Public Act 104-0428 (SB 1797), Digital Assets and Consumer Protection Act (Part 1 of 2)
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Public Act 104-0428
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AN ACT concerning regulation.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Article 1. General Provisions
Section 1-1. Short title. This Act may be cited as the
Digital Assets and Consumer Protection Act.
Section 1-5. Definitions.
(a) As used in this Act:
"Affiliate" means any person that controls, is controlled
by, or is under common control with another person. For
purposes of this definition, "control" means the possession,
direct or indirect, of the power to direct or cause the
direction of the management and policies of a person.
"Applicant" means a person that applies for registration
under this Act.
"Bank" means a bank, savings banks, savings and loan
association, savings association, or industrial loan company
chartered under the laws of this State or any other state or
under the laws of the United States.
"Confidential supervisory information" means information
or documents obtained by employees, agents, or representatives
of the Department in the course of any examination,
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investigation, audit, visit, registration, certification,
review, licensing, or any other regulatory or supervisory
activity pursuant to this Act, and any record prepared or
obtained by the Department to the extent that the record
summarizes or contains information derived from any report,
document, or record described in this Act.
"Conflict of interest" means an interest that might
incline a covered person or an individual who is an associated
person of a covered person to make a recommendation that is not
disinterested.
"Corporate fiduciary" shall mean a corporate fiduciary as
defined by Section 1-5.05 of the Corporate Fiduciary Act.
"Covered person" means a registrant or person required to
register pursuant to this Act.
"Covered exchange" means a covered person that exchanges
or holds itself out as being able to exchange a digital asset
for a resident as part of a business or on behalf of a customer
who has entered into an agreement with a business for the
provision of such services.
"Credit union" means a credit union chartered under the
laws of this State or any other state or under the laws of the
United States.
"Department" means the Department of Financial and
Professional Regulation.
"Digital asset" means a digital representation of value
that is used as a medium of exchange, unit of account, or store
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of value, and that is not fiat currency, whether or not
denominated in fiat currency. "Digital asset" does not include
any of the following:
(1) A digital representation of value that a merchant
grants as part of an affinity or rewards program and that
primarily relates to such affinity or rewards program.
(2) A digital representation of value that is issued
by or on behalf of a game publisher and that is used
primarily within online games or gaming platforms.
(3) Other digital representations of value that have
substantial value, utility, or significance beyond the
asset's mere existence as a digital asset, including
digital equivalents of tangible and intangible goods such
as: (A) works of art, musical compositions, literary
works, and similar intellectual property; (B) collectibles
and merchandise; and (C) licenses, tickets, and similar
rights to attend events or participate in activities.
(4) A digital representation of value that is not
marketed, used, promoted, offered, or sold for investment
or speculation, except that this exclusion shall not apply
to any digital representation of value that (A) is
meme-based with no intrinsic value or utility or (B) is
marketed, used, promoted, offered, or sold in a manner
that intends to establish a reasonable expectation or
belief among the general public that the instrument will
retain a nominal value that is so stable as to render the
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nominal value effectively fixed. The Department may adopt
rules to clarify the scope and applicability of this
subsection.
(5) A digital representation of value that is used as
part of prepaid cards.
"Digital asset business activity" means any of the
following:
(1) Exchanging, transferring, or storing a digital
asset as part of a business or on behalf of a customer who
has entered into an agreement with a business for the
provision of such services.
(2) Engaging in digital asset administration.
(3) Any other business activity involving digital
assets designated by rule by the Department as may be
necessary and appropriate for the protection of residents.
"Digital asset business activity" does not include (1)
peer-to-peer exchanges or transfers of digital assets, (2)
decentralized exchanges facilitating peer-to-peer exchanges or
transfers solely through use of a computer program or a
transaction protocol that is intended to automatically
execute, control, or document events and actions, (3) the
development, publication, constitution, administration,
maintenance, and dissemination of software in and of itself,
(4) the issuance of a non-fungible token in and of itself, and
(5) validating a digital asset transaction, operating a node,
or engaging in similar activity to participate in
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facilitating, operating, or securing a blockchain system.
"Exchange", when used as a verb, means to exchange, buy,
sell, trade, or convert, on behalf of a resident, either of the
following:
(1) A digital asset for fiat currency or one or more
forms of digital assets.
(2) Fiat currency for one or more forms of digital
assets.
