Offer" shall include every offer to
10 sell or otherwise dispose of, or solicitation of an offer to
11 purchase, whether orally or by means of publication,
12 including but not limited to printed and electronic media, a
13 security or interest in a security for value; provided that
14 the term "offer" shall not include preliminary negotiations
15 or agreements between an issuer and any underwriter or among
16 underwriters who are or are to be in privity of contract with
17 an issuer, or the circulation or publication of an
18 identifying statement or circular or preliminary prospectus,
19 as defined by rules or regulations of the Secretary of State.
20 (Source: P.A. 89-209, eff. 1-1-96.)
21 (815 ILCS 5/2.9) (from Ch. 121 1/2, par. 137.2-9)
22 Sec. 2.9. "Salesperson" means an individual, other than
23 an issuer or a dealer, employed or appointed or authorized by
24 a dealer, issuer or controlling person to offer, purchase or
25 sell securities in this State. The partners or officers of a
26 dealer or issuer shall not be deemed to be salespersons
27 within the meaning of this definition if they are not or have
28 not been regularly engaged in securities offering, purchasing
29 or selling activities other than transactions for their own
30 respective accounts. No individual shall be deemed to be a
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1 salesperson solely by reason of effecting transactions in a
2 covered security to qualified purchasers as described in
3 Section 18(b)(3) of the Federal 1933 Act, effecting
4 transactions in a covered security as described in Section
5 18(b)(4)(D) of the Federal 1933 Act, or engaging in offers or
6 effecting sales of securities to employees of the issuer of
7 such securities or to employees of the parent or any majority
8 wholly-owned subsidiary of such issuer, provided that such
9 individual is an employee of such issuer, parent or
10 subsidiary who has not been employed primarily to make such
11 offers or sales and who receives no special compensation,
12 directly or indirectly, for or on account of any such offer
13 or sale. "Salesperson" also means a limited Canadian
14 salesperson. "Salesperson" also means an individual who, in
15 this State, communicates with members of the public to
16 identify prospective customers for the purpose of soliciting
17 the purchase or sale of securities or related services.
18 (Source: P.A. 90-70, eff. 7-8-97; 90-667, eff. 7-30-98.)
19 (815 ILCS 5/2.12b) (from Ch. 121 1/2, par. 137.2-12b)
20 Sec. 2.12b. Investment adviser representative.
21 "Investment adviser representative" means, with respect to an
22 investment adviser who is required to register under this
23 Act, any partner, officer, director of (or a person occupying
24 a similar status or performing similar functions), or other
25 natural person employed by or associated with an investment
26 adviser, except clerical or ministerial personnel, who in
27 this State:
28 (1) makes any recommendations or otherwise renders
29 advice regarding securities;
30 (2) manages accounts or portfolios of clients;
31 (3) determines what recommendation or advice regarding
32 securities should be given; or
33 (4) supervises any employee who performs any of the
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1 foregoing; or.
2 (5) solicits, refers, offers, or negotiates for the sale
3 of, or sells, investment advisory services.
4 With respect to a federal covered investment adviser,
5 "investment adviser representative" means any person who is
6 an investment adviser representative with a place of business
7 in this State as such terms are defined by the Securities and
8 Exchange Commission under Section 203A of the Federal 1940
9 Investment Advisers Act.
10 (Source: P.A. 90-70, eff. 7-8-97; 90-667, eff. 7-30-98.)
11 (815 ILCS 5/3) (from Ch. 121 1/2, par. 137.3)
12 Sec. 3. The provisions of Sections 2a, 5, 6 and 7 of
13 this Act shall not apply to any of the following securities:
14 A. Any security (including a revenue obligation) issued
15 or guaranteed by the United States, any state, any political
16 subdivision of a state, or any agency or corporation or other
17 instrumentality of any one or more of the foregoing, or any
18 certificate of deposit for any such security.
19 B. Any security issued or guaranteed by Canada, any
20 Canadian province, any political subdivision of any such
21 province, any agency or corporation or other instrumentality
22 of one or more of the foregoing, or any other foreign
23 government with which the United States then maintains
24 diplomatic relations, if the security is recognized as a
25 valid obligation by the issuer or guarantor.
26 C. (1) Any security issued by and representing an
27 interest in or a debt of, or guaranteed by, any bank or
28 savings bank, bank holding company, or credit union organized
29 under the laws of the United States, or any bank, savings
30 bank, savings institution or trust company organized and
31 supervised under the laws of any state, or any interest or
32 participation in any common trust fund or similar fund
33 maintained by any such bank, savings bank, savings
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1 institution or trust company exclusively for the collective
2 investment and reinvestment of assets contributed thereto by
3 such bank, savings bank, savings institution or trust company
4 or any affiliate thereof, in its capacity as fiduciary,
5 trustee, executor, administrator or guardian.
6 (2) Any security issued or guaranteed to both principal
7 and interest by an international bank of which the United
8 States is a member.
9 D. (1) Any security issued by and representing an
10 interest in or a debt of, or guaranteed by, any federal
11 savings and loan association, or any savings and loan
12 association or building and loan association organized and
13 supervised under the laws of any state.
14 (2) Any security issued or guaranteed by any federal
15 credit union or any credit union, industrial loan
16 association, or similar organization organized and supervised
17 under the laws of any state.
18 E. Any security issued or guaranteed by any railroad,
19 other common carrier, public utility or holding company where
20 such issuer or guarantor is subject to the jurisdiction of
21 the Interstate Commerce Commission or successor entity, or is
22 a registered holding company under the Public Utility Holding
23 Company Act of 1935 or a subsidiary of such a company within
24 the meaning of that Act, or is regulated in respect of its
25 rates and charges by a governmental authority of the United
26 States or any state, or is regulated in respect of the
27 issuance or guarantee of the security by a governmental
28 authority of the United States, any state, Canada, or any
29 Canadian province.
30 F. Equipment trust certificates in respect of equipment
31 leased or conditionally sold to a person, if securities
32 issued by such person would be exempt under subsection E of
33 this Section.
34 G. Any security which at the time of sale is listed or
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1 approved for listing upon notice of issuance on the New York
2 Stock Exchange, Inc., the American Stock Exchange, Inc., the
3 Pacific Stock Exchange, Inc., the Chicago Stock Exchange,
4 Inc., the Chicago Board of Trade, the Philadelphia Stock
5 Exchange, Inc., the Chicago Board Options Exchange,
6 Incorporated, the National Market System of the Nasdaq Stock
7 Market, or any other exchange, automated quotation system or
8 board of trade which the Secretary of State, by rule or
9 regulation, deems to have substantially equivalent standards
10 for listing or designation as required by any such exchange,
11 automated quotation system or board of trade; and securities
12 senior or of substantially equal rank, both as to dividends
13 or interest and upon liquidation, to securities so listed or
14 designated; and warrants and rights to purchase any of the
15 foregoing; provided, however, that this subsection G shall
16 not apply to investment fund shares or securities of like
17 character, which are being continually offered at a price or
18 prices determined in accordance with a prescribed formula.
19 The Secretary of State may, after notice and opportunity
20 for hearing, revoke the exemption afforded by this
21 subparagraph with respect to any securities by issuing an
22 order if the Secretary of State finds that the further sale
23 of the securities in this State would work or tend to work a
24 fraud on purchasers of the securities.
25 H. Any security issued by a person organized and
26 operated not for pecuniary profit and exclusively for
27 religious, educational, benevolent, fraternal, agricultural,
28 charitable, athletic, professional, trade, social or
29 reformatory purposes, or as a chamber of commerce or local
30 industrial development corporation, or for more than one of
31 said purposes and no part of the net earnings of which inures
32 to the benefit of any private stockholder or member.
33 I. Instruments evidencing indebtedness under an
34 agreement for the acquisition of property under contract of
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1 conditional sale.
2 J. A note secured by a first mortgage upon tangible
3 personal or real property when such mortgage is made,
4 assigned, sold, transferred and delivered with such note or
5 other written obligation secured by such mortgage, either to
6 or for the benefit of the purchaser or lender; or bonds or
7 notes not more than 10 in number secured by a first mortgage
8 upon the title in fee simple to real property if the
9 aggregate principal amount secured by such mortgage does not
10 exceed $500,000 and also does not exceed 75% of the fair
11 market value of such real property.
12 K. A note or notes not more than 10 in number secured by
13 a junior mortgage lien if the aggregate principal amount of
14 the indebtedness represented thereby does not exceed 50% of
15 the amount of the then outstanding prior lien indebtedness
16 and provided that the total amount of the indebtedness
17 (including the indebtedness represented by the subject junior
18 mortgage note or notes) shall not exceed 90% of the fair
19 market value of the property securing such indebtedness; and
20 provided further that each such note or notes shall bear
21 across the face thereof the following legend in letters at
22 least as large as 12 point type: "THIS NOTE IS SECURED BY A
23 JUNIOR MORTGAGE".
24 L. Any negotiable promissory note or draft, bill of
25 exchange or bankers' acceptance which arises out of a current
26 transaction or the proceeds of which have been or are to be
27 used for current transactions, and which evidences an
28 obligation to pay cash within 9 months of the date of
29 issuance exclusive of days of grace, or any renewal of such
30 note, draft, bill or acceptance which is likewise limited, or
31 any guarantee of such note, draft, bill or acceptance or of
32 any such renewal, provided that the note, draft, bill, or
33 acceptance is a negotiable security eligible for discounting
34 by banks that are members of the Federal Reserve System. Any
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1 instrument exempted under this subsection from the
2 requirement of Sections 5, 6, and 7 of this Act shall bear
3 across the face thereof the following legend in letters at
4 least as large as 12 point type: "THIS INSTRUMENT IS NEITHER
5 GUARANTEED, NOR IS THE ISSUANCE THEREOF REGULATED BY ANY
6 AGENCY OR DEPARTMENT OF THE STATE OF ILLINOIS OR THE UNITED
7 STATES.". However, the foregoing legend shall not be
8 required with respect to any such instrument:
9 (i) sold to a person described in subsection C or H
10 of Section 4 of this Act;
11 (ii) sold to a "Qualified Institutional Buyer" as
12 that term is defined in Rule 144a adopted under the
13 Securities Act of 1933;
14 (iii) where the minimum initial subscription for
15 the purchase of such instrument is $100,000 or more; or
16 (iv) issued by an issuer that has any class of
17 securities registered under Section 12 of the Securities
18 Exchange Act of 1934 or has any outstanding class of
19 indebtedness rated in one of the 3 highest categories by
20 a rating agency designated by the Department;
21 M. Any security issued by and representing an interest
22 in or a debt of, or guaranteed by, any insurance company
23 organized under the laws of any state.
24 N. Any security issued pursuant to (i) a written
25 compensatory benefit plan (including without limitation, any
26 purchase, savings, option, bonus, stock appreciation, profit
27 sharing, thrift, incentive, pension, or similar plan) and
28 interests in such plans established by one or more of the
29 issuers thereof or its parents or majority-owned subsidiaries
30 for the participation of their employees, directors, general
31 partners, trustees (where the issuer is a business trust),
32 officers, or consultants or advisers of such issuers or its
33 parents or majority-owned subsidiaries, provided that bona
34 fide services are rendered by consultants or advisers and
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1 those services are not in connection with the offer and sale
2 of securities in a capital-raising transaction or (ii) a
3 written contract relating to the compensation of any such
4 person.
5 O. Any option, put, call, spread or straddle issued by a
6 clearing agency registered as such under the Federal 1934
7 Act, if the security, currency, commodity, or other interest
8 underlying the option, put, call, spread or straddle is not
9 required to be registered under Section 5.
10 P. Any security which meets all of the following
11 conditions:
12 (1) If the issuer is not organized under the laws
13 of the United States or a state, it has appointed a duly
14 authorized agent in the United States for service of
15 process and has set forth the name and address of the
16 agent in its prospectus.
17 (2) A class of the issuer's securities is required
18 to be and is registered under Section 12 of the Federal
19 1934 Act, and has been so registered for the three years
20 immediately preceding the offering date.
21 (3) Neither the issuer nor a significant subsidiary
22 has had a material default during the last seven years,
23 or for the period of the issuer's existence if less than
24 seven years, in the payment of (i) principal, interest,
25 dividend, or sinking fund installment on preferred stock
26 or indebtedness for borrowed money, or (ii) rentals under
27 leases with terms of three years or more.
28 (4) The issuer has had consolidated net income,
29 before extraordinary items and the cumulative effect of
30 accounting changes, of at least $1,000,000 in four of its
31 last five fiscal years including its last fiscal year;
32 and if the offering is of interest bearing securities,
33 has had for its last fiscal year, net income, before
34 deduction for income taxes and depreciation, of at least
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1 1-1/2 times the issuer's annual interest expense, giving
2 effect to the proposed offering and the intended use of
3 the proceeds. For the purposes of this clause "last
4 fiscal year" means the most recent year for which audited
5 financial statements are available, provided that such
6 statements cover a fiscal period ended not more than 15
7 months from the commencement of the offering.
8 (5) If the offering is of stock or shares other
9 than preferred stock or shares, the securities have
10 voting rights and the rights include (i) the right to
11 have at least as many votes per share, and (ii) the right
12 to vote on at least as many general corporate decisions,
13 as each of the issuer's outstanding classes of stock or
14 shares, except as otherwise required by law.
15 (6) If the offering is of stock or shares, other
16 than preferred stock or shares, the securities are owned
17 beneficially or of record, on any date within six months
18 prior to the commencement of the offering, by at least
19 1,200 persons, and on that date there are at least
20 750,000 such shares outstanding with an aggregate market
21 value, based on the average bid price for that day, of at
22 least $3,750,000. In connection with the determination
23 of the number of persons who are beneficial owners of the
24 stock or shares of an issuer, the issuer or dealer may
25 rely in good faith for the purposes of this clause upon
26 written information furnished by the record owners.
