815 ILCS 5/6

Current through Public Act 103-1052

Section 815 ILCS 5/6 - Registration of Face Amount Certificate Contracts

All face amount certificate contracts except those set forth under Section 2a of this Act, or those exempt under Section 3 of this Act, or those offered or sold in transactions exempt under Section 4 of this Act, shall be registered either by coordination or by qualification, as hereinafter in this Section provided, prior to their offer or sale in this State.

A.Registration of Face Amount Certificate Contracts by Coordination.

(1) Face amount certificate contracts which are being or have been registered under the Federal 1933 Act may be registered by coordination in the manner provided in this subsection A, if the effective date of the registration under the Federal 1933 Act is not more than 30 days before the filing with the Secretary of State.

(2) Face amount certificate contracts may be registered by coordination by the filing with the Secretary of State by the issuer, by a controlling person or by a registered dealer of:

(a) One copy of the registration statement (without exhibits) descriptive of the face amount certificate contracts on file with the Securities and Exchange Commission in its most recent form as of the date of the initial filing under this subsection A;

(b) An application, in such form and executed, verified, or authenticated by such person as the Secretary of State shall by rule or regulation prescribe, setting forth the title of every series, type or class of face amount certificate contracts to be offered in this State under this subsection A and, if the applicant is electing the date of effectiveness of a post-effective amendment as its effective date as provided in Section 2.13 of this Act, specifying such date as the effective date for purposes of registration under this subsection A;

(c) An undertaking to forward to the Secretary of State, in writing (which may be by electronic or facsimile transmission), any and all subsequent amendments of and supplements to the registration statement not later than the 7th day after the forwarding thereof to the Securities and Exchange Commission, or such longer period as the Secretary of State may permit by rule, regulation or order; and

(d) If the applicant is not a registered dealer, the name of at least one registered dealer for the face amount certificate contracts being registered under this subsection A or a written statement setting forth the method of offer and sale in this State of the face amount certificate contracts being registered in compliance with Section 8 of this Act.

(3) Registration of face amount certificate contracts by coordination shall take effect automatically as of the effective date of the registration statement (or post-effective amendment) filed under the Federal 1933 Act, provided that on the effective date, the information required by sub-paragraphs (a), (b), and (d) and the undertaking required by sub-paragraph (c) of paragraph (2) of this subsection A have been on file with the Secretary of State for at least 10 business days, or such shorter period as the Secretary of State may permit by rule, regulation or order. If, however, the time period referred to in the preceding sentence shall not have expired on the effective date of the registration statement (or post-effective amendment) filed under the Federal 1933 Act, registration of such face amount certificate contracts by coordination shall, upon the expiration of such time period, take effect automatically as of the effective date of the registration statement (or post-effective amendment) filed under the Federal 1933 Act.

(4) If the information required by sub-paragraphs (a), (b), and (d) and the undertaking required by sub-paragraph (c) of paragraph (2) of this subsection A are not filed with the Secretary of State prior to the effective date of the registration statement (or post-effective amendment) filed under the Federal 1933 Act, any registration of face amount certificate contracts by coordination under this subsection A shall take effect automatically as soon as all of the following conditions have been satisfied:

(a) the information required by sub-paragraphs (a), (b), and (d) and the undertaking required by sub-paragraph (c) of paragraph (2) of this subsection A have been on file with the Secretary of State for 10 business days, or for such shorter period as the Secretary of State may permit by rule, regulation or order;

(b) the registration statement or post-effective amendment filed under the Federal 1933 Act is then in effect; and

(c) the prospectus then on file with the Secretary of State satisfies the requirements of Section 10(a)(3) of the Federal 1933 Act.

(5) The applicant shall furnish to the Secretary of State written notice (which may be by electronic or facsimile transmission) confirming the date of effectiveness and the title of the face amount certificate contracts registered under the Federal 1933 Act, no later than the close of business on the second business day following the date on which registration becomes effective under the Federal 1933 Act.

(6) No action by the Secretary of State shall be necessary to evidence the effectiveness of the registration by coordination under this subsection A. The Secretary of State may, at his or her discretion, provide a statement attesting to such registration, which statement shall be in such form as the Secretary of State may deem appropriate.