"Exchange" does not include buying, selling, or trading
digital assets for a person's own account in a principal
capacity.
"Executive officer" includes, without limitation, an
individual who is a director, officer, manager, managing
member, partner, or trustee, or other functionally equivalent
responsible individual, of a person.
"Federally insured depository institution" shall mean an
insured depository institution as defined by Section 3(c)(2)
of the Federal Deposit Insurance Act, 12 U.S.C. 1813(c)(2), as
amended, or an insured credit union as defined by Section
101(7) of the Federal Credit Union Act, 12 U.S.C. 1752(7), as
amended.
"Fiat currency" means a medium of exchange or unit of
value issued by the United States or a foreign government and
that is designated as legal tender in its country of issuance.
"Insolvent" means any of the following:
(1) Having generally ceased to pay debts in the
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ordinary course of business other than as a result of a
bona fide dispute.
(2) Being unable to pay debts as they become due.
(3) Being insolvent within the meaning of federal
bankruptcy law.
"Non-fungible token" means any unique digital identifier
on any blockchain or digital asset network used to certify
authenticity and ownership rights that is not readily
exchangeable or replaceable with a mutually interchangeable
digital asset of the same value. The Department may modify
this definition by rule.
"Person" includes, without limitation, any individual,
corporation, business trust, estate, trust, partnership,
proprietorship, syndicate, limited liability company,
association, joint venture, government, governmental
subsection, agency or instrumentality, public corporation or
joint stock company, or any other organization or legal or
commercial entity.
"Prepaid card" means an electronic payment device that,
subject to any rules adopted by the Department:
(1) is usable at a single merchant or an affiliated
group of merchants that share the same name, mark, or
logo, or is usable at multiple, unaffiliated merchants or
service providers;
(2) is issued in and for a specified amount of fiat
currency;
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(3) can be reloaded in and for only fiat currency, if
at all;
(4) is issued or reloaded on a prepaid basis for the
future purchase or delivery of goods or services;
(5) is honored upon presentation;
(6) can be redeemed in and for only fiat currency, if
at all;
(7) is governed by the Uniform Money Transmission
Modernization Act; and
(8) complies with any other condition designated by
rule by the Department as may be necessary and appropriate
for the protection of residents.
"Qualified custodian" means a bank, credit union, or trust
company, subject to any rules adopted by the Department.
"Record" means information that is inscribed on a tangible
medium or that is stored in an electronic or other medium and
is retrievable in perceivable form.
"Registrant" means a person registered under this Act.
"Resident" means any of the following:
(1) A person who is domiciled in this State.
(2) A person who is physically located in this State
for more than 183 days of the previous 365 days.
(3) A person who has a place of business in this State.
(4) A legal representative of a person that is
domiciled in this State.
"Request for assistance" means all inquiries, complaints,
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account disputes, and requests for documentation a covered
person receives from residents.
"Responsible individual" means an individual who has
direct control over, or significant management, policy, or
decision-making authority with respect to, a person's digital
asset business activity in this State.
"Secretary" means the Secretary of Financial and
Professional Regulation and any authorized representative of
the Secretary.
"Service provider" means any person that provides a
material service to a covered person in connection with the
offering or provision by that covered person of a digital
asset business activity in this State, including a person that
either:
(1) Participates in designing, operating, or
maintaining the digital asset business activity.
(2) Processes transactions relating to the digital
asset business activity, other than unknowingly or
incidentally transmitting or processing financial data in
a manner that the data is undifferentiated from other
types of data of the same form as the person transmits or
processes.
"State" means a state of the United States, the District
of Columbia, Puerto Rico, the United States Virgin Islands, or
any territory or insular possession subject to the
jurisdiction of the United States.
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"Store," "storage", and "storing", except in the phrase
"store of value," means to store, hold, or maintain custody or
control of a digital asset on behalf of a resident by a person
other than the resident.
"Transfer" means to transfer or transmit a digital asset
on behalf of a resident, including by doing any of the
following:
(1) Crediting the digital asset to the account or
storage of another person.
(2) Moving the digital asset from one account or
storage of a resident to another account or storage of the
same resident.
(3) Relinquishing custody or control of a digital
asset to another person.
"United States dollar equivalent of digital assets" means
the equivalent value of a particular digital asset in United
States dollars shown on a covered exchange regulated in the
United States for a particular date or period specified in
this Act, subject to any rules adopted by the Department.