27 (7) The issuer meets the conditions specified in
28 paragraphs (2), (3) and (4) of this subsection P if
29 either the issuer or the issuer and the issuer's
30 predecessor, taken together, meet such conditions and if:
31 (a) the succession was primarily for the purpose of
32 changing the state of incorporation of the predecessor or
33 forming a holding company and the assets and liabilities
34 of the successor at the time of the succession were
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1 substantially the same as those of the predecessor; or
2 (b) all predecessors met such conditions at the time of
3 succession and the issuer has continued to do so since
4 the succession.
5 Q. Any security appearing on the List of OTC Margin
6 Stocks published by the Board of Governors of the Federal
7 Reserve System or any security incorporated by reference to
8 the List of OTC Margin Stocks by the Board of Governors of
9 the Federal Reserve System; any other securities of the same
10 issuer which are of senior or substantially equal rank; any
11 securities called for by subscription rights or warrants so
12 listed or approved; or any warrants or rights to purchase or
13 subscribe to any of the foregoing.
14 R. Any security issued by a bona fide agricultural
15 cooperative operating in this State that is organized under
16 the laws of this State or as a foreign cooperative
17 association organized under the law of another state that has
18 been duly qualified to transact business in this State.
19 (Source: P.A. 89-209, eff. 1-1-96; 90-70, eff. 7-8-97.)
20 (815 ILCS 5/4) (from Ch. 121 1/2, par. 137.4)
21 Sec. 4. Exempt transactions. The provisions of Sections
22 2a, 5, 6 and 7 of this Act shall not apply to any of the
23 following transactions, except where otherwise specified in
24 this Section 4:
25 A. Any offer or sale, whether through a dealer or
26 otherwise, of securities by a person who is not an issuer,
27 underwriter, dealer or controlling person in respect of such
28 securities, and who, being the bona fide owner of such
29 securities, disposes thereof for his or her own account;
30 provided, that such offer or sale is not made directly or
31 indirectly for the benefit of the issuer or of an underwriter
32 or controlling person.
33 B. Any offer, sale, issuance or exchange of securities
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1 of the issuer to or with security holders of the issuer
2 except to or with persons who are security holders solely by
3 reason of holding transferable warrants, transferable
4 options, or similar transferable rights of the issuer, if no
5 commission or other remuneration is paid or given directly or
6 indirectly for or on account of the procuring or soliciting
7 of such sale or exchange (other than a fee paid to
8 underwriters based on their undertaking to purchase any
9 securities not purchased by security holders in connection
10 with such sale or exchange).
11 C. Any offer, sale or issuance of securities to any
12 corporation, bank, savings bank, savings institution, savings
13 and loan association, trust company, insurance company,
14 building and loan association, or dealer; to a pension fund,
15 pension trust, or employees' profit sharing trust, other
16 financial institution or institutional investor, any
17 government or political subdivision or instrumentality
18 thereof, whether the purchaser is acting for itself or in
19 some fiduciary capacity; to any partnership or other
20 association engaged as a substantial part of its business or
21 operations in purchasing or holding securities; to any trust
22 in respect of which a bank or trust company is trustee or
23 co-trustee; to any entity in which at least 90% of the equity
24 is owned by persons described under subsection C, H, or S of
25 this Section 4; to any employee benefit plan within the
26 meaning of Title I of the Federal ERISA Act if (i) the
27 investment decision is made by a plan fiduciary as defined in
28 Section 3(21) of the Federal ERISA Act and such plan
29 fiduciary is either a bank, savings and loan association,
30 insurance company, registered investment adviser or an
31 investment adviser registered under the Federal 1940
32 Investment Advisers Act, or (ii) the plan has total assets in
33 excess of $5,000,000, or (iii) in the case of a self-directed
34 plan, investment decisions are made solely by persons that
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1 are described under subsection C, D, H or S of this Section
2 4; to any plan established and maintained by, and for the
3 benefit of the employees of, any state or political
4 subdivision or agency or instrumentality thereof if such plan
5 has total assets in excess of $5,000,000; or to any
6 organization described in Section 501(c)(3) of the Internal
7 Revenue Code of 1986, any Massachusetts or similar business
8 trust, or any partnership, if such organization, trust, or
9 partnership has total assets in excess of $5,000,000.
10 D. The Secretary of State is granted authority to create
11 by rule or regulation a limited offering transactional
12 exemption that furthers the objectives of compatibility with
13 federal exemptions and uniformity among the states. The
14 Secretary of State shall prescribe by rule or regulation the
15 amount of the fee for filing any report required under this
16 subsection, but the fee shall not be less than the minimum
17 amount nor more than the maximum amount established under
18 Section 11a of this Act and shall not be returnable in any
19 event.
20 E. Any offer or sale of securities by an executor,
21 administrator, guardian, receiver or trustee in insolvency or
22 bankruptcy, or at any judicial sale, or at a public sale by
23 auction held at an advertised time and place, or the offer or
24 sale of securities in good faith and not for the purpose of
25 avoiding the provisions of this Act by a pledgee of
26 securities pledged for a bona fide debt.
27 F. Any offer or sale by a registered dealer, either as
28 principal or agent, of any securities (except face amount
29 certificate contracts and investment fund shares) at a price
30 reasonably related to the current market price of such
31 securities, provided:
32 (1) (a) the securities are issued and outstanding;
33 (b) the issuer is required to file reports
34 pursuant to Section 13 or Section 15(d) of the
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1 Federal 1934 Act and has been subject to such
2 requirements during the 90 day period immediately
3 preceding the date of the offer or sale, or is an
4 issuer of a security covered by Section 12(g)(2)(B)
5 or (G) of the Federal 1934 Act;
6 (c) the dealer has a reasonable basis for
7 believing that the issuer is current in filing the
8 reports required to be filed at regular intervals
9 pursuant to the provisions of Section 13 or Section
10 15(d), as the case may be, of the Federal 1934 Act,
11 or in the case of insurance companies exempted from
12 Section 12(g) of the Federal 1934 Act by
13 subparagraph 12(g)(2)(G) thereof, the annual
14 statement referred to in Section 12(g)(2)(G)(i) of
15 the Federal 1934 Act; and
16 (d) the dealer has in its records, and makes
17 reasonably available upon request to any person
18 expressing an interest in a proposed transaction in
19 the securities, the issuer's most recent annual
20 report filed pursuant to Section 13 or 15(d), as the
21 case may be, of the Federal 1934 Act or the annual
22 statement in the case of an insurance company
23 exempted from Section 12(g) of the Federal 1934 Act
24 by subparagraph 12(g)(2)(G) thereof, together with
25 any other reports required to be filed at regular
26 intervals under the Federal 1934 Act by the issuer
27 after such annual report or annual statement;
28 provided that the making available of such reports
29 pursuant to this subparagraph, unless otherwise
30 represented, shall not constitute a representation
31 by the dealer that the information is true and
32 correct, but shall constitute a representation by
33 the dealer that the information is reasonably
34 current; or
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1 (2) (a) prior to any offer or sale, an application
2 for the authorization thereof and a report as set
3 forth under sub-paragraph (d) of this paragraph (2)
4 has been filed by any registered dealer with and
5 approved by the Secretary of State pursuant to such
6 rules and regulations as the Secretary of State may
7 prescribe;
8 (b) the Secretary of State shall have the
9 power by order to refuse to approve any application
10 or report filed pursuant to this paragraph (2) if
11 (i) the application or report does not
12 comply with the provisions of this paragraph
13 (2), or
14 (ii) the offer or sale of such securities
15 would work or tend to work a fraud or deceit,
16 or
17 (iii) the issuer or the applicant has
18 violated any of the provisions of this Act;
19 (c) each application and report filed pursuant
20 to this paragraph (2) shall be accompanied by a
21 filing fee and an examination fee in the amount
22 established pursuant to Section 11a of this Act,
23 which shall not be returnable in any event;
24 (d) there shall be submitted to the Secretary
25 of State no later than 120 days following the end of
26 the issuer's fiscal year, each year during the
27 period of the authorization, one copy of a report
28 which shall contain a balance sheet and income
29 statement prepared as of the issuer's most recent
30 fiscal year end certified by an independent
31 certified public accountant, together with such
32 current information concerning the securities and
33 the issuer thereof as the Secretary of State may
34 prescribe by rule or regulation or order;
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1 (e) prior to any offer or sale of securities
2 under the provisions of this paragraph (2), each
3 registered dealer participating in the offer or sale
4 of such securities shall provide upon request of
5 prospective purchasers of such securities a copy of
6 the most recent report required under the provisions
7 of sub-paragraph (d) of this paragraph (2);
8 (f) approval of an application filed pursuant
9 to this paragraph (2) of subsection F shall expire 5
10 years after the date of the granting of the
11 approval, unless said approval is sooner terminated
12 by (1) suspension or revocation by the Secretary of
13 State in the same manner as is provided for in
14 subsections E, F and G of Section 11 of this Act, or
15 (2) the applicant filing with the Secretary of State
16 an affidavit to the effect that (i) the subject
17 securities have become exempt under Section 3 of
18 this Act or (ii) the applicant no longer is capable
19 of acting as the applicant and stating the reasons
20 therefor or (iii) the applicant no longer desires to
21 act as the applicant. In the event of the filing of
22 an affidavit under either preceding sub-division
23 (ii) or (iii) the Secretary of State may authorize a
24 substitution of applicant upon the new applicant
25 executing the application as originally filed.
26 However, the aforementioned substituted execution
27 shall have no effect upon the previously determined
28 date of expiration of approval of the application.
29 Notwithstanding the provisions of this subparagraph
30 (f), approvals granted under this paragraph (2) of
31 subsection F prior to the effective date of this Act
32 shall be governed by the provisions of this Act in
33 effect on such date of approval; and
34 (g) no person shall be considered to have
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1 violated Section 5 of this Act by reason of any
2 offer or sale effected in reliance upon an approval
3 granted under this paragraph (2) after a termination
4 thereof under the foregoing subparagraph (f) if
5 official notice of such termination has not been
6 circulated generally to dealers by the Secretary of
7 State and if such person sustains the burden of
8 proof that he or she did not know, and in the
9 exercise of reasonable care, could not have known,
10 of the termination; or
11 (3) the securities, or securities of the same
12 class, are the subject of an existing registration under
13 Section 5 of this Act.
14 The exemption provided in this subsection F shall apply
15 only if the offer or sale is made in good faith and not for
16 the purpose of avoiding any of the provisions of this Act,
17 and only if the offer or sale is not made for the direct or
18 indirect benefit of the issuer of the securities, or the
19 controlling person in respect of such issuer.
20 G. (1) Any offer, sale or issuance of a security,
21 whether to residents or to non-residents of this State,
22 where:
23 (a) all sales of such security to residents of
24 this State (including the most recent such sale)
25 within the immediately preceding 12-month period
26 have been made to not more than 35 persons or have
27 involved an aggregate sales price of not more than
28 $1,000,000;
29 (b) such security is not offered or sold by
30 means of any general advertising or general
31 solicitation in this State; and
32 (c) no commission, discount, or other
33 remuneration exceeding 20% of the sale price of such
34 security, if sold to a resident of this State, is
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1 paid or given directly or indirectly for or on
2 account of such sales.
3 (2) In computing the number of resident purchasers
4 or the aggregate sales price under paragraph (1) (a)
5 above, there shall be excluded any purchaser or dollar
6 amount of sales price, as the case may be, with respect
7 to any security which at the time of its sale was exempt
8 under Section 3 or was registered under Section 5, 6 or 7
9 or was sold in a transaction exempt under other
10 subsections of this Section 4.
11 (3) A prospectus or preliminary prospectus with
12 respect to a security for which a registration statement
13 is pending or effective under the Federal 1933 Act shall
14 not be deemed to constitute general advertising or
15 general solicitation in this State as such terms are used
16 in paragraph (1) (b) above, provided that such prospectus
17 or preliminary prospectus has not been sent or otherwise
18 delivered to more than 150 residents of this State.
19 (4) The Secretary of State shall by rule or
20 regulation require the filing of a report or reports of
21 sales made in reliance upon the exemption provided by
22 this subsection G and prescribe the form of such report
23 and the time within which such report shall be filed.
24 Such report shall set forth the name and address of the
25 issuer and of the controlling person, if the sale was for
26 the direct or indirect benefit of such person, and any
27 other information deemed necessary by the Secretary of
28 State to enforce compliance with this subsection G. The
29 Secretary of State shall prescribe by rule or regulation
30 the amount of the fee for filing any such report,
31 established pursuant to Section 11a of this Act, which
32 shall not be returnable in any event. The Secretary of
33 State may impose, in such cases as he or she may deem
34 appropriate, a penalty for failure to file any such
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1 report in a timely manner, but no such penalty shall
2 exceed an amount equal to five times the filing fee. The
3 contents of any such report or portion thereof may be
4 deemed confidential by the Secretary of State by rule or
5 order and if so deemed shall not be disclosed to the
6 public except by order of court or in court proceedings.