(7) Notwithstanding the foregoing, the issuer, controlling person or registered dealer who filed the application set forth in subparagraph (b) of paragraph (2) of this subsection A may request, in writing (which may be by electronic or facsimile transmission) prior to or upon notice of effectiveness under the Federal 1933 Act, a waiver of automatic effectiveness of the registration of the face amount certificate contracts and the Secretary of State may, at his or her discretion, grant such waiver of automatic effectiveness. Upon the grant by the Secretary of State of the request of waiver of automatic effectiveness, such registration of the face amount certificate contracts shall become effective automatically on the date that the issuer, controlling person or registered dealer who filed the application set forth in subparagraph (b) of paragraph (2) of this subsection A notifies the Secretary of State in writing.

B.Registration of Face Amount Certificate Contracts by Qualification. Face amount certificate contracts may be registered by qualification in the manner provided in this subsection B.

(1) An application for registration by qualification shall be made by the issuer, by a controlling person or by a registered dealer together with the examination fee established pursuant to Section 11a of the Act, which shall not be returnable in any event. Such application shall be executed, verified, or authenticated by the applicant and filed with the Secretary of State. The application shall set forth:

(a) The names and addresses of the persons creating or sponsoring the face amount certificate contracts; and

(b) The title of each series, type or class of face amount certificate contracts to be offered.

(2) If the issuer, dealer, or controlling person has not filed a registration statement or post-effective amendment which is then in effect under the Federal 1933 Act, there shall be filed with the application:

(a) Specimen copies of each and every series, type or class of face amount certificate contract proposed to be offered in this State, and specimen copies of each and every form of face amount certificate contract or other security being issued or proposed to be offered and issued elsewhere;

(b) (Blank);

(c) (Blank);

(d) An opinion of counsel as to the legality of the face amount certificate contracts;

(e) An undertaking to file promptly (no later than 2 business days after the occurrence of any event which requires a material change in the prospectus) with the Secretary of State any and all amendments of and supplements to the prospectus as theretofore filed under this subsection B, together with any additional information, document or undertaking which the Secretary of State at his or her discretion, deems material, accompanied by the amendment filing fee established pursuant to Section 11a of this Act or, in lieu thereof, a notification in writing that all offers and sales of the face amount certificate contracts have been suspended pending the filing with the Secretary of State of such amendment of or supplement to the prospectus; and

(3) In addition, there shall be filed with the application such additional information and material in such form as the Secretary of State may by rule, regulation or order prescribe and a prospectus which contains, but is not limited to the following:

(a) The date and form of organization of the issuer;

(b) A brief description of the business conducted and intended to be conducted by the issuer and by its subsidiaries and the general development of such business during the past 5 years or such shorter period as the issuer and such subsidiaries may have been in existence;

(c) The location and general character of the physical properties of the issuer and of its subsidiaries;

(d) A complete description of the terms and conditions of each and every series, type or class of face amount certificate contracts being issued or proposed to be offered in this State or elsewhere, which description shall include appropriate tables of initial or periodic installment payments required of the purchaser, surrender or liquidation values, maturity values, optional plans of extended contract periods and schedules of annuity payments which may be elected by a face amount certificate contract holder;

(e) A schedule of all types of deductions which may be made from plan payments or the income therefrom or the avails thereof as charges prior to distributions to holders of the face amount certificate contracts;

(f) The names and addresses of all of the issuer's officers and directors, or persons performing similar functions, their business experience during the preceding 5 years and the remuneration paid to each by the issuer and its subsidiaries during the fiscal year last past and proposed to be paid for the then current fiscal year;

(g) The names and addresses of all persons owning of record, and of all persons owning beneficially, to the extent known to the applicant, 10% or more of any class of equity securities of the issuer, and the percentage owned by each;

(h) A brief description of any pending material legal proceeding, and of any material legal proceeding known to be contemplated by governmental authorities, involving the issuer or its subsidiaries; and

(i) The following financial statements of the issuer:

(i) a balance sheet as of a date within 135 days prior to the date application for registration is received by the Secretary of State, which balance sheet, if not certified by an independent certified public accountant, shall be accompanied by a certified balance sheet of the issuer as of the close of the last prior fiscal year;

(ii) a detailed statement of income and expenses, including income from investments, service fees, loading and other sources, operating expenses and provisions for contract reserves or any additional credits to contract liabilities, profits realized and losses sustained in transactions in investments, and all other charges to operations, for a period of not less than 3 fiscal years (or for the period of existence of the issuer if less than 3 years) last preceding the date of the balance sheet presented under subdivision (i) of this subparagraph (i), which statement of income and expenses, if not certified by an independent certified public accountant, shall be accompanied by a certified statement of income and expenses for a period of 3 years last preceding the uncertified period or periods presented as and for this subdivision (ii);

(iii) a detailed analysis of each surplus and reserve account for the same period or periods covered by subdivision (ii) of this subparagraph (i), with like requirement for independent certification; and

(iv) such other financial data as the Secretary of State may reasonably require in any specific case or by rule or regulation.