(b) Whenever the terms "include", "including" or terms of
similar import appear in this Act, unless the context requires
otherwise, such terms shall not be construed to imply the
exclusion of any person, class, or thing not specifically
included.
(c) A reference in this Act to any other law or statute of
this State, or of any other jurisdiction, means such law or
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statute as amended to the effective date of this Act, and
unless the context otherwise requires, as amended thereafter.
(d) Any reference to this Act shall include any rules
adopted in accordance with this Act.
Section 1-10. Applicability.
(a) This Act governs the digital asset business activity
of a person doing business in this State or, wherever located,
who engages in or holds itself out as engaging in the activity
with or on behalf of a resident, to the extent not preempted by
federal law and except as otherwise provided in subsections
(b), (c), (d), or (e).
(b)(1) This Act does not apply to the exchange, transfer,
or storage of a digital asset or to digital asset
administration to the extent that:
(A) the Securities Exchange Act of 1934, 15 U.S.C.
78a et seq., or the Illinois Securities Law of 1953
govern the activity as a security transaction and the
activity is regulated by the U.S. Securities and
Exchange Commission or the Illinois Secretary of
State; or
(B) the Commodity Exchange Act, 7 U.S.C. 1 et
seq., governs the activity, the activity is in
connection with trading of a contract of sale of a
commodity for future delivery, an option on such a
contract or a swap, and the activity is regulated by
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the U.S. Commodity Futures Trading Commission.
(2) This subsection shall be construed in a manner
consistent with affording the greatest protection to
residents and the Department's authority under subsection
(a) of Section 1-15 to exercise nonexclusive oversight and
enforcement under any federal law applicable to digital
asset business activity. This subsection shall not be
construed to exempt an activity solely because a financial
regulatory agency has anti-fraud and anti-manipulation
enforcement authority over the activity.
(c) This Act does not apply to the following persons:
(1) The United States, a State, political subdivision
of a State, agency, or instrumentality of federal, State,
or local government, or a foreign government or a
subdivision, department, agency, or instrumentality of a
foreign government.
(2) A federally insured depository institution.
(3) A corporate fiduciary acting as a fiduciary or
otherwise engaging in fiduciary activities.
(4) A merchant using digital assets solely for the
purchase or sale of goods or services, excluding the sale
of purchase of digital assets, in the ordinary course of
its business.
(5) A person using digital assets solely for the
purchase or sale of goods or services for his or her own
personal, family, or household purposes.
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(6) A person who (A) contributes connectivity software
or computing power or otherwise participates in the
process of securing a network, (B) records digital asset
transactions to the network or protocol governing transfer
of the digital representation of value, or (C) develops,
publishes, constitutes, administers, maintains, or
otherwise distributes software relating to the network, so
long as the person does not control transactions of
digital assets on the network.
(7) A credit union with member share accounts insured
by an insurer approved by the credit union's primary
financial regulatory agency. An out-of-state credit union
may not conduct any activity in this State that is not
authorized for a credit union chartered under the laws of
this State.
Nothing in this Act grants persons described in this
subsection (c) authority to engage in any activity not
otherwise granted under existing law.
(d) The Department may by rule or order clarify whether an
activity is governed under this Act or another Act that
governs money transmission. This subsection (d) shall not be
applied in a manner inconsistent with the protection of
residents.
(e) Notwithstanding any other provision of this Act, the
Department, by rule or order, may conditionally or
unconditionally exempt any person, digital asset, or
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transaction, or any class or classes of persons, digital
assets, or transactions, from any provision of this Act or of
any rule thereunder, to the extent that the exemption is
necessary or appropriate, in the public interest, and
consistent with the protection of residents.
Section 1-15. General powers and duties.
(a) The Department shall regulate digital asset business
activity in this State, unless it is exempt pursuant to
Section 1-10. To the extent permissible under federal law, the
Department shall exercise nonexclusive oversight and
enforcement under any federal law applicable to digital asset
business activity.
(b) The functions, powers, and duties conferred upon the
Department by this Act are cumulative to any other functions,
powers, and duties conferred upon the Department by other laws
applicable to digital asset business activity.