7 The failure to file any such report shall not affect the
8 availability of such exemption, but such failure to file
9 any such report shall constitute a violation of
10 subsection D of Section 12 of this Act, subject to the
11 penalties enumerated in Section 14 of this Act. The
12 civil remedies provided for in subsection A of Section 13
13 of this Act and the civil remedies of rescission and
14 appointment of a receiver, conservator, ancillary
15 receiver or ancillary conservator provided for in
16 subsection F of Section 13 of this Act shall not be
17 available against any person by reason of the failure to
18 file any such report or on account of the contents of any
19 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 excluding
25 the value of a principal residence, or (2) any natural person
26 who had, or is reasonably believed by the person relying upon
27 this subsection H to have had, an income or joint income with
28 that person's spouse, in excess of $200,000 in each of the
29 two most recent years and who reasonably expects, or is
30 reasonably expected to have, an income in excess of $200,000
31 in the current year, or (3) any person that is not a natural
32 person and in which at least 90% of the equity interest is
33 owned by persons who meet either of the tests set forth in
34 clauses (1) or (2) of this subsection H; provided that such
-19- LRB9111259STsb
1 security is not offered or sold by means of any general
2 advertising or general solicitation in 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
-20- LRB9111259STsb
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
-21- LRB9111259STsb
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
-22- LRB9111259STsb
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
-23- LRB9111259STsb
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
-24- LRB9111259STsb
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 90-70, eff. 7-8-97.)
9 (815 ILCS 5/8) (from Ch. 121 1/2, par. 137.8)
10 Sec. 8. Registration of dealers, limited Canadian
11 dealers, salespersons, investment advisers, and investment
12 adviser representatives.
13 A. Except as otherwise provided in this subsection A,
14 every dealer, limited Canadian dealer, salesperson,
15 investment adviser, and investment adviser representative
16 shall be registered as such with the Secretary of State. No
17 dealer or salesperson need be registered as such when
18 offering or selling securities in transactions believed in
19 good faith to be exempted by subsection A, B, C, D, E, G, H,
20 I, J, K, M, O, P, Q, R or S of Section 4 of this Act,
21 provided that such dealer or salesperson is not regularly
22 engaged in the business of offering or selling securities in
23 reliance upon the exemption set forth in subsection G or M of
24 Section 4 of this Act. No dealer, issuer or controlling
25 person shall employ a salesperson unless such salesperson is
26 registered as such with the Secretary of State or is employed
27 for the purpose of offering or selling securities solely in
28 transactions believed in good faith to be exempted by
29 subsection A, B, C, D, E, G, H, I, J, K, L, M, O, P, Q, R or
30 S of Section 4 of this Act; provided that such salesperson
31 need not be registered when effecting transactions in this
32 State limited to those transactions described in Section
33 15(h)(2) of the Federal 1934 Act or engaging in the offer or
-25- LRB9111259STsb
1 sale of securities in respect of which he or she has
2 beneficial ownership and is a controlling person. The
3 Secretary of State may, by rule, regulation or order and
4 subject to such terms, conditions as fees as may be
5 prescribed in such rule, regulation or order, exempt from the
6 registration requirements of this Section 8 any investment
7 adviser, if the Secretary of State shall find that such
8 registration is not necessary in the public interest by
9 reason of the small number of clients or otherwise limited
10 character of operation of such investment adviser.
11 B. An application for registration as a dealer or
12 limited Canadian dealer, executed, verified, or authenticated
13 by or on behalf of the applicant, shall be filed with the
14 Secretary of State, in such form as the Secretary of State
15 may by rule, regulation or order prescribe, setting forth or
16 accompanied by:
17 (1) The name and address of the applicant, the
18 location of its principal business office and all branch
19 offices, if any, and the date of its organization;
20 (2) A statement of any other Federal or state
21 licenses or registrations which have been granted the
22 applicant and whether any such licenses or registrations
23 have ever been refused, cancelled, suspended, revoked or
24 withdrawn;
25 (3) The assets and all liabilities, including
26 contingent liabilities of the applicant, as of a date not
27 more than 60 days prior to the filing of the application;
28 (4) (a) A brief description of any civil or
29 criminal proceeding of which fraud is an essential
30 element pending against the applicant and whether the
31 applicant has ever been convicted of a felony, or of any
32 misdemeanor of which fraud is an essential element;
33 (b) A list setting forth the name, residence and
34 business address and a 10 year occupational statement of
-26- LRB9111259STsb
1 each principal of the applicant and a statement
2 describing briefly any civil or criminal proceedings of
3 which fraud is an essential element pending against any
4 such principal and the facts concerning any conviction of
5 any such principal of a felony, or of any misdemeanor of
6 which fraud is an essential element;
7 (5) If the applicant is a corporation: a list of
8 its officers and directors setting forth the residence
9 and business address of each; a 10-year occupational
10 statement of each such officer or director; and a
11 statement describing briefly any civil or criminal
12 proceedings of which fraud is an essential element
13 pending against each such officer or director and the
14 facts concerning any conviction of any officer or
15 director of a felony, or of any misdemeanor of which
16 fraud is an essential element;
17 (6) If the applicant is a sole proprietorship, a
18 partnership, limited liability company, an unincorporated
19 association or any similar form of business organization:
20 the name, residence and business address of the
21 proprietor or of each partner, member, officer, director,
22 trustee or manager; the limitations, if any, of the
23 liability of each such individual; a 10-year occupational
24 statement of each such individual; a statement describing
25 briefly any civil or criminal proceedings of which fraud
26 is an essential element pending against each such
27 individual and the facts concerning any conviction of any
28 such individual of a felony, or of any misdemeanor of
29 which fraud is an essential element;
30 (7) Such additional information as the Secretary of
31 State may by rule or regulation prescribe as necessary to
32 determine the applicant's financial responsibility,
33 business repute and qualification to act as a dealer.
34 (8) (a) No applicant shall be registered or
-27- LRB9111259STsb
1 re-registered as a dealer or limited Canadian dealer
2 under this Section unless and until each principal of the
3 dealer has passed an examination conducted by the
4 Secretary of State or a self-regulatory organization of
5 securities dealers or similar person, which examination
6 has been designated by the Secretary of State by rule,
7 regulation or order to be satisfactory for purposes of
8 determining whether the applicant has sufficient
9 knowledge of the securities business and laws relating
10 thereto to act as a registered dealer. Any dealer who was
11 registered on September 30, 1963, and has continued to be
12 so registered; and any principal of any registered
13 dealer, who was acting in such capacity on and
14 continuously since September 30, 1963; and any individual
15 who has previously passed a securities dealer examination
16 administered by the Secretary of State or any examination
17 designated by the Secretary of State to be satisfactory
18 for purposes of determining whether the applicant has
19 sufficient knowledge of the securities business and laws
20 relating thereto to act as a registered dealer by rule,
21 regulation or order, shall not be required to pass an
22 examination in order to continue to act in such capacity.
23 The Secretary of State may by order waive the examination
24 requirement for any principal of an applicant for
25 registration under this subsection B who has had such
26 experience or education relating to the securities
27 business as may be determined by the Secretary of State
28 to be the equivalent of such examination. Any request
29 for such a waiver shall be filed with the Secretary of
30 State in such form as may be prescribed by rule or
31 regulation.
32 (b) Unless an applicant is a member of the body
33 corporate known as the Securities Investor Protection
34 Corporation established pursuant to the Act of Congress
-28- LRB9111259STsb
1 of the United States known as the Securities Investor
2 Protection Act of 1970, as amended, a member of an
3 association of dealers registered as a national
4 securities association pursuant to Section 15A of the
5 Federal 1934 Act, or a member of a self-regulatory
6 organization or stock exchange in Canada which the
7 Secretary of State has designated by rule or order, an
8 applicant shall not be registered or re-registered unless
9 and until there is filed with the Secretary of State
10 evidence that such applicant has in effect insurance or
11 other equivalent protection for each client's cash or
12 securities held by such applicant, and an undertaking
13 that such applicant will continually maintain such
14 insurance or other protection during the period of
15 registration or re-registration. Such insurance or other
16 protection shall be in a form and amount reasonably
17 prescribed by the Secretary of State by rule or
18 regulation.
19 (9) The application for the registration of a
20 dealer or limited Canadian dealer shall be accompanied
21 by a filing fee and a fee for each branch office in this
22 State, in each case in the amount established pursuant to
23 Section 11a of this Act, which fees shall not be
24 returnable in any event.
25 (10) The Secretary of State shall notify the dealer
26 or limited Canadian dealer by written notice (which may
27 be by electronic or facsimile transmission) of the
28 effectiveness of the registration as a dealer in this
29 State.
30 (11) Any change which renders no longer accurate
31 any information contained in any application for
32 registration or re-registration of a dealer or limited
33 Canadian dealer shall be reported to the Secretary of
34 State within 10 business days after the occurrence of
-29- LRB9111259STsb
1 such change; but in respect to assets and liabilities
2 only materially adverse changes need be reported.
3 C. Any registered dealer, limited Canadian dealer,
4 issuer, or controlling person desiring to register a
5 salesperson shall file an application with the Secretary of
6 State, in such form as the Secretary of State may by rule or
7 regulation prescribe, which the salesperson is required by
8 this Section to provide to the dealer, issuer, or controlling
9 person, executed, verified, or authenticated by the
10 salesperson setting forth or accompanied by:
11 (1) The name, residence and business address of the
12 salesperson;
13 (2) Whether any federal or State license or
14 registration as dealer, limited Canadian dealer, or
15 salesperson has ever been refused the salesperson or
16 cancelled, suspended, revoked, or withdrawn;
17 (3) The nature of employment with, and names and
18 addresses of, employers of the salesperson for the 10
19 years immediately preceding the date of application;
20 (4) A brief description of any civil or criminal
21 proceedings of which fraud is an essential element
22 pending against the salesperson, and whether the
23 salesperson has ever been convicted of a felony, or of
24 any misdemeanor of which fraud is an essential element;
25 (5) Such additional information as the Secretary of
26 State may by rule, regulation or order prescribe as
27 necessary to determine the salesperson's business repute
28 and qualification to act as a salesperson; and
29 (6) No individual shall be registered or
30 re-registered as a salesperson under this Section unless
31 and until such individual has passed an examination
32 conducted by the Secretary of State or a self-regulatory
33 organization of securities dealers or similar person,
34 which examination has been designated by the Secretary of
-30- LRB9111259STsb
1 State by rule, regulation or order to be satisfactory for
2 purposes of determining whether the applicant has
3 sufficient knowledge of the securities business and laws
4 relating thereto to act as a registered salesperson.
5 Any salesperson who was registered prior to
6 September 30, 1963, and has continued to be so
7 registered, and any individual who has passed a
8 securities salesperson examination administered by the
9 Secretary of State or an examination designated by the
10 Secretary of State by rule, regulation or order to be
11 satisfactory for purposes of determining whether the
12 applicant has sufficient knowledge of the securities
13 business and laws relating thereto to act as a registered
14 salesperson, shall not be required to pass an examination
15 in order to continue to act as a salesperson. The
16 Secretary of State may by order waive the examination
17 requirement for any applicant for registration under this
18 subsection C who has had such experience or education
19 relating to the securities business as may be determined
20 by the Secretary of State to be the equivalent of such
21 examination. Any request for such a waiver shall be
22 filed with the Secretary of State in such form as may be
23 prescribed by rule, regulation or order.
24 (7) The application for registration of a
25 salesperson shall be accompanied by a filing fee and a
26 Securities Audit and Enforcement Fund fee, each in the
27 amount established pursuant to Section 11a of this Act,
28 which shall not be returnable in any event.
29 (8) Any change which renders no longer accurate any
30 information contained in any application for registration
31 or re-registration as a salesperson shall be reported to
32 the Secretary of State within 10 business days after the
33 occurrence of such change. If the activities are
34 terminated which rendered an individual a salesperson for
-31- LRB9111259STsb
1 the dealer, issuer or controlling person, the dealer,
2 issuer or controlling person, as the case may be, shall
3 notify the Secretary of State, in writing, within 30 days
4 of the salesperson's cessation of activities, using the
5 appropriate termination notice form.
6 (9) A registered salesperson may transfer his or
7 her registration under this Section 8 for the unexpired
8 term thereof from one registered dealer or limited
9 Canadian dealer to another by the giving of notice of the
10 transfer by the new registered dealer or limited Canadian
11 dealer to the Secretary of State in such form and subject
12 to such conditions as the Secretary of State shall by
13 rule or regulation prescribe. The new registered dealer
14 or limited Canadian dealer shall promptly file an
15 application for registration of such salesperson as
16 provided in this subsection C, accompanied by the filing
17 fee prescribed by paragraph (7) of this subsection C.
18 C-5. Except with respect to federal covered investment
19 advisers whose only clients are investment companies as
20 defined in the Federal 1940 Act, other investment advisers,
21 federal covered investment advisers, or any similar person
22 which the Secretary of State may prescribe by rule or order,
23 a federal covered investment adviser shall file with the
24 Secretary of State, prior to acting as a federal covered
25 investment adviser in this State, such documents as have been
26 filed with the Securities and Exchange Commission as the
27 Secretary of State by rule or order may prescribe. The
28 notification of a federal covered investment adviser shall be
29 accompanied by a notification filing fee established pursuant
30 to Section 11a of this Act, which shall not be returnable in
31 any event. Every person acting as a federal covered
32 investment adviser in this State shall file a notification
33 filing and pay an annual notification filing fee established
34 pursuant to Section 11a of this Act, which is not returnable
-32- LRB9111259STsb
1 in any event. The failure to file any such notification
2 shall constitute a violation of subsection D of Section 12 of
3 this Act, subject to the penalties enumerated in Section 14
4 of this Act. Until October 10, 1999 or other date as may be
5 legally permissible, a federal covered investment adviser who
6 fails to file the notification or refuses to pay the fees as
7 required by this subsection shall register as an investment
8 adviser with the Secretary of State under Section 8 of this
9 Act. The civil remedies provided for in subsection A of
10 Section 13 of this Act and the civil remedies of rescission
11 and appointment of receiver, conservator, ancillary receiver,
12 or ancillary conservator provided for in subsection F of
13 Section 13 of this Act shall not be available against any
14 person by reason of the failure to file any such notification
15 or to pay the notification fee or on account of the contents
16 of any such notification.