(4) The Secretary of State shall within a reasonable time examine the application and related documents filed with him or her and, unless the Secretary of State makes a determination that the application and related documents so filed do not conform to the requirements of this subsection B or there is a proceeding pending under Section 11 of this Act, shall upon receipt of the deposit required by subsection G of this Section 6 and upon receipt of the registration fee as hereinafter prescribed, register the face amount certificate contracts, as described by series, type or class within the application, for offer and sale in this State under this subsection B.

C.Pending Application and Filing Fee. No application for registration of face amount certificate contracts shall be deemed to be filed or pending and no face amount certificate contracts covered by such application shall be deemed to be registered under subsection A of this Section 6 unless a filing fee in the amount established pursuant to Section 11a of this Act has been paid, which shall not be returnable in any event. No application for registration of face amount certificate contracts shall be deemed to be filed or pending and no face amount certificate contracts covered by such application shall be deemed to be registered under subsection B of this Section 6 unless the examination fee and filing fee established pursuant to Section 11a of this Act have been paid, which fees shall not be returnable in any event.

D.Effective Period and Sales Reports.

(1) A registration under subsection A or B of this Section 6, unless sooner terminated by the voluntary action of the issuer, or by suspension or revocation by the Secretary of State, shall continue in force and effect for a period of one year from the date of registration or renewal of registration or such other period of time as the Secretary of State may prescribe by rule or regulation, and shall permit the offer and sale of face amount certificate contracts so registered without limitation as to number or aggregate amount during such period of registration; provided, however, that, in the case of face amount certificate contracts registered under subsection B of this Section 6, the issuer shall promptly file with the Secretary of State, throughout such registration year, (i) one specimen copy of each monthly, quarterly, semi-annual or other periodic or special report and of each financial statement distributed to contract holders; (ii) one certified copy of all statements and reports filed with any regulatory authority or agency of the Federal Government which relate to the issuer or the issuance of the securities registered pursuant to this Section 6 and (iii) one copy of each independently certified audit report pertaining to the financial affairs and position of the issuer covering the issuer's fiscal year ending during the registration year, to be supplied to the Secretary of State as soon as available after the close of the issuer's fiscal year.

(2) The Secretary of State may, at his or her discretion, require each issuer, controlling person or registered dealer on whose behalf a registration of face amount certificate contracts is effective under this Section 6 to file a report, in such form and of such content and for such time period as the Secretary of State may by rule or regulation prescribe, stating the aggregate dollar amount of face amount certificate contracts sold to Illinois residents. The civil remedies provided for in subsection A of Section 13 of this Act and the civil remedies of rescission and appointment of a receiver, conservator, ancillary receiver or ancillary conservator provided for in subsection I of Section 11 and in subsections F and G of Section 13 of this Act and the civil remedies of restitution, damages and disgorgement of profits provided for in subsection I of Section 11 of this Act shall not be available against any person by reason of the failure to file any such report or on account of the contents of any such report.

E.Amendatory statements and required fees. The Secretary of State may by rule or regulation require the filing of an amendatory statement and prescribe its form and content. The fee for filing the statement shall be established pursuant to Section 11a of this Act. The fee shall not be returnable in any event.

F.Renewal of Registration. A registration of face amount certificate contracts in effect under subsection A or B of this Section 6 may be renewed by the issuer by filing an application for renewal with the Secretary of State no later than 10 business days prior to the date upon which such registration would otherwise expire, (or such lesser period as the Secretary of State may prescribe by rule or regulation) in such form and executed, verified, or authenticated by such person as the Secretary of State shall prescribe by rule or regulation. Such application shall be accompanied by a prospectus in its most current form together with a renewal fee established pursuant to Section 11a of this Act, which shall not be returnable in any event. A renewal of registration of face amount certificate contracts shall take effect as of the date and time that the prior registration under subsection A of this Section 6 or prior renewal under this subsection F would otherwise have expired and (or such alternative date as the Secretary of State may prescribe by rule or regulation) thereafter shall be deemed to be a new registration of the face amount certificate contracts covered thereby. The Secretary of State may by rule or regulation prescribe an additional fee for the failure to file timely an application for renewal and limit the number of times a registration may be renewed.