(c) The Department shall have the following functions,
powers, and duties in carrying out its responsibilities under
this Act and any other law applicable to digital asset
business activity in this State:
(1) to issue or refuse to issue any registration or
other authorization under this Act;
(2) to revoke or suspend for cause any registration or
other authorization under this Act;
(3) to keep records of all registrations or other
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authorizations under this Act;
(4) to receive, consider, investigate, and act upon
complaints made by any person relating to any digital
asset business activity in this State;
(5) to prescribe the forms of and receive:
(A) applications for registrations or other
authorizations under this Act; and
(B) all reports and all books and records required
to be made under this Act;
(6) to subpoena documents and witnesses and compel
their attendance and production, to administer oaths, and
to require the production of any books, papers, or other
materials relevant to any inquiry authorized by this Act
or other law applicable to digital asset business activity
in this State;
(7) to issue orders against any person:
(A) if the Secretary has reasonable cause to
believe that an unsafe, unsound, or unlawful practice
has occurred, is occurring, or is about to occur;
(B) if any person has violated, is violating, or
is about to violate any law, rule, or written
agreement with the Secretary; or
(C) for the purpose of administering the
provisions of this Act or other law applicable to
digital asset business activity and any rule adopted
in accordance with this Act or other law applicable to
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digital asset business activity;
(8) to address any inquiries to any covered person, or
the directors, officers, or employees of the covered
person, or the affiliates or service providers of the
covered person, in relation to the covered person's
activities and conditions or any other matter connected
with its affairs, and it shall be the duty of any person so
addressed to promptly reply in writing to those inquiries;
the Secretary may also require reports from any covered
person at any time the Secretary chooses;
(9) to examine the books and records of every covered
person, affiliate, or service provider;
(10) to enforce the provisions of this Act and any
state or federal law applicable to digital asset business
activity;
(11) to levy fees, fines, and civil penalties, charges
for services, and assessments to defray operating
expenses, including direct and indirect costs, of
administering this Act and other laws applicable to
digital asset business activity;
(12) to appoint examiners, supervisors, experts, and
special assistants as needed to effectively and
efficiently administer this Act and other laws applicable
to digital asset business activity;
(13) to conduct hearings for the purpose of carrying
out the purposes of this Act;
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(14) to exercise visitorial power over a covered
person, affiliate, or service provider;
(15) to enter into cooperative agreements with federal
and state regulatory authorities and to accept reports of
examinations from federal and state regulatory
authorities;
(16) to assign on an emergency basis an examiner or
examiners to monitor the affairs of a covered person,
affiliate, or service provider with whatever frequency the
Secretary determines appropriate and to charge the covered
person for reasonable and necessary expenses of the
Secretary if in the opinion of the Secretary an emergency
exists or appears likely to occur;
(17) to impose civil penalties against a covered
person, affiliate, or service provider for failing to
respond to a regulatory request or reporting requirement;
and
(18) to conduct investigations, market surveillance,
and research, studies, and analyses of matters affecting
the interests of users of digital assets;
(19) to take such actions as the Secretary deems
necessary to educate and protect users of digital assets;
(20) to develop and implement initiatives and programs
to promote responsible innovation in digital asset
business activity; and
(21) to perform any other lawful acts necessary or
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desirable to carry out the purposes and provisions of this
Act and other laws applicable to digital asset business
activity.
(d) The Department may share any information obtained
pursuant to this Act or any other law applicable to digital
asset business activity with law enforcement officials or
other regulatory agencies.
Section 1-20. Funds.
(a) All moneys collected or received by the Department
under this Act shall be deposited into the Consumer Protection
Fund, which is hereby created as a special fund in the State
treasury. The amounts deposited into the Consumer Protection
Fund shall be used for the ordinary and contingent expenses of
the Department in administering this Act and other financial
laws; nothing in this Act shall prevent the continuation of
the practice of paying expenses involving salaries,
retirement, social security, and State-paid insurance of State
officers and employees by appropriation from the General
Revenue Fund or any other fund. Moneys deposited into the
Consumer Protection Fund may be transferred to the Professions
Indirect Cost Fund or any other Department fund.
(b) The expenses of administering this Act, including
investigations and examinations provided for in this Act,
shall be borne by and assessed against persons regulated by
this Act. The Department may establish fees by rule, including
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in the following categories:
(1) investigation of registrants and registration
applicant fees;
(2) examination fees;
(3) contingent fees; and
(4) such other categories as may be required to
administer this Act.
(c) The Department shall charge and collect fees from
covered persons, which shall be nonrefundable unless otherwise
indicated, for the expenses of administering this Act as
follows:
(1) Each covered person shall pay $150 for each hour
or part of an hour for each examiner or staff assigned to
the supervision of the covered person plus actual travel
costs for any examination of digital asset business
activity pursuant to the Act.