17 D. An application for registration as an investment
18 adviser, executed, verified, or authenticated by or on behalf
19 of the applicant, shall be filed with the Secretary of State,
20 in such form as the Secretary of State may by rule or
21 regulation prescribe, setting forth or accompanied by:
22 (1) The name and form of organization under which
23 the investment adviser engages or intends to engage in
24 business; the state or country and date of its
25 organization; the location of the adviser's principal
26 business office and branch offices, if any; the names and
27 addresses of the adviser's principal, partners, officers,
28 directors, and persons performing similar functions or,
29 if the investment adviser is an individual, of the
30 individual; and the number of the adviser's employees who
31 perform investment advisory functions;
32 (2) The education, the business affiliations for
33 the past 10 years, and the present business affiliations
34 of the investment adviser and of the adviser's principal,
-33- LRB9111259STsb
1 partners, officers, directors, and persons performing
2 similar functions and of any person controlling the
3 investment adviser;
4 (3) The nature of the business of the investment
5 adviser, including the manner of giving advice and
6 rendering analyses or reports;
7 (4) The nature and scope of the authority of the
8 investment adviser with respect to clients' funds and
9 accounts;
10 (5) The basis or bases upon which the investment
11 adviser is compensated;
12 (6) Whether the investment adviser or any
13 principal, partner, officer, director, person performing
14 similar functions or person controlling the investment
15 adviser (i) within 10 years of the filing of the
16 application has been convicted of a felony, or of any
17 misdemeanor of which fraud is an essential element, or
18 (ii) is permanently or temporarily enjoined by order or
19 judgment from acting as an investment adviser,
20 underwriter, dealer, principal or salesperson, or from
21 engaging in or continuing any conduct or practice in
22 connection with any such activity or in connection with
23 the purchase or sale of any security, and in each case
24 the facts relating to the conviction, order or judgment;
25 (7) (a) A statement as to whether the investment
26 adviser is engaged or is to engage primarily in the
27 business of rendering investment supervisory services;
28 and
29 (b) A statement that the investment adviser will
30 furnish his, her, or its clients with such information as
31 the Secretary of State deems necessary in the form
32 prescribed by the Secretary of State by rule or
33 regulation;
34 (8) Such additional information as the Secretary of
-34- LRB9111259STsb
1 State may, by rule, regulation or order prescribe as
2 necessary to determine the applicant's financial
3 responsibility, business repute and qualification to act
4 as an investment adviser.
5 (9) No applicant shall be registered or
6 re-registered as an investment adviser under this Section
7 unless and until each principal of the applicant who is
8 actively engaged in the conduct and management of the
9 applicant's advisory business in this State has passed an
10 examination or completed an educational program conducted
11 by the Secretary of State or an association of investment
12 advisers or similar person, which examination or
13 educational program has been designated by the Secretary
14 of State by rule, regulation or order to be satisfactory
15 for purposes of determining whether the applicant has
16 sufficient knowledge of the securities business and laws
17 relating thereto to conduct the business of a registered
18 investment adviser.
19 Any person who was a registered investment adviser
20 prior to September 30, 1963, and has continued to be so
21 registered, and any individual who has passed an
22 investment adviser examination administered by the
23 Secretary of State, or passed an examination or completed
24 an educational program designated by the Secretary of
25 State by rule, regulation or order to be satisfactory for
26 purposes of determining whether the applicant has
27 sufficient knowledge of the securities business and laws
28 relating thereto to conduct the business of a registered
29 investment adviser, shall not be required to pass an
30 examination or complete an educational program in order
31 to continue to act as an investment adviser. The
32 Secretary of State may by order waive the examination or
33 educational program requirement for any applicant for
34 registration under this subsection D if the principal of
-35- LRB9111259STsb
1 the applicant who is actively engaged in the conduct and
2 management of the applicant's advisory business in this
3 State has had such experience or education relating to
4 the securities business as may be determined by the
5 Secretary of State to be the equivalent of the
6 examination or educational program. Any request for a
7 waiver shall be filed with the Secretary of State in such
8 form as may be prescribed by rule or regulation.
9 (10) No applicant shall be registered or
10 re-registered as an investment adviser under this Section
11 8 unless the application for registration or
12 re-registration is accompanied by an application for
13 registration or re-registration for each person acting as
14 an investment adviser representative on behalf of the
15 adviser and a Securities Audit and Enforcement Fund fee
16 that shall not be returnable in any event is paid with
17 respect to each investment adviser representative.
18 (11) The application for registration of an
19 investment adviser shall be accompanied by a filing fee
20 and a fee for each branch office in this State, in each
21 case in the amount established pursuant to Section 11a of
22 this Act, which fees shall not be returnable in any
23 event.
24 (12) The Secretary of State shall notify the
25 investment adviser by written notice (which may be by
26 electronic or facsimile transmission) of the
27 effectiveness of the registration as an investment
28 adviser in this State.
29 (13) Any change which renders no longer accurate
30 any information contained in any application for
31 registration or re-registration of an investment adviser
32 shall be reported to the Secretary of State within 10
33 business days after the occurrence of the change. In
34 respect to assets and liabilities of an investment
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1 adviser that retains custody of clients' cash or
2 securities or accepts pre-payment of fees in excess of
3 $500 per client and 6 or more months in advance only
4 materially adverse changes need be reported by written
5 notice (which may be by electronic or facsimile
6 transmission) no later than the close of business on the
7 second business day following the discovery thereof.
8 (14) Each application for registration as an
9 investment adviser shall become effective automatically
10 on the 45th day following the filing of the application,
11 required documents or information, and payment of the
12 required fee unless (i) the Secretary of State has
13 registered the investment adviser prior to that date or
14 (ii) an action with respect to the applicant is pending
15 under Section 11 of this Act.
16 D-5. A registered investment adviser or federal covered
17 investment adviser desiring to register an investment
18 adviser representative shall file an application with the
19 Secretary of State, in the form as the Secretary of State may
20 by rule or order prescribe, which the investment adviser
21 representative is required by this Section to provide to the
22 investment adviser, executed, verified, or authenticated by
23 the investment adviser representative and setting forth or
24 accompanied by:
25 (1) The name, residence, and business address of
26 the investment adviser representative;
27 (2) A statement whether any federal or state
28 license or registration as a dealer, salesperson,
29 investment adviser, or investment adviser representative
30 has ever been refused, canceled, suspended, revoked or
31 withdrawn;
32 (3) The nature of employment with, and names and
33 addresses of, employers of the investment adviser
34 representative for the 10 years immediately preceding the
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1 date of application;
2 (4) A brief description of any civil or criminal
3 proceedings, of which fraud is an essential element,
4 pending against the investment adviser representative and
5 whether the investment adviser representative has ever
6 been convicted of a felony or of any misdemeanor of which
7 fraud is an essential element;
8 (5) Such additional information as the Secretary of
9 State may by rule or order prescribe as necessary to
10 determine the investment adviser representative's
11 business repute or qualification to act as an investment
12 adviser representative;
13 (6) Documentation that the individual has passed an
14 examination conducted by the Secretary of State, an
15 organization of investment advisers, or similar person,
16 which examination has been designated by the Secretary of
17 State by rule or order to be satisfactory for purposes of
18 determining whether the applicant has sufficient
19 knowledge of the investment advisory or securities
20 business and laws relating to that business to act as a
21 registered investment adviser representative; and
22 (7) A Securities Audit and Enforcement Fund fee
23 established under Section 11a of this Act, which shall
24 not be returnable in any event.
25 The Secretary of State may by order waive the examination
26 requirement for an applicant for registration under this
27 subsection D-5 who has had the experience or education
28 relating to the investment advisory or securities business as
29 may be determined by the Secretary of State to be the
30 equivalent of the examination. A request for a waiver shall
31 be filed with the Secretary of State in the form as may be
32 prescribed by rule or order.
33 A change that renders no longer accurate any information
34 contained in any application for registration or
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1 re-registration as an investment adviser representative must
2 be reported to the Secretary of State within 10 business days
3 after the occurrence of the change. If the activities that
4 rendered an individual an investment adviser representative
5 for the investment adviser are terminated, the investment
6 adviser shall notify the Secretary of State in writing (which
7 may be by electronic or facsimile transmission), within 30
8 days of the investment adviser representative's termination,
9 using the appropriate termination notice form as the
10 Secretary of State may prescribe by rule or order.
11 A registered investment adviser representative may
12 transfer his or her registration under this Section 8 for the
13 unexpired term of the registration from one registered
14 investment adviser to another by the giving of notice of the
15 transfer by the new investment adviser to the Secretary of
16 State in the form and subject to the conditions as the
17 Secretary of State shall prescribe. The new registered
18 investment adviser shall promptly file an application for
19 registration of the investment adviser representative as
20 provided in this subsection, accompanied by the Securities
21 Audit and Enforcement Fund fee prescribed by paragraph (7) of
22 this subsection D-5.
23 E. (1) Subject to the provisions of subsection F of
24 Section 11 of this Act, the registration of a dealer, limited
25 Canadian dealer, salesperson, investment adviser, or
26 investment adviser representative may be denied, suspended or
27 revoked if the Secretary of State finds that the dealer,
28 limited Canadian dealer, salesperson, investment adviser, or
29 investment adviser representative or any principal officer,
30 director, partner, member, trustee, manager or any person who
31 performs a similar function of the dealer, limited Canadian
32 dealer, or investment adviser:
33 (a) Has been convicted of any felony during the 10
34 year period preceding the date of filing of any
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1 application for registration or at any time thereafter,
2 or of any misdemeanor of which fraud is an essential
3 element;
4 (b) Has engaged in any unethical inequitable
5 practice in the offer or sale of securities or in any
6 fraudulent business practice;
7 (c) Has failed to account for any money or
8 property, or has failed to deliver any security, to any
9 person entitled thereto when due or within a reasonable
10 time thereafter;
11 (d) In the case of a dealer, limited Canadian
12 dealer, or investment adviser, is insolvent;
13 (e) In the case of a dealer, or limited Canadian
14 dealer, salesperson, or registered principal of a dealer
15 or limited Canadian dealer (i) has failed reasonably to
16 supervise the securities activities of any of its
17 salespersons and the failure has permitted or facilitated
18 a violation of Section 12 of this Act or (ii) is offering
19 or selling or has offered or sold securities in this
20 State through a salesperson other than a registered
21 salesperson, or, in the case of a salesperson, is selling
22 or has sold securities in this State for a dealer,
23 limited Canadian dealer, issuer or controlling person
24 with knowledge that the dealer, limited Canadian dealer,
25 issuer or controlling person has not complied with the
26 provisions of this Act or (iii) has failed reasonably to
27 supervise the implementation of compliance measures
28 following notice by the Secretary of State of
29 noncompliance with the Act or with the regulations
30 promulgated thereunder or both;
31 (f) In the case of an investment adviser, has
32 failed reasonably to supervise the advisory activities of
33 any of its investment adviser representatives or
34 employees and the failure has permitted or facilitated a
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1 violation of Section 12 of this Act;
2 (g) Has violated any of the provisions of this Act;
3 (h) Has made any material misrepresentation to the
4 Secretary of State in connection with any information
5 deemed necessary by the Secretary of State to determine a
6 dealer's, limited Canadian dealer's, or investment
7 adviser's financial responsibility or a dealer's, limited
8 Canadian dealer's, investment adviser's, salesperson's,
9 or investment adviser representative's business repute or
10 qualifications, or has refused to furnish any such
11 information requested by the Secretary of State;
12 (i) Has had a license or registration under any
13 Federal or State law regulating the offer or sale of
14 securities or commodity futures contracts, refused,
15 cancelled, suspended or withdrawn;
16 (j) Has been suspended or expelled from or refused
17 membership in or association with or limited in any
18 capacity by any self-regulatory organization registered
19 under the Federal 1934 Act or the Federal 1974 Act
20 arising from any fraudulent or deceptive act or a
21 practice in violation of any rule, regulation or standard
22 duly promulgated by the self-regulatory organization;
23 (k) Has had any order entered against it after
24 notice and opportunity for hearing by a securities agency
25 of any state, any foreign government or agency thereof,
26 the Securities and Exchange Commission, or the Federal
27 Commodities Futures Trading Commission arising from any
28 fraudulent or deceptive act or a practice in violation of
29 any statute, rule or regulation administered or
30 promulgated by the agency or commission;
31 (l) In the case of a dealer or limited Canadian
32 dealer, fails to maintain a minimum net capital in an
33 amount which the Secretary of State may by rule or
34 regulation require;
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1 (m) Has conducted a continuing course of dealing of
2 such nature as to demonstrate an inability to properly
3 conduct the business of the dealer, limited Canadian
4 dealer, salesperson, investment adviser, or investment
5 adviser representative;
6 (n) Has had, after notice and opportunity for
7 hearing, any injunction or order entered against it or
8 license or registration refused, cancelled, suspended,
9 revoked, withdrawn or limited by any state or federal
10 body, agency or commission regulating banking, insurance,
11 finance or small loan companies, real estate or mortgage
12 brokers or companies, if the action resulted from any act
13 found by the body, agency or commission to be a
14 fraudulent or deceptive act or practice in violation of
15 any statute, rule or regulation administered or
16 promulgated by the body, agency or commission;
17 (o) Has failed to file a return, or to pay the tax,
18 penalty or interest shown in a filed return, or to pay
19 any final assessment of tax, penalty or interest, as
20 required by any tax Act administered by the Illinois
21 Department of Revenue, until such time as the
22 requirements of that tax Act are satisfied;
23 (p) In the case of a natural person who is a
24 dealer, limited Canadian dealer, salesperson, investment
25 adviser, or investment adviser representative, has
26 defaulted on an educational loan guaranteed by the
27 Illinois Student Assistance Commission, until the natural
28 person has established a satisfactory repayment record as
29 determined by the Illinois Student Assistance Commission;
30 (q) Has failed to maintain the books and records
31 required under this Act or rules or regulations
32 promulgated under this Act within a reasonable time after
33 receiving notice of any deficiency;
34 (r) Has refused to allow or otherwise impeded
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1 designees of the Secretary of State from conducting an
2 audit, examination, inspection, or investigation provided
3 for under Section 8 or 11 of this Act;
4 (s) Has failed to maintain any minimum net capital
5 or bond requirement set forth in this Act or any rule or
6 regulation promulgated under this Act;
7 (t) Has refused the Secretary of State or his or
8 her designee access to any office or location within an
9 office to conduct an investigation, audit, examination,
10 or inspection;
11 (u) Has advised or caused a public pension fund or
12 retirement system established under the Illinois Pension
13 Code to make an investment or engage in a transaction not
14 authorized by that Code.