G.Deposit of Securities. No face amount certificate contract shall be registered under subsection B of this Section 6 unless the issuer shall establish and maintain with the Secretary of State, for the benefit of the holders of such contracts residing in this State, a deposit of securities representing debt obligations of the kind in which life insurance companies organized under the laws of this State are permitted to invest their funds, in an amount having a fair market value of not less than $100,000 and at no time less than the current contract liability on all such face amount certificate contracts held by persons residing in this State, and provided further that deposited securities, other than those secured by entire first mortgage or trust deeds on improved unencumbered real estate, are issued by an issuer required to file reports pursuant to Section 13 or 15(d) of the Federal 1934 Act or are covered by Section 12(g)(2)(B) or (G) of the Federal 1934 Act, or appear in current quotations in transactions on exchanges recognized by subsection G of Section 3 of this Act, and provided further, that bonds or notes secured by mortgages or trust deeds be limited to those (i) constituting the entire indebtedness secured thereby, (ii) establishing a first lien on improved real estate held in fee simple, and (iii) insured by the Federal Housing Administrator under an Act of Congress of the United States entitled "National Housing Act". Debentures issued by the Federal Housing Administrator under an Act of Congress of the United States entitled the "National Housing Act" may be included in the deposit prescribed by this subsection in amounts related to, and in substitution for, specific insured mortgage loans then included in the subject deposit which are in default, but at no time shall the aggregate principal amount of such debentures included in the subject deposit exceed 5% of the fair market value of securities comprising the subject deposit. The current contract liability in respect of contracts held by persons residing in this State shall be that as determined in such contracts as computed by the issuer and regularly certified to the Secretary of State, on or before the last day of each calendar month as of the close of the month last prior to the date of reporting.

Securities deposited as hereinabove required may be withdrawn by the depositor at any time, and from time to time, whenever other securities eligible for deposit and of a fair market value not less than that withdrawn are deposited in substitution for securities withdrawn.

The Secretary of State may, upon receipt of appropriate certification in writing, deemed by the Secretary of State to be competent and adequate, evidencing the reduction of contract liability on contracts held by persons residing in this State to an aggregate amount representing not more than 90% of the fair market value of the securities then on deposit, permit an equivalent reduction in the deposited securities.

H.Minimum Deposit; Annual Fee; Transaction Charge. The initial and continuing deposit required hereby shall, so long as the face amount certificate contracts registered under subsection B of this Section 6 are being offered and sold in this State, and until all contract liability on all contracts outstanding in this State has been discharged, include obligations of the United States or the State of Illinois in bearer form or fully registered, or registered as to principal, in the title of Treasurer of the State of Illinois, and his or her successors in office, in the minimum principal amount of $50,000. An issuer of face amount certificate contracts, in respect of which a deposit is required to be established and maintained under this Section 6, and an issuer of face amount certificate contracts heretofore qualified for issuance to persons residing in this State under "An Act relating to the sale or other disposition of securities and providing penalties for the violation thereof and to repeal Acts in conflict therewith", approved June 10, 1919, as amended, and in respect of which a deposit of securities was established and has been maintained under the Act approved June 10, 1919, as cited above, shall pay to the Secretary of State an annual fee determined at the rate of 1/30th of one percent on the average of quarterly computations on the aggregate of principal amounts of market-quoted or listed securities and the original loan amounts of real estate loans insured by the Federal Housing Administrator, and in addition each such issuer shall pay to the Secretary of State, against quarterly billings therefor, a transaction charge in the amount established pursuant to Section 11a of this Act, which annual fee and transaction charge shall not be returnable in any event, for each separate issue or loan included in additions to and withdrawals from such deposits, provided however that the transaction charge established pursuant to Section 11a of this Act for each separate issue of market-quoted or listed securities shall apply to all the items of that issue included in a single transaction, regardless of the aggregate principal amount, and in respect of real estate loans such transaction charge shall apply to the group of documents pertaining to each separate loan, and not to the separate items and documents included in such group.