(2) Each covered person shall pay to the Department
its pro rata share of the cost for administration of this
Act that exceeds other fees listed in this Act, as
estimated by the Department, for the current year and any
deficit actually incurred in the administration of the Act
in prior years. The total annual assessment for all
registrants shall initially be divided into a
transaction-based assessment and a custody-based
assessment, each equal to approximately half the cost for
administration of this Act. Each registrant's pro rata
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share of the transaction-based assessment shall be the
percentage that the total volume of digital asset
transactions conducted on behalf of residents by the
registrant bears to the total volume of digital asset
transactions by all registrants in Illinois. Each
registrant's pro rata share of the custody-based
assessment shall be the percentage that the total United
States dollar value of digital assets held in custody or
controlled by the registrant for residents bears to the
total United States dollar value held in custody or
controlled by all registrants in Illinois for residents.
(3) Beginning one year after the effective date of
this Act, the Department may, by rule, amend the fees set
forth in this subsection in accordance with this Act. The
Department is authorized to consider setting fees for
digital asset business activity based on the value of
digital assets transacted by covered persons, volume of
digital assets transacted by covered persons, the value of
digital assets held in custody by covered person, and the
volume of digital assets held in custody by covered
persons.
Article 5. Customer Protections
Section 5-5. Customer disclosures.
(a) When engaging in digital asset business activity with
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a resident, a covered person shall provide to a resident the
customer disclosures required by subsection (b) and any
additional disclosures the Department by rule determines to be
necessary and appropriate for the protection of residents. The
Department may determine by rule the time and form required
for disclosures. A disclosure required by this Section shall
be made separately from any other information provided by the
covered person and in a clear and conspicuous manner in a
record the resident may keep.
(b) Before engaging in digital asset business activity
with a resident, a covered person shall disclose, to the
extent applicable to the digital asset business activity the
covered person will undertake with the resident, subject to
any rule or order issued by the Department, all of the
following:
(1) A schedule of fees and charges the covered person
may assess, the manner by which fees and charges will be
calculated if they are not set in advance and disclosed,
and the timing of the fees and charges.
(2) Whether the product or service provided by the
covered person is covered by either of the following:
(A) A form of insurance or other guarantee against
loss by an agency of the United States as follows:
(i) Up to the full United States dollar
equivalent of digital assets placed under the
custody or control of, or purchased from, the
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covered person as of the date of the placement or
purchase, including the maximum amount provided by
insurance under the Federal Deposit Insurance
Corporation or National Credit Union
Administration or otherwise available from the
Securities Investor Protection Corporation.
(ii) If not provided at the full United States
dollar equivalent of the digital assets placed
under the custody or control of or purchased from
the covered person, the maximum amount of coverage
for each resident expressed in the United States
dollar equivalent of the digital asset.
(iii) If not applicable to the product or
service provided by the covered person, a clear
and conspicuous statement that the product is not
insured, as applicable, by the Federal Deposit
Insurance Corporation, National Credit Union
Administration, or the Securities Investor
Protection Corporation.
(B)(i) Private insurance against loss or theft,
including cybertheft or theft by other means.
(ii) A covered person shall disclose the terms
of the insurance policy to the resident in a
manner that allows the resident to understand the
specific insured risks that may result in partial
coverage of the resident's assets.
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(3) The irrevocability of a transfer or exchange and
any exception to irrevocability.
(4) A description of all of the following:
(A) The covered person's liability for an
unauthorized, mistaken, or accidental transfer or
exchange.
(B) The resident's responsibility to provide
notice to the covered person of an unauthorized,
mistaken, or accidental transfer or exchange.
(C) The basis for any recovery by the resident
from the covered person in case of an unauthorized,
mistaken, or accidental transfer or exchange.
(D) General error resolution rights applicable to
an unauthorized, mistaken, or accidental transfer or
exchange.
(E) The method for the resident to update the
resident's contact information with the covered
person.
(5) That the date or time when the transfer or
exchange is made and the resident's account is debited may
differ from the date or time when the resident initiates
the instruction to make the transfer or exchange.
(6) Whether the resident has a right to stop a
preauthorized payment or revoke authorization for a
transfer and the procedure to initiate a stop-payment
order or revoke authorization for a subsequent transfer.