15 (2) If the Secretary of State finds that any registrant
16 or applicant for registration is no longer in existence or
17 has ceased to do business as a dealer, limited Canadian
18 dealer, salesperson, investment adviser, or investment
19 adviser representative, or is subject to an adjudication as a
20 person under legal disability or to the control of a
21 guardian, or cannot be located after reasonable search, or
22 has failed after written notice to pay to the Secretary of
23 State any additional fee prescribed by this Section or
24 specified by rule or regulation, or if a natural person, has
25 defaulted on an educational loan guaranteed by the Illinois
26 Student Assistance Commission, the Secretary of State may by
27 order cancel the registration or application.
28 (3) Withdrawal of an application for registration or
29 withdrawal from registration as a dealer, limited Canadian
30 dealer, salesperson, investment adviser, or investment
31 adviser representative becomes effective 30 days after
32 receipt of an application to withdraw or within such shorter
33 period of time as the Secretary of State may determine,
34 unless any proceeding is pending under Section 11 of this Act
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1 when the application is filed or a proceeding is instituted
2 within 30 days after the application is filed. If a
3 proceeding is pending or instituted, withdrawal becomes
4 effective at such time and upon such conditions as the
5 Secretary of State by order determines. If no proceeding is
6 pending or instituted and withdrawal automatically becomes
7 effective, the Secretary of State may nevertheless institute
8 a revocation or suspension proceeding within 2 years one year
9 after withdrawal became effective and enter a revocation or
10 suspension order as of the last date on which registration
11 was effective.
12 F. The Secretary of State shall make available upon
13 request the date that each dealer, investment adviser,
14 salesperson, or investment adviser representative was granted
15 registration, together with the name and address of the
16 dealer, limited Canadian dealer, or issuer on whose behalf
17 the salesperson is registered, and all orders of the
18 Secretary of State denying or abandoning an application, or
19 suspending or revoking registration, or censuring the
20 persons. The Secretary of State may designate by rule,
21 regulation or order the statements, information or reports
22 submitted to or filed with him or her pursuant to this
23 Section 8 which the Secretary of State determines are of a
24 sensitive nature and therefore should be exempt from public
25 disclosure. Any such statement, information or report shall
26 be deemed confidential and shall not be disclosed to the
27 public except upon the consent of the person filing or
28 submitting the statement, information or report or by order
29 of court or in court proceedings.
30 G. The registration or re-registration of a dealer or
31 limited Canadian dealer and of all salespersons registered
32 upon application of the dealer or limited Canadian dealer
33 shall expire on the next succeeding anniversary date of the
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1 registration or re-registration of the dealer; and the
2 registration or re-registration of an investment adviser and
3 of all investment adviser representatives registered upon
4 application of the investment adviser shall expire on the
5 next succeeding anniversary date of the registration of the
6 investment adviser; provided, that the Secretary of State may
7 by rule or regulation prescribe an alternate date which any
8 dealer registered under the Federal 1934 Act or a member of
9 any self-regulatory association approved pursuant thereto, a
10 member of a self-regulatory organization or stock exchange in
11 Canada, or any investment adviser may elect as the expiration
12 date of its dealer or limited Canadian dealer and salesperson
13 registrations, or the expiration date of its investment
14 adviser registration, as the case may be. A registration of
15 a salesperson registered upon application of an issuer or
16 controlling person shall expire on the next succeeding
17 anniversary date of the registration, or upon termination or
18 expiration of the registration of the securities, if any,
19 designated in the application for his or her registration or
20 the alternative date as the Secretary may prescribe by rule
21 or regulation. Subject to paragraph (9) of subsection C of
22 this Section 8, a salesperson's registration also shall
23 terminate upon cessation of his or her employment, or
24 termination of his or her appointment or authorization, in
25 each case by the person who applied for the salesperson's
26 registration, provided that the Secretary of State may by
27 rule or regulation prescribe an alternate date for the
28 expiration of the registration.
29 H. Applications for re-registration of dealers, limited
30 Canadian dealers, salespersons, investment advisers, and
31 investment adviser representatives shall be filed with the
32 Secretary of State prior to the expiration of the then
33 current registration and shall contain such information as
34 may be required by the Secretary of State upon initial
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1 application with such omission therefrom or addition thereto
2 as the Secretary of State may authorize or prescribe. Each
3 application for re-registration of a dealer, limited Canadian
4 dealer, or investment adviser shall be accompanied by a
5 filing fee, each application for re-registration as a
6 salesperson shall be accompanied by a filing fee and a
7 Securities Audit and Enforcement Fund fee established
8 pursuant to Section 11a of this Act, and each application for
9 re-registration as an investment adviser representative shall
10 be accompanied by a Securities Audit and Enforcement Fund fee
11 established under Section 11a of this Act, which shall not be
12 returnable in any event. Notwithstanding the foregoing,
13 applications for re-registration of dealers, limited Canadian
14 dealers, and investment advisers may be filed within 30 days
15 following the expiration of the registration provided that
16 the applicant pays the annual registration fee together with
17 an additional amount equal to the annual registration fee and
18 files any other information or documents that the Secretary
19 of State may prescribe by rule or regulation or order. Any
20 application filed within 30 days following the expiration of
21 the registration shall be automatically effective as of the
22 time of the earlier expiration provided that the proper fee
23 has been paid to the Secretary of State.
24 Each registered dealer, limited Canadian dealer, or
25 investment adviser shall continue to be registered if the
26 registrant changes his, her, or its form of organization
27 provided that the dealer or investment adviser files an
28 amendment to his, her, or its application not later than 30
29 days following the occurrence of the change and pays the
30 Secretary of State a fee in the amount established under
31 Section 11a of this Act.
32 I. (1) Every registered dealer, limited Canadian dealer,
33 and investment adviser shall make and keep for such periods,
34 such accounts, correspondence, memoranda, papers, books and
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1 records as the Secretary of State may by rule or regulation
2 prescribe. All records so required shall be preserved for 3
3 years unless the Secretary of State by rule, regulation or
4 order prescribes otherwise for particular types of records.
5 (2) Every registered dealer, limited Canadian dealer,
6 and investment adviser shall file such financial reports as
7 the Secretary of State may by rule or regulation prescribe.
8 (3) All the books and records referred to in paragraph
9 (1) of this subsection I are subject at any time or from time
10 to time to such reasonable periodic, special or other audits,
11 examinations, or inspections by representatives of the
12 Secretary of State, within or without this State, as the
13 Secretary of State deems necessary or appropriate in the
14 public interest or for the protection of investors.
15 (4) At the time of an audit, examination, or inspection,
16 the Secretary of State, by his or her designees, may conduct
17 an interview of any person employed or appointed by or
18 affiliated with a registered dealer, limited Canadian dealer,
19 or investment advisor, provided that the dealer, limited
20 Canadian dealer, or investment advisor shall be given
21 reasonable notice of the time and place for the interview.
22 At the option of the dealer, limited Canadian dealer, or
23 investment advisor, a representative of the dealer or
24 investment advisor with supervisory responsibility over the
25 individual being interviewed may be present at the interview.
26 J. The Secretary of State may require by rule or
27 regulation the payment of an additional fee for the filing of
28 information or documents required to be filed by this Section
29 which have not been filed in a timely manner. The Secretary
30 of State may also require by rule or regulation the payment
31 of an examination fee for administering any examination which
32 it may conduct pursuant to subsection B, C, D, or D-5 of this
33 Section 8.
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1 K. The Secretary of State may declare any application
2 for registration or limited registration under this Section 8
3 abandoned by order if the applicant fails to pay any fee or
4 file any information or document required under this Section
5 8 or by rule or regulation for more than 30 days after the
6 required payment or filing date. The applicant may petition
7 the Secretary of State for a hearing within 15 days after the
8 applicant's receipt of the order of abandonment, provided
9 that the petition sets forth the grounds upon which the
10 applicant seeks a hearing.
11 L. Any document being filed pursuant to this Section 8
12 shall be deemed filed, and any fee being paid pursuant to
13 this Section 8 shall be deemed paid, upon the date of actual
14 receipt thereof by the Secretary of State or his or her
15 designee.
16 M. The Secretary of State shall provide to the Illinois
17 Student Assistance Commission annually or at mutually agreed
18 periodic intervals the names and social security numbers of
19 natural persons registered under subsections B, C, D, and D-5
20 of this Section. The Illinois Student Assistance Commission
21 shall determine if any student loan defaulter is registered
22 as a dealer, limited Canadian dealer, salesperson, or
23 investment adviser under this Act and report its
24 determination to the Secretary of State or his or her
25 designee.
26 (Source: P.A. 89-209, eff. 1-1-96; 89-626, eff. 8-9-96;
27 90-70, eff. 7-8-97; 90-507, eff. 8-22-97; 90-655, eff.
28 7-30-98.)
29 (815 ILCS 5/11) (from Ch. 121 1/2, par. 137.11)
30 Sec. 11. Duties and powers of the Secretary of State.
31 A. (1) The administration of this Act is vested in the
32 Secretary of State, who may from time to time make, amend and
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1 rescind such rules and regulations as may be necessary to
2 carry out this Act, including rules and regulations governing
3 procedures of registration, statements, applications and
4 reports for various classes of securities, persons and
5 matters within his or her jurisdiction and defining any
6 terms, whether or not used in this Act, insofar as the
7 definitions are not inconsistent with this Act. The rules
8 and regulations adopted by the Secretary of State under this
9 Act shall be effective in the manner provided for in the
10 Illinois Administrative Procedure Act.
11 (2) Among other things, the Secretary of State shall
12 have authority, for the purposes of this Act, to prescribe
13 the form or forms in which required information shall be set
14 forth, accounting practices, the items or details to be shown
15 in balance sheets and earning statements, and the methods to
16 be followed in the preparation of accounts, in the appraisal
17 or valuation of assets and liabilities, in the determination
18 of depreciation and depletion, in the differentiation of
19 recurring and non-recurring income, in the differentiation of
20 investment and operating income, and in the preparation of
21 consolidated balance sheets or income accounts of any person,
22 directly or indirectly, controlling or controlled by the
23 issuer, or any person under direct or indirect common control
24 with the issuer.
25 (3) No provision of this Act imposing any liability
26 shall apply to any act done or omitted in good faith in
27 conformity with any rule or regulation of the Secretary of
28 State under this Act, notwithstanding that the rule or
29 regulation may, after the act or omission, be amended or
30 rescinded or be determined by judicial or other authority to
31 be invalid for any reason.
32 (4) The Securities Department of the Office of the
33 Secretary of State shall be deemed a criminal justice agency
34 for purposes of all federal and state laws and regulations
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1 and, in that capacity, shall be entitled to access to any
2 information available to criminal justice agencies.
3 (5) The Secretary of State, by rule, may conditionally
4 or unconditionally exempt any person, security, or
5 transaction, or any class or classes of persons, securities,
6 or transactions from any provision of Section 5, 6, 7, 8, 8a,
7 or 9 of this Act or of any rule promulgated under these
8 Sections, to the extent that such exemption is necessary or
9 appropriate in the public interest, and is consistent with
10 the protection of investors.
11 B. The Secretary of State may, anything in this Act to
12 the contrary notwithstanding, require financial statements
13 and reports of the issuer, dealer, salesperson, or investment
14 adviser as often as circumstances may warrant. In addition,
15 the Secretary of State may secure information or books and
16 records from or through others and may make or cause to be
17 made investigations respecting the business, affairs, and
18 property of the issuer of securities, any person involved in
19 the sale or offer for sale, purchase or offer to purchase of
20 any mineral investment contract, mineral deferred delivery
21 contract, or security and of dealers, salespersons, and
22 investment advisers that are registered or are the subject of
23 an application for registration under this Act. The costs of
24 an investigation shall be borne by the registrant or the
25 applicant, provided that the registrant or applicant shall
26 not be obligated to pay the costs without his, her or its
27 consent in advance.
28 C. Whenever it shall appear to the Secretary of State,
29 either upon complaint or otherwise, that this Act, or any
30 rule or regulation prescribed under authority thereof, has
31 been or is about to be violated, he or she may, in his or her
32 discretion, do one or both of the following:
33 (1) require or permit the person to file with the
34 Secretary of State a statement in writing under oath, or
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1 otherwise, as to all the facts and circumstances
2 concerning the subject matter which the Secretary of
3 State believes to be in the public interest to
4 investigate, audit, examine, or inspect; and
5 (2) conduct an investigation, audit, examination,
6 or inspection as necessary or advisable for the
7 protection of the interests of the public.
8 D. (1) For the purpose of all investigations, audits,
9 examinations, or inspections which in the opinion of the
10 Secretary of State are necessary and proper for the
11 enforcement of this Act, the Secretary of State or a person
12 designated by him or her is empowered to administer oaths and
13 affirmations, subpoena witnesses, take evidence, and require
14 the production of any books and records, papers, or other
15 documents which the Secretary of State or a person designated
16 by him or her deems relevant or material to the inquiry.