Nothing herein contained in respect of prescribed custody of deposited securities with the State Treasurer and of permissible procedures of liquidation of deposited securities by the Secretary of State in the event of insolvency of an issuer of face amount certificate contracts, or the appointment of a trustee in bankruptcy, shall preclude the surrender of deposited securities to a duly qualified trustee under appointment by a Court having jurisdiction under the Federal Bankruptcy Code under an appropriate order of such Court.

I.Liquidation of Securities. Upon the insolvency of the issuer of face amount certificate contracts or appointment of a receiver or trustee in bankruptcy, the Secretary of State, if not required otherwise under Federal law or under an order of a Federal Court of competent jurisdiction, may apply to the Circuit Court of Sangamon County, or any other court of competent jurisdiction, for authority to proceed for the liquidation of such securities held for the benefit of the holders of such contracts who reside in this State. The Secretary of State is hereby authorized to deal with such securities on deposit in this State for the benefit of the holders of such face amount certificate contracts, in his or her name or, if the Court shall so order, in the name of the issuer. The Secretary of State may, subject to the approval of the Court, sell or otherwise dispose of the securities so deposited or any part thereof. The Secretary of State shall as soon as may be conveniently possible, give notice by publication as provided by law, and as the Court may direct, to all contract holders residing in this State who may have claims against the issuer under such face amount certificate contracts and for whose benefit such deposit is held, to file and prove their claims in the manner and within the time the Court shall direct. In order to preserve so far as possible the rights and interests of the holders of outstanding contracts of such issuer who reside in this State, the Secretary of State may liquidate such securities on deposit in this State by entering into contracts with any issuer or person able to buy such securities in whole, or in part. Upon receiving an offer or offers for the purchase of such securities in whole, or in part, the Secretary of State shall submit such offer or offers to the Court, and if, after a full hearing upon the petition filed by the Secretary of State, the court shall find that the Secretary of State endeavored to obtain the best contract price for the benefit of the contract holders, and if the court shall find that the best contract price in the interests of the contract holders has been obtained, and that it is for the best interests of the holders of such contracts that such securities be sold, the court shall, by written order approve the acts of the Secretary of State and authorize him or her to dispose of such securities. Upon the conversion of such securities to cash, the Secretary of State may then proceed to dispose of the sum received for such securities among the respective holders of such contracts as their interests may appear. Upon the liquidation and distribution of such funds, the Secretary of State may make proper liquidation of such securities and the distribution or disposition thereof or of the proceeds therefrom as herein provided.

For the purpose of liquidation of such securities, the Secretary of State shall have the power to appoint one or more special deputies as his or her agent or agents and to employ such clerks, assistants or attorneys as may by him or her be deemed necessary and to give each of such persons such power to assist him or her as he or she may consider wise. The compensation of every such special deputy, agent, clerk, assistant or attorney shall be fixed, and all expenses of taking possession of such securities of the issuer and the administration thereof shall be approved, by the Secretary of State subject to the approval of the court and shall be paid out of the funds or assets received from the liquidation of such securities.

J.The applicant or registrant shall notify the Secretary of State, by written notice (which may be by electronic or facsimile transmission), within 2 business days after its receipt of any stop order, denial, order to show cause, suspension or revocation order, injunction or restraining order, or similar order entered or issued by any state, federal or other regulatory authority or by any court, concerning the face amount certificate contracts which are being or have been registered in this State or any other securities of the issuer currently being or proposed to be offered to the public, if the matter which is the subject of, or the failure to disclose the existence of, such order would in this State constitute a violation of subsection E, F, G, H, I or J of Section 12 of this Act. The obligation contained in this subsection J shall continue until such time as offers and sales of the face amount certificate contracts registered under this Section 6 are no longer being made in this State by the applicant or registrant.

K.Any document being filed pursuant to this Section 6 shall be deemed filed, and any fee being paid pursuant to this Section 6 shall be deemed paid, upon the date of actual receipt thereof by the Secretary of State.

L.The Secretary of State may require by rule or regulation the payment of an additional fee for the filing of information or documents required to be filed by this Section 6 which have not been filed in a timely manner. Such fees shall be deposited into the Securities Investors Education Fund and used to promote public awareness of the dangers of securities fraud.

815 ILCS 5/6

P.A. 89-209, eff. 1/1/1996; 90-70, eff. 7/8/1997.