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(7) The resident's right to receive a receipt, trade
ticket, or other evidence of the transfer or exchange.
(8) The resident's right to at least 14 days' prior
notice of a change in the covered person's fee schedule,
other terms and conditions that have a material impact on
digital asset business activity with the resident, or the
policies applicable to the resident's account.
(9) That no digital asset is currently recognized as
legal tender by the State of Illinois or the United
States.
(10)(A) A list of instances in the past 12 months when
the covered person's service was unavailable to customers
seeking to engage in digital asset business activity due
to a service outage on the part of the covered person and
the causes of each identified service outage.
(B) As part of the disclosure required by this
paragraph, the covered person may list any steps the
covered person has taken to resolve underlying causes
for those outages.
(11) A disclosure, provided separately from the
disclosures provided pursuant to paragraphs (1) to (10) of
this subsection and written prominently in bold type, that
the State of Illinois has not approved or endorsed any
digital assets or determined if this customer disclosure
is truthful or complete.
(c) Except as otherwise provided in subsection (d), at the
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conclusion of a digital asset transaction with, or on behalf
of, a resident, a covered person shall provide the resident a
confirmation in a record which contains all of the following:
(1) The name and contact information of the covered
person, including the toll-free telephone number required
under Section 5-20.
(2) The type, value, date, precise time, and amount of
the transaction.
(3) The fee charged for the transaction, including any
charge for conversion of a digital asset to fiat currency
or other digital asset, as well as any indirect charges.
(d) If a covered person discloses that it will provide a
daily confirmation in the initial disclosure under subsection
(c), the covered person may elect to provide a single, daily
confirmation for all transactions with or on behalf of a
resident on that day instead of a per transaction
confirmation.
Section 5-10. Custody and protection of customer assets.
(a) A covered person that stores, holds, or maintains
custody or control of a digital asset for one or more persons
shall:
(1) at all times maintain an amount of each type of
digital asset sufficient to satisfy the aggregate
entitlements of the persons to the type of digital asset;
(2) segregate such digital assets from the other
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assets of the covered person; and
(3) not sell, transfer, assign, lend, hypothecate,
pledge, or otherwise use or encumber such digital assets,
except for the sale, transfer, or assignment of such
digital assets at the direction of such other persons.
(b) If a covered person violates subsection (a), then the
property interests of the persons in the digital asset are pro
rata property interests in the type of digital asset to which
the persons are entitled without regard to the time the
persons became entitled to the digital asset or the covered
person obtained control of the digital asset.
(c) A digital asset subject to this Section is:
(1) held for the persons entitled to the digital asset
under subsection (a);
(2) not the property of the covered person; and
(3) not subject to the claims of creditors of the
covered person.
(d) Digital assets subject to this Section, even if
commingled with other assets of the covered person, are held
in trust for the benefit of the persons entitled to the digital
assets under subsection (a), in the event of insolvency, the
filing of a petition by or against the covered person under the
United States Bankruptcy Code (11 U.S.C. 101 et seq.) for
bankruptcy or reorganization, the filing of a petition by or
against the covered person for receivership, the commencement
of any other judicial or administrative proceeding for its
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dissolution or reorganization, or an action by a creditor
against the covered person who is not a beneficiary of this
statutory trust. No digital asset impressed with a trust
pursuant to this subsection shall be subject to attachment,
levy of execution, or sequestration by order of any court,
except for a beneficiary of this statutory trust.
(e) The Department may adopt rules applicable to covered
persons related to additional protections of customer assets,
including, but not limited to:
(1) rules requiring that digital assets and funds
controlled by the covered person on behalf of residents be
held in accounts segregated from the covered person's own
digital assets and funds;
(2) rules related to qualified custodians that may
hold such segregated accounts;
(3) rules related to titling of such segregated
accounts;
(4) rules related to audit requirements for customer
assets;
(5) rules requiring compliance with specific
provisions of the Uniform Commercial Code applicable to
digital assets;
(6) rules restricting selling, transferring,
assigning, lending, hypothecating, pledging, or otherwise
using or encumbering customer assets; and
(7) any rules as may be as may be necessary and
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appropriate for the protection of residents or necessary
to effectuate the purposes of this Section.
Section 5-15. Covered exchanges.