17 (2) The Secretary of State or a person designated by him
18 or her is further empowered to administer oaths and
19 affirmations, subpoena witnesses, take evidence, and require
20 the production of any books and records, papers, or other
21 documents in this State at the request of a securities agency
22 of another state, if the activities constituting the alleged
23 violation for which the information is sought would be in
24 violation of Section 12 of this Act if the activities had
25 occurred in this State.
26 (3) The Circuit Court of any County of this State, upon
27 application of the Secretary of State or a person designated
28 by him or her may order the attendance of witnesses, the
29 production of books and records, papers, accounts and
30 documents and the giving of testimony before the Secretary of
31 State or a person designated by him or her; and any failure
32 to obey the order may be punished by the Circuit Court as a
33 contempt thereof.
34 (4) The fees of subpoenaed witnesses under this Act for
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1 attendance and travel shall be the same as fees of witnesses
2 before the Circuit Courts of this State, to be paid when the
3 witness is excused from further attendance, provided, the
4 witness is subpoenaed at the instance of the Secretary of
5 State; and payment of the fees shall be made and audited in
6 the same manner as other expenses of the Secretary of State.
7 (5) Whenever a subpoena is issued at the request of a
8 complainant or respondent as the case may be, the Secretary
9 of State may require that the cost of service and the fee of
10 the witness shall be borne by the party at whose instance the
11 witness is summoned.
12 (6) The Secretary of State shall have power at his or
13 her discretion, to require a deposit to cover the cost of the
14 service and witness fees and the payment of the legal witness
15 fee and mileage to the witness served with subpoena.
16 (7) A subpoena issued under this Act shall be served in
17 the same manner as a subpoena issued out of a circuit court.
18 (8) The Secretary of State may in any investigation,
19 audits, examinations, or inspections cause the taking of
20 depositions of persons residing within or without this State
21 in the manner provided in civil actions under the laws of
22 this State.
23 E. Anything in this Act to the contrary notwithstanding:
24 (1) If the Secretary of State shall find that the
25 offer or sale or proposed offer or sale or method of
26 offer or sale of any securities by any person, whether
27 exempt or not, in this State, is fraudulent, or would
28 work or tend to work a fraud or deceit, or is being
29 offered or sold in violation of Section 12, or there has
30 been a failure or refusal to submit any notification
31 filing or fee required under this Act, the Secretary of
32 State may by written order prohibit or suspend the offer
33 or sale of securities by that person or deny or revoke
34 the registration of the securities or the exemption from
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1 registration for the securities.
2 (2) If the Secretary of State shall find that any
3 person has violated subsection C, D, E, F, G, H, I, J, or
4 K of Section 12 of this Act, the Secretary of State may
5 by written order temporarily or permanently prohibit or
6 suspend the person from offering or selling any
7 securities, any mineral investment contract, or any
8 mineral deferred delivery contract in this State,
9 provided that any person who is the subject of an order
10 of permanent prohibition may petition the Secretary of
11 State for a hearing to present evidence of rehabilitation
12 or change in circumstances justifying the amendment or
13 termination of the order of permanent prohibition.
14 (3) If the Secretary of State shall find that any
15 person is engaging or has engaged in the business of
16 selling or offering for sale securities as a dealer or
17 salesperson or is acting or has acted as an investment
18 adviser, investment adviser representative, or federal
19 covered investment adviser, without prior thereto and at
20 the time thereof having complied with the registration or
21 notice filing requirements of this Act, the Secretary of
22 State may by written order prohibit or suspend the person
23 from engaging in the business of selling or offering for
24 sale securities, or acting as an investment adviser,
25 investment adviser representative, or federal covered
26 investment adviser, in this State.
27 (4) In addition to any other sanction or remedy
28 contained in this subsection E, the Secretary of State,
29 after finding that any provision of this Act has been
30 violated, may impose a fine as provided by rule,
31 regulation or order not to exceed $10,000 for each
32 violation of this Act, and may issue an order of public
33 censure against the violator.
34 F. (1) The Secretary of State shall not deny, suspend or
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1 revoke the registration of securities, suspend or revoke the
2 registration of a dealer, salesperson or investment adviser,
3 prohibit or suspend the offer or sale of any securities,
4 prohibit or suspend any person from offering or selling any
5 securities in this State, prohibit or suspend a dealer or
6 salesperson from engaging in the business of selling or
7 offering for sale securities, prohibit or suspend a person
8 from acting as an investment adviser or federal covered
9 investment adviser, impose any fine for violation of this
10 Act, issue an order of public censure, or enter into an
11 agreed settlement except after an opportunity for hearing
12 upon not less than 10 days notice given by personal service
13 or registered mail or certified mail, return receipt
14 requested, to the person or persons concerned. Such notice
15 shall state the date and time and place of the hearing and
16 shall contain a brief statement of the proposed action of the
17 Secretary of State and the grounds for the proposed action.
18 A failure to appear at the hearing or otherwise respond to
19 the allegations set forth in the notice of hearing shall
20 constitute an admission of any facts alleged therein and
21 shall constitute sufficient basis to enter an order.
22 (2) Anything herein contained to the contrary
23 notwithstanding, the Secretary of State may temporarily
24 prohibit or suspend, for a maximum period of 90 60 days, by
25 an order effective immediately, the offer or sale or
26 registration of securities, the registration of a dealer,
27 salesperson, or investment adviser, or investment adviser
28 representative, or the offer or sale of securities by any
29 person, or the business of rendering investment advice,
30 without the notice and prior hearing in this subsection
31 prescribed, if the Secretary of State shall in his or her
32 opinion, based on credible evidence, deem it necessary to
33 prevent an imminent violation of this Act or to prevent
34 losses to investors which the Secretary of State reasonably
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1 believes will occur as a result of a prior violation of this
2 Act. Immediately after taking action without such notice and
3 hearing, the Secretary of State shall deliver a copy of the
4 temporary order to the respondent named therein by personal
5 service or registered mail or certified mail, return receipt
6 requested. The temporary order shall set forth the grounds
7 for the action and shall advise that the respondent may
8 request a hearing as soon as reasonably practicable, that the
9 request for a hearing will not stop the effectiveness of the
10 temporary order and that respondent's failure to request a
11 hearing within 30 days after the date of the entry of the
12 temporary order shall constitute an admission of any facts
13 alleged therein and shall constitute sufficient basis to make
14 the temporary order final. Any provision of this paragraph
15 (2) to the contrary notwithstanding, the Secretary of State
16 may not pursuant to the provisions of this paragraph (2)
17 suspend the registration of a dealer, limited Canadian
18 dealer, salesperson, investment adviser, or investment
19 adviser representative based upon sub-paragraph (n) of
20 paragraph (l) of subsection E of Section 8 of this Act or
21 revoke the registration of securities or revoke the
22 registration of any dealer, salesperson, investment adviser
23 representative, or investment adviser.
24 (3) The Secretary of State may issue a temporary order
25 suspending or delaying the effectiveness of any registration
26 of securities under subsection A or B of Section 5, 6 or 7 of
27 this Act subsequent to and upon the basis of the issuance of
28 any stop, suspension or similar order by the Securities and
29 Exchange Commission with respect to the securities which are
30 the subject of the registration under subsection A or B of
31 Section 5, 6 or 7 of this Act, and the order shall become
32 effective as of the date and time of effectiveness of the
33 Securities and Exchange Commission order and shall be vacated
34 automatically at such time as the order of the Securities and
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1 Exchange Commission is no longer in effect.
2 (4) When the Secretary of State finds that an
3 application for registration as a dealer, salesperson or
4 investment adviser should be denied, the Secretary of State
5 may enter an order denying the registration. Immediately
6 after taking such action, the Secretary of State shall
7 deliver a copy of the order to the respondent named therein
8 by personal service or registered mail or certified mail,
9 return receipt requested. The order shall state the grounds
10 for the action and that the matter will be set for hearing
11 upon written request filed with the Secretary of State within
12 30 days after the receipt of the request by the respondent.
13 The respondent's failure to request a hearing within 30 days
14 after receipt of the order shall constitute an admission of
15 any facts alleged therein and shall make the order final. If
16 a hearing is held, the Secretary of State shall affirm,
17 vacate, or modify the order.
18 (5) The findings and decision of the Secretary of State
19 upon the conclusion of each final hearing held pursuant to
20 this subsection shall be set forth in a written order signed
21 on behalf of the Secretary of State by his or her designee
22 and shall be filed as a public record. All hearings shall be
23 held before a person designated by the Secretary of State,
24 and appropriate records thereof shall be kept.
25 (6) Notwithstanding the foregoing, the Secretary of
26 State, after notice and opportunity for hearing, may at his
27 or her discretion enter into an agreed settlement,
28 stipulation or consent order with a respondent in accordance
29 with the provisions of the Illinois Administrative Procedure
30 Act. The provisions of the agreed settlement, stipulation or
31 consent order shall have the full force and effect of an
32 order issued by the Secretary of State.
33 (7) Anything in this Act to the contrary
34 notwithstanding, whenever the Secretary of State finds that a
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1 person is currently expelled from, refused membership in or
2 association with, or limited in any material capacity by a
3 self-regulatory organization registered under the Federal
4 1934 Act or the Federal 1974 Act because of a fraudulent or
5 deceptive act or a practice in violation of a rule,
6 regulation, or standard duly promulgated by the
7 self-regulatory organization, the Secretary of State may, at
8 his or her discretion, enter a Summary Order of Prohibition,
9 which shall prohibit the offer or sale of any securities,
10 mineral investment contract, or mineral deferred delivery
11 contract by the person in this State. The order shall take
12 effect immediately upon its entry. Immediately after taking
13 the action the Secretary of State shall deliver a copy of the
14 order to the named Respondent by personal service or
15 registered mail or certified mail, return receipt requested.
16 A person who is the subject of an Order of Prohibition may
17 petition the Secretary of State for a hearing to present
18 evidence of rehabilitation or change in circumstances
19 justifying the amendment or termination of the Order of
20 Prohibition.
21 G. No administrative action shall be brought by the
22 Secretary of State for relief under this Act or upon or
23 because of any of the matters for which relief is granted by
24 this Act after the earlier to occur of (i) 3 years from the
25 date upon which the Secretary of State had notice of facts
26 which in the exercise of reasonable diligence would lead to
27 actual knowledge of the alleged violation of the Act, or (ii)
28 5 years from the date on which the alleged violation
29 occurred.
30 H. The action of the Secretary of State in denying,
31 suspending, or revoking the registration of a dealer, limited
32 Canadian dealer, salesperson, investment adviser, or
33 investment adviser representative, in prohibiting any person
34 from engaging in the business of offering or selling
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1 securities as a dealer, limited Canadian dealer, or
2 salesperson, in prohibiting or suspending the offer or sale
3 of securities by any person, in prohibiting a person from
4 acting as an investment adviser, federal covered investment
5 adviser, or investment adviser representative, in denying,
6 suspending, or revoking the registration of securities, in
7 prohibiting or suspending the offer or sale or proposed offer
8 or sale of securities, in imposing any fine for violation of
9 this Act, or in issuing any order shall be subject to
10 judicial review in the Circuit Court of any county in this
11 State. The Administrative Review Law shall apply to and
12 govern every action for the judicial review of final actions
13 or decisions of the Secretary of State under this Act.
14 I. Notwithstanding any other provisions of this Act to
15 the contrary, whenever it shall appear to the Secretary of
16 State that any person is engaged or about to engage in any
17 acts or practices which constitute or will constitute a
18 violation of this Act or of any rule or regulation prescribed
19 under authority of this Act, the Secretary of State may at
20 his or her discretion, through the Attorney General:
21 (1) file a complaint and apply for a temporary
22 restraining order without notice, and upon a proper
23 showing the court may enter a temporary restraining order
24 without bond, to enforce this Act; and
25 (2) file a complaint and apply for a preliminary or
26 permanent injunction, and, after notice and a hearing and
27 upon a proper showing, the court may grant a preliminary
28 or permanent injunction and may order the defendant to
29 make an offer of rescission with respect to any sales or
30 purchases of securities, mineral investment contracts, or
31 mineral deferred delivery contracts determined by the
32 court to be unlawful under this Act.
33 The court shall further have jurisdiction and authority,
34 in addition to the penalties and other remedies in this Act
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1 provided, to enter an order for the appointment of the court
2 or a person as a receiver, conservator, ancillary receiver or
3 ancillary conservator for the defendant or the defendant's
4 assets located in this State, or to require restitution,
5 damages or disgorgement of profits on behalf of the person or
6 persons injured by the act or practice constituting the
7 subject matter of the action, and may assess costs against
8 the defendant for the use of the State; provided, however,
9 that the civil remedies of rescission and appointment of a
10 receiver, conservator, ancillary receiver or ancillary
11 conservator shall not be available against any person by
12 reason of the failure to file with the Secretary of State, or
13 on account of the contents of, any report of sale provided
14 for in subsection G or P of Section 4, paragraph (2) of
15 subsection D of Sections 5 and 6, or paragraph (2) of
16 subsection F of Section 7 of this Act. Appeals may be taken
17 as in other civil cases.
18 J. In no case shall the Secretary of State, or any of
19 his or her employees or agents, in the administration of this
20 Act, incur any official or personal liability by instituting
21 an injunction or other proceeding or by denying, suspending
22 or revoking the registration of a dealer or salesperson, or
23 by denying, suspending or revoking the registration of
24 securities or prohibiting the offer or sale of securities, or
25 by suspending or prohibiting any person from acting as a
26 dealer, limited Canadian dealer, salesperson, investment
27 adviser, or investment adviser representative or from
28 offering or selling securities.
29 K. No provision of this Act shall be construed to
30 require or to authorize the Secretary of State to require any
31 investment adviser or federal covered investment adviser
32 engaged in rendering investment supervisory services to
33 disclose the identity, investments, or affairs of any client
34 of the investment adviser or federal covered investment
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1 adviser, except insofar as the disclosure may be necessary or
2 appropriate in a particular proceeding or investigation
3 having as its object the enforcement of this Act.
4 L. Whenever, after an examination, investigation or
5 hearing, the Secretary of State deems it of public interest
6 or advantage, he or she may certify a record to the State's
7 Attorney of the county in which the act complained of,
8 examined or investigated occurred. The State's Attorney of
9 that county within 90 days after receipt of the record shall
10 file a written statement at the Office of the Secretary of
11 State, which statement shall set forth the action taken upon
12 the record, or if no action has been taken upon the record
13 that fact, together with the reasons therefor, shall be
14 stated.
15 M. The Secretary of State may initiate, take, pursue, or
16 prosecute any action authorized or permitted under Section 6d
17 of the Federal 1974 Act.
18 N. (1) Notwithstanding any provision of this Act to the
19 contrary, to encourage uniform interpretation,
20 administration, and enforcement of the provisions of this
21 Act, the Secretary of State may cooperate with the securities
22 agencies or administrators of one or more states, Canadian
23 provinces or territories, or another country, the Securities
24 and Exchange Commission, the Commodity Futures Trading
25 Commission, the Securities Investor Protection Corporation,
26 any self-regulatory organization, and any governmental law
27 enforcement or regulatory agency.
28 (2) The cooperation authorized by paragraph (1) of this
29 subsection includes, but is not limited to, the following:
30 (a) establishing or participating in a central
31 depository or depositories for registration under this
32 Act and for documents or records required under this Act;
33 (b) making a joint audit, inspection, examination,
34 or investigation;
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1 (c) holding a joint administrative hearing;
2 (d) filing and prosecuting a joint civil or
3 criminal proceeding;
4 (e) sharing and exchanging personnel;
5 (f) sharing and exchanging information and
6 documents; or
7 (g) issuing any joint statement or policy.
8 (Source: P.A. 89-209, eff. 1-1-96; 89-626, eff. 8-9-96;
9 90-70, eff. 7-8-97.)
10 (815 ILCS 5/12) (from Ch. 121 1/2, par. 137.12)
11 Sec. 12. Violation. It shall be a violation of the
12 provisions of this Act for any person:
13 A. To offer or sell any security except in accordance
14 with the provisions of this Act.
15 B. To deliver to a purchaser any security required to be
16 registered under Section 5, Section 6 or Section 7 hereof
17 unless accompanied or preceded by a prospectus that meets the
18 requirements of the pertinent subsection of Section 5 or of
19 Section 6 or of Section 7.
20 C. To act as a dealer, salesperson, or investment
21 adviser, or investment adviser representative, unless
22 registered as such, where such registration is required,
23 under the provisions of this Act.
24 D. To fail to file with the Secretary of State any
25 application, report or document required to be filed under
26 the provisions of this Act or any rule or regulation made by
27 the Secretary of State pursuant to this Act or to fail to
28 comply with the terms of any order of the Secretary of State
29 issued pursuant to Section 11 hereof.
30 E. To make, or cause to be made, (1) in any application,
31 report or document filed under this Act or any rule or
32 regulation made by the Secretary of State pursuant to this
33 Act, any statement which was false or misleading with respect
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1 to any material fact or (2) any statement to the effect that
2 a security (other than a security issued by the State of
3 Illinois) has been in any way endorsed or approved by the
4 Secretary of State or the State of Illinois.
5 F. To engage in any transaction, practice or course of
6 business in connection with the sale or purchase of
7 securities which works or tends to work a fraud or deceit
8 upon the purchaser or seller thereof.
9 G. To obtain money or property through the sale of
10 securities by means of any untrue statement of a material
11 fact or any omission to state a material fact necessary in
12 order to make the statements made, in the light of the
13 circumstances under which they were made, not misleading.
14 H. To sign or circulate any statement, prospectus, or
15 other paper or document required by any provision of this Act
16 knowing or having reasonable grounds to know any material
17 representation therein contained to be false or untrue.
18 I. To employ any device, scheme or artifice to defraud
19 in connection with the sale or purchase of any security,
20 directly or indirectly.
21 J. When acting as an investment adviser, investment
22 adviser representative, or federal covered investment
23 adviser, by any means or instrumentality, directly or
24 indirectly:
25 (1) To employ any device, scheme or artifice to
26 defraud any client or prospective client;
27 (2) To engage in any transaction, practice, or
28 course of business which operates as a fraud or deceit
29 upon any client or prospective client; or
30 (3) To engage in any act, practice, or course of
31 business which is fraudulent, deceptive or manipulative.
32 The Secretary of State shall for the purposes of this
33 paragraph (3), by rules and regulations, define and
34 prescribe means reasonably designed to prevent such acts,
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1 practices, and courses of business as are fraudulent,
2 deceptive, or manipulative.
3 K. When offering or selling any mineral investment
4 contract or mineral deferred delivery contract:
5 (1) To employ any device, scheme, or artifice to
6 defraud any customer, prospective customer, or offeree;
7 (2) To engage in any transaction, practice, or
8 course of business that operates as a fraud or deceit
9 upon any customer, prospective customer, or offeree; or
10 (3) To engage in any act, practice, or course of
11 business that is fraudulent, deceptive, or manipulative.
12 The Secretary of State shall for the purposes of this
13 paragraph (3), by rules and regulations, define and
14 prescribe means reasonably designed to prevent acts,
15 practices, and courses of business as are fraudulent,
16 deceptive, or manipulative.
17 (Source: P.A. 90-70, eff. 7-8-97.)
18 Section 10. The Illinois Loan Brokers Act of 1995 is
19 amended by changing Sections 15-15, 15-40 and 15-80 as
20 follows:
21 (815 ILCS 175/15-15)
22 Sec. 15-15. Application for registration; contents;
23 bond; issuance; effective date; consent to Secretary of State
24 as process agent.
25 (a) In order to be registered under this Act a loan
26 broker shall file an application for registration with the
27 Secretary of State. The application for registration shall
28 contain:
29 (1) the disclosure document required under
30 subsection (b) of Section 15-30 of this Act and the form
31 of disclosure statement proposed to be used under item
32 (1) of subsection (b) of Section 15-30 of this Act;
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1 (2) consent to service of process under subsection
2 (e) of this Section;
3 (3) (blank); evidence of the bond required in
4 subsection (b) of this Section;
5 (4) a fee in the amount as specified in subsection
6 (a) of Section 15-25 of this Act, and shall not be
7 returnable in any event.
8 (b) (Blank). A loan broker who engages in any loan
9 brokerage transactions where the loan is subject to the
10 Truth-in-Lending Act must maintain a bond satisfactory to the
11 Secretary of State in the amount of $25,000, which shall be
12 in favor of the State.
13 (c) Whenever the provisions of this Act have been
14 complied with, the Secretary of State shall issue a
15 certificate of registration to the applicant, authorizing the
16 applicant to engage in the business of loan brokering.
17 (d) An application for registration becomes effective 30
18 days after it is filed, unless a certificate of the Secretary
19 of State establishes an earlier effective date. Every
20 registration is effective until January 1 of the year after
21 it goes into effect.
22 (e) Every applicant for registration shall file with the
23 Secretary of State, in such form as the Secretary of State
24 may prescribe by rule or regulation, an irrevocable consent
25 appointing the Secretary of State to be the applicant's agent
26 to receive service of any lawful process in any noncriminal
27 suit, action or proceeding against the applicant arising from
28 the violation of any provision of this Act.
29 (f) An application shall be considered filed when all
30 required documentation and fees are received by the Office of
31 the Secretary of State.
32 (Source: P.A. 90-70, eff. 7-8-97; 91-357, eff. 7-29-99.)
33 (815 ILCS 175/15-40)
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1 Sec. 15-40. Denial, suspension or revocation of
2 registration; orders and hearing.
3 (a) The Secretary of State may deny, suspend or revoke
4 the registration of a loan broker if the loan broker:
5 (1) (Blank). Fails to maintain the bond required
6 under subsection (b) of Section 15-15 of this Act.
7 (2) Is insolvent.
8 (3) Has violated any provision of this Act.
9 (4) Has filed with the Secretary of State any
10 document or statement containing any false representation
11 of a material fact or omitting to state a material fact.
12 (5) Has been convicted, within 10 years before the
13 date of the application, renewal or review, of any crime
14 involving fraud or deceit.
15 (b) The Secretary of State may not enter a final order
16 denying, suspending or revoking the registration of a loan
17 broker without prior notice to all interested parties,
18 opportunity for a hearing and written findings of fact and
19 conclusions of law. The Secretary of State may by summary
20 order deny, suspend or revoke a registration pending final
21 determination of any proceeding under this Section. Upon the
22 entry of a summary order, the Secretary of State shall
23 promptly notify all interested parties that it has been
24 entered, of the reasons for the summary order and, that upon
25 receipt by the Secretary of State of a written request from a
26 party, the matter will be set for hearing which shall be
27 conducted in accordance with the provisions of the Illinois
28 Administrative Procedure Act. If no hearing is requested
29 within 30 days of the entry of the order and none is ordered
30 by the Secretary of State, the order remains in effect until
31 it is modified vacated, or superseded by a final order. A
32 final order may be entered by the Secretary of State against
33 any party who fails to request a hearing within 30 days of
34 the entry of the summary order. If a hearing is requested or
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1 ordered, the Secretary of State, after notice of the hearing
2 has been given to all interested persons and the hearing has
3 been held, may modify or vacate the order, extend it until
4 final determination, or issue a final order.
5 (Source: P.A. 89-209, eff. 1-1-96; 90-70, eff. 7-8-97.)
6 (815 ILCS 175/15-80)
7 Sec. 15-80. Persons exempt from registration and other
8 duties; burden of proof thereof.
9 (a) The following persons are exempt from the
10 requirements of Sections 15-10, 15-15, 15-20, 15-25, 15-30,
11 15-35, 15-40, and 15-75 of this Act:
12 (1) Any attorney while engaging in the practice of
13 law.
14 (2) Any certified public accountant licensed to
15 practice in Illinois, while engaged in practice as a
16 certified public accountant and whose service in relation
17 to procurement of a loan is incidental to his or her
18 practice.
19 (3) Any person licensed to engage in business as a
20 real estate broker or salesperson in Illinois while
21 rendering services in the ordinary course of a
22 transaction in which a license as a real estate broker or
23 salesperson is required.
24 (4) Any dealer, salesperson or investment adviser
25 registered under the Illinois Securities Law of 1953, or
26 an investment advisor, representative, or any person who
27 is regularly engaged in the business of offering or
28 selling securities in a transaction exempted under
29 subsection C, H, M, R, Q, or S of Section 4 of the
30 Illinois Securities Law of 1953 or subsection G of
31 Section 4 of the Illinois Securities Law of 1953 provided
32 that such person is registered under the federal
33 securities law.
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1 (4.1) An associated person described in subdivision
2 (h)(2) of Section 15 of the Federal 1934 Act.
3 (4.2) An investment adviser registered pursuant to
4 Section 203 of the Federal 1940 Investment Advisors Act.
5 (4.3) A person described in subdivision (a)(11) of
6 Section 202 of the Federal 1940 Investment Advisors Act.
7 (5) (Blank). Any person whose fee is wholly
8 contingent on the successful procurement of a loan from a
9 third party and to whom no fee, other than a bona fide
10 third party fee, is paid before the procurement.
11 (6) Any person who is a creditor, or proposed to be
12 a creditor, for any loan.
13 (7) (Blank).
14 (8) Any person regulated by the Department of
15 Financial Institutions or the Office of Banks and Real
16 Estate, or any insurance producer or company authorized
17 to do business in this State.
18 (b) As used in this Section, "bona fide third party fee"
19 includes fees for:
20 (1) Credit reports, appraisals and investigations.
21 (2) If the loan is to be secured by real property,
22 title examinations, an abstract of title, title
23 insurance, a property survey and similar purposes.
24 (c) As used in this Section, "successful procurement of
25 a loan" means that a binding commitment from a creditor to
26 advance money has been received and accepted by the borrower.
27 (d) The burden of proof of any exemption provided in
28 this Act shall be on the party claiming the exemption.
29 (Source: P.A. 90-70, eff. 7-8-97; 91-435, eff. 8-6-99.)
30 Section 15. The Illinois Business Brokers Act of 1995 is
31 amended by changing Sections 10-25 and 10-60 as follows:
32 (815 ILCS 307/10-25)
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1 Sec. 10-25. Fees and funds. All fees and funds accruing
2 for the administration of this Act shall be accounted for by
3 the Secretary of State and shall be deposited with the State
4 Treasurer who shall deposit them in the Securities Audit and
5 Enforcement Fund.
6 (a) The Secretary of State shall, by rule or regulation,
7 impose and collect fees necessary for the administration of
8 this Act, including but not limited to, fees for the
9 following purposes:
10 (1) Filing an application pursuant to Section 10-10
11 of this Act;
12 (2) Examining an application pursuant to Sections
13 10-10 and 10-20 of this Act;
14 (3) Registering a business broker under Section
15 10-10 of this Act;
16 (4) Renewing registration of a business broker
17 pursuant to Section 10-20 of this Act;
18 (5) Failure to file or file timely any document or
19 information required under this Act;
20 (6) (Blank). Filing a notice of lien with the
21 Secretary of State pursuant to Section 10-115 of this
22 Act.
23 (b) The Secretary of State may, by rule or regulation,
24 raise or lower any fee imposed by, and which he or she is
25 authorized by law to collect under, this Act.
26 (Source: P.A. 90-70, eff. 7-8-97; 91-194, eff. 7-20-99;
27 91-534, eff. 1-1-00.)
28 (815 ILCS 307/10-60)
29 Sec. 10-60. Violations; liability of business broker to
30 damaged parties; rights of prospective client. A person who
31 commits a material violation of this Act, in connection with
32 a contract for the services of a business broker, is liable
33 to any client damaged by the violation, for the amount of the
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1 actual damages suffered, but not more than the fees actually
2 paid by the client seeking relief, together with interest at
3 the legal rate, and attorney fees. If a business broker
4 commits a material violation of Section Sections 10-10,
5 10-20, or and 10-30 of this Act, in connection with a
6 contract for business brokering services, the contract is
7 void, and the prospective client is entitled to receive from
8 the business broker all sums paid to the business broker,
9 with interest and any attorney's fee required to enforce this
10 Section.
11 (Source: P.A. 89-209, eff. 1-1-96; 90-70, eff. 7-8-97.)
12 Section 20. The Business Opportunity Sales Law of 1995 is
13 amended by changing Sections 5-5.10, 5-10, and 5-45 as
14 follows:
15 (815 ILCS 602/5-5.10)
16 Sec. 5-5.10. Business opportunity.
17 (a) "Business opportunity" means a contract or
18 agreement, between a seller and purchaser, express or
19 implied, orally or in writing, wherein it is agreed that the
20 seller or a person recommended by the seller shall provide to
21 the purchaser any product, equipment, supplies or services
22 enabling the purchaser to start a business when the purchaser
23 is required to make a payment to the seller or a person
24 recommended by the seller of more than $500 and the seller
25 represents directly or indirectly, orally or in writing,
26 that:
27 (1) the seller or a person recommended by the
28 seller will provide or assist the purchaser in finding
29 locations for the use or operation of vending machines,
30 racks, display cases or other similar devices, on
31 premises neither owned nor leased by the purchaser or
32 seller;
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1 (2) the seller or a person recommended by the
2 seller will provide or assist the purchaser in finding
3 outlets or accounts for the purchaser's products or
4 services;
5 (3) the seller or a person specified by the seller
6 will purchase any or all products made, produced,
7 fabricated, grown, bred or modified by the purchaser;
8 (4) the seller guarantees that the purchaser will
9 derive income from the business which exceeds the price
10 paid to the seller;
11 (5) the seller will refund all or part of the price
12 paid to the seller, or repurchase any of the products,
13 equipment or supplies provided by the seller or a person
14 recommended by the seller, if the purchaser is
15 dissatisfied with the business; or
16 (6) the seller will provide a marketing plan,
17 provided that this Law shall not apply to the sale of a
18 marketing plan made in conjunction with the licensing of
19 a federally registered trademark or federally registered
20 service mark.
21 (b) "Business opportunity" does not include:
22 (1) any offer or sale of an ongoing business
23 operated by the seller and to be sold in its entirety;
24 (2) any offer or sale of a business opportunity to
25 an ongoing business where the seller will provide
26 products, equipment, supplies or services which are
27 substantially similar to the products, equipment,
28 supplies or services sold by the purchaser in connection
29 with the purchaser's ongoing business;
30 (3) any offer or sale of a business opportunity
31 which is a franchise as defined by the Franchise
32 Disclosure Act of 1987;
33 (4) any offer or sale of a business opportunity
34 which is registered pursuant to the Illinois Securities
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1 Law of 1953;
2 (5) (blank); any offer or sale of a business
3 opportunity which involves a marketing plan made in
4 conjunction with the licensing of a federally registered
5 trademark or federally registered service mark provided
6 that the seller had a minimum net worth of $1,000,000 as
7 determined on the basis of the seller's most recent
8 audited financial statement prepared within 13 months of
9 the first offer in this State. Net worth may be
10 determined on a consolidated basis where the seller is at
11 least 80% owned by one person and that person expressly
12 guarantees the obligations of the seller with regard to
13 the offer or sale of any business opportunity claimed to
14 be excluded under this item;
15 (6) any offer or sale of a business opportunity by
16 an executor, administrator, sheriff, marshal, receiver,
17 trustee in bankruptcy, guardian or conservator or a
18 judicial offer or sale, of a business opportunity; or
19 (7) cash payments made by a purchaser not exceeding
20 $500 and the payment is made for the not-for-profit sale
21 of sales demonstration equipment, material or samples, or
22 the payment is made for product inventory sold to the
23 purchaser at a bona fide wholesale price.
24 (Source: P.A. 90-70, eff. 7-8-97; 91-357, eff. 7-29-99.)
25 (815 ILCS 602/5-10)
26 Sec. 5-10. Exemptions. Registration pursuant to Section
27 5-30 This Law shall not apply to any of the following:
28 (a) Any offer or sale of a business opportunity for
29 which the immediate cash payment made by the purchaser for
30 any business opportunity is at least $25,000 if the immediate
31 cash payment does not exceed 20% of the purchaser's net
32 worth as determined exclusive of principal residence,
33 furnishings therein, and automobiles; provided, however, the
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1 Secretary of State may by rule or regulation withdraw or
2 further condition the availability of this exemption.
3 (b) Any offer or sale of a business opportunity for
4 which the seller does not advertise, solicit, or sell for
5 purchaser is not required to make an initial payment to the
6 seller or a person recommended by the seller exceeding $500.
7 (c) Any offer or sale of a business opportunity where
8 the seller has a net worth of not less than $1,000,000 as
9 determined on the basis of the seller's most recent audited
10 financial statement, prepared within 13 months of the first
11 offer in this State. Net worth may be determined on a
12 consolidated basis where the seller is at least 80% owned by
13 one person and that person expressly guarantees the
14 obligations of the seller with regard to the offer or sale of
15 any business opportunity claimed to be exempt under this
16 subsection. The Secretary of State may by rule or regulation
17 withdraw or further condition the availability of this
18 exemption.
19 (d) Any offer or sale of a business opportunity where
20 the purchaser has a net worth of not less than $250,000. Net
21 worth shall be determined exclusive of principal residence,
22 furnishings therein, and automobiles. The Secretary of State
23 may by rule or regulation withdraw or further condition the
24 availability of this exemption.
25 (e) Any offer or sale of a business opportunity where
26 the purchaser is a bank, savings and loan association, trust
27 company, insurance company, credit union, or investment
28 company as defined by the federal Investment Company Act of
29 1940, pension or profit sharing trust, or other financial
30 institution or institutional buyer, or a dealer registered
31 under the Illinois Securities Law of 1953, where the
32 purchaser is acting for itself or in a fiduciary capacity.
33 (f) Any offer or sale of a business opportunity which is
34 defined as a franchise under the Franchise Disclosure Act of
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1 1987 provided that the seller delivers to each purchaser at
2 the earlier of the first personal meeting, or 10 business
3 days prior to the earlier of the execution by a purchaser of
4 any contract or agreement imposing a binding legal obligation
5 on the purchaser or the payment by a purchaser of any
6 consideration in connection with the offer or sale of the
7 business opportunity, one of the following disclosure
8 documents:
9 (1) The Franchise Offering Circular provided for
10 under the Franchise Disclosure Act of 1987 which the
11 Secretary of State may adopt by rule or regulation; or
12 (2) A disclosure document prepared pursuant to the
13 Federal Trade Commission rule entitled Disclosure
14 Requirements and Prohibitions Concerning Franchising and
15 Business Opportunity Ventures, 16 C.F.R. Sec. 436 (1979).
16 For the purposes of this subsection, a personal meeting
17 shall mean a face-to-face meeting between the purchaser
18 and the seller or their representatives, which is held
19 for the purpose of discussing the offer or sale of a
20 business opportunity.
21 (g) Any offer or sale of a business opportunity for
22 which the cash payment required to be made by a purchaser for
23 any business opportunity does not exceed $500 and the payment
24 is made for the not-for-profit sale of sales demonstration
25 equipment, material, or samples or the payment is made for
26 product inventory sold to the purchaser at a bona fide
27 wholesale price.
28 (h) Any offer or sale of a business opportunity which
29 the Secretary of State exempts by order or a class of
30 business opportunities which the Secretary of State exempts
31 by rule or regulation upon the finding that such exemption
32 would not be contrary to public interest and that
33 registration would not be necessary or appropriate for the
34 protection of purchasers.
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1 (Source: P.A. 89-209, eff. 1-1-96.)
2 (815 ILCS 602/5-45)
3 Sec. 5-45. Denial, suspension, or revocation of
4 registration.
5 (a) The Secretary of State may issue an order denying
6 effectiveness to, or suspending or revoking the effectiveness
7 of, a registration if the Secretary of State finds that the
8 order is in the public interest and that any of the following
9 exist:
10 (1) The registration as of its effective date or as
11 of any earlier date in the case of an order denying
12 effectiveness, or any amendment as of its effective date,
13 or any report is incomplete in any material respect or
14 contains any statement which was, in the light of the
15 circumstances under which it was made, false or
16 misleading with respect to any material fact.
17 (2) Any provision of this Law or any rule,
18 regulation, order, or condition lawfully imposed under
19 this Law has been willfully violated, in connection with
20 the business opportunity:
21 (A) by the person filing the registration; or
22 (B) by the seller, any partner, officer, or
23 director of the seller, any person occupying a
24 similar status or performing similar functions, or
25 any person directly or indirectly controlling or
26 controlled by the seller, but only if the person
27 filing the registration is directly or indirectly
28 controlled by or acting for the seller.
29 (3) The business opportunity registered or sought
30 to be registered is the subject of an administrative
31 order denying, suspending or revoking a registration or a
32 permanent or temporary injunction or final order of any
33 court of competent jurisdiction; but the Secretary of
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1 State:
2 (A) may not institute a proceeding against an
3 effective registration under this paragraph more
4 than one year from the date of the order or
5 injunction relied on; and
6 (B) may not enter an order under this
7 paragraph on the basis of an order or injunction
8 entered under any other State Act unless that order
9 or injunction was based on facts which would
10 currently constitute a ground for an order under
11 this Section.
12 (4) The seller's enterprise or method of business,
13 or that of the business opportunity, includes or would
14 include activities which are illegal where performed.
15 (5) The business opportunity or the offering of a
16 business opportunity has worked or tended to work a fraud
17 upon purchasers or would so operate.
18 (6) There has been a failure to file any documents
19 or information required by Section 5-30 of this Law.
20 (7) The seller has failed to pay the proper filing
21 fee but the Secretary of State may enter only a denial
22 order under this paragraph and the Secretary of State
23 shall vacate any such order when the deficiency has been
24 corrected.
25 (8) The seller's literature or advertising is
26 misleading, incorrect, incomplete or deceptive.
27 (b) The Secretary of State may not institute a
28 proceeding under this Section against an effective
29 registration on the basis of a fact or transaction known to
30 the Secretary of State when the registration became effective
31 unless the proceeding is instituted within the next 30 days.
32 (c) The Secretary of State may by summary order postpone
33 or suspend the effectiveness of the registration pending
34 final determination of any proceeding under this Section.
-75- LRB9111259STsb
1 Upon the entry of the order, the Secretary of State shall
2 promptly notify the seller that the order has been entered
3 and of the reasons therefor and that within 15 days after the
4 receipt of a written request the matter will be set down for
5 hearing. The written request must be made within 30 days of
6 the entry of the order. If no hearing is requested and none
7 is ordered by the Secretary of State, the order will remain
8 in effect until it is modified or vacated by the Secretary of
9 State. If a hearing is requested or ordered, the Secretary of
10 State, after notice of an opportunity for hearing to the
11 seller, may modify or vacate the order or extend it until
12 final determination.
13 (d) No summary order may be entered under any part of
14 this Section, except the first sentence of subsection (c) of
15 this Section, without appropriate prior notice to the seller,
16 opportunity for hearing, and written findings of fact and
17 conclusions of law.
18 (e) The Secretary of State may vacate or modify an order
19 issued under this Section if the Secretary of State finds
20 that the conditions which prompted its entry have changed or
21 that it is otherwise in the public interest to do so.
22 (f) Notwithstanding anything in this Act to the
23 contrary, the Secretary of State, after notice and
24 opportunity for hearing, may, at the Secretary of State's
25 discretion, enter into an agreed settlement, stipulation, or
26 consent order with a respondent in accordance with the
27 provisions of the Illinois Administrative Procedure Act. The
28 provisions of the agreed settlement, stipulation, or consent
29 order shall have the full force and effect of an order issued
30 by the Secretary of State.
31 (g) The action of the Secretary of State in issuing any
32 order under this Section shall be subject to judicial review
33 under the Administrative Review Law.
34 (Source: P.A. 90-70, eff. 7-8-97; 91-357, eff. 7-29-99.)
-76- LRB9111259STsb
1 INDEX
2 Statutes amended in order of appearance
3 815 ILCS 5/2.5a from Ch. 121 1/2, par. 137.2-5a
4 815 ILCS 5/2.9 from Ch. 121 1/2, par. 137.2-9
5 815 ILCS 5/2.12b from Ch. 121 1/2, par. 137.2-12b
6 815 ILCS 5/3 from Ch. 121 1/2, par. 137.3
7 815 ILCS 5/4 from Ch. 121 1/2, par. 137.4
8 815 ILCS 5/8 from Ch. 121 1/2, par. 137.8
9 815 ILCS 5/11 from Ch. 121 1/2, par. 137.11
10 815 ILCS 5/12 from Ch. 121 1/2, par. 137.12
11 815 ILCS 175/15-15
12 815 ILCS 175/15-40
13 815 ILCS 175/15-80
14 815 ILCS 307/10-25
15 815 ILCS 307/10-60
16 815 ILCS 602/5-5.10
17 815 ILCS 602/5-10
18 815 ILCS 602/5-45