(a)(1) Except as provided for under paragraph (2) of this
subsection, a covered exchange, before listing or offering a
digital asset that the covered exchange can exchange on behalf
of a resident, shall certify on a form provided by the
Department that the covered exchange has done the following:
(A) Identified the risk that the digital asset would
be deemed a security by federal or state regulators.
(B) Provided, in writing, full and fair disclosure of
all material facts relating to conflicts of interest that
are associated with the covered exchange and the digital
asset.
(C) Conducted a comprehensive risk assessment designed
to ensure consumers are adequately protected from
cybersecurity risk, risk of malfeasance, including theft,
risks related to code or protocol defects, market-related
risks, including price manipulation and fraud, and any
other material risks.
(D) Established policies and procedures to reevaluate
the appropriateness of the continued listing or offering
of the digital asset, including an evaluation of whether
material changes have occurred.
(E) Established policies and procedures to cease
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listing or offering the digital asset, including
notification to affected consumers and counterparties.
(F) Any other requirement designated by rule by the
Department as may be necessary and appropriate for the
protection of residents.
(2) Certification by a covered exchange shall not be
required for any digital asset approved for listing on or
before the effective date of this Act by the New York
Department of Financial Services pursuant to Part 200 of Title
23 of the New York Code of Rules and Regulations, if the
covered exchange provides notification to the Department on a
form provided by the Department.
(3) After a finding that a covered exchange has listed or
offered a digital asset without appropriate certification or
after a finding that misrepresentations were made in the
certification process, the Department may require the covered
exchange to cease listing or offering the digital asset and
may take an enforcement action under Section 20-50 of this
Act.
(b)(1) A covered exchange shall make every effort to
execute a resident's request to exchange a digital asset that
the covered exchange receives fully and promptly.
(2)(A) A covered exchange shall use reasonable diligence
to ensure that the outcome to the resident is as favorable as
possible under prevailing market conditions. Compliance with
this paragraph shall be determined by factors, including, but
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not limited to, all of the following:
(i) The character of the market for the digital asset,
including price and volatility.
(ii) The size and type of transaction.
(iii) The number of markets checked.
(iv) Accessibility of appropriate pricing.
(v) Any other factor designated by rule by the
Department as may be necessary and appropriate for the
protection of residents.
(B) At least once every 6 months, a covered exchange shall
review aggregated trading records of residents against
benchmarks to determine execution quality, investigate the
causes of any variance, and promptly take action to remedy
issues identified in that review.
(3) In a transaction for or with a resident, the covered
exchange shall not interject a third party between the covered
exchange and the best market for the digital asset in a manner
inconsistent with this subsection.
(4) If a covered exchange cannot execute directly with a
market and employs other means in order to ensure an execution
advantageous to the resident, the burden of showing the
acceptable circumstances for doing so is on the covered
exchange.
Section 5-20. Customer service; requests for assistance.
(a) A covered person shall prominently display on its
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internet website a toll-free telephone number through which a
resident can contact the covered person for requests for
assistance and receive live customer assistance, subject to
any rules adopted by the Department.
(b) A covered person shall implement reasonable policies
and procedures for accepting, processing, investigating, and
responding to requests for assistance in a timely and
effective manner. Such policies and procedures shall include
all of the following:
(1) A procedure for resolving disputes between the
covered person and a resident.
(2) A procedure for a resident to report an
unauthorized, mistaken, or accidental digital asset
business activity transaction.
(3) A procedure for a resident to file a complaint
with the covered person and for the resolution of the
complaint in a fair and timely manner with notice to the
resident as soon as reasonably practical of the resolution
and the reasons for the resolution.
(4) Any other procedure designated by rule by the
Department as may be necessary and appropriate for the
protection of residents.
Section 5-25. Collection of compensation. Unless exempt
from registration under this Act, no person engaged in or
offering to engage in any act or service for which a
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registration under this Act is required may bring or maintain
any action in any court to collect compensation for the
performance of the registrable services without alleging and
proving that he or she was the holder of a valid registration
under this Act at all times during the performance of those
services.
Article 10. Compliance
Section 10-5. General requirements.
(a) Each registrant is required to comply with the
provisions of this Act, any lawful order, rule, or regulation
made or issued under the provisions of this Act, and all
applicable federal and State laws, rules, and regulations.
(b) Each registrant shall designate a qualified individual
or individuals responsible for coordinating and monitoring
compliance with subsection (a).
(c) Each registrant shall maintain, implement, update, and
enforce written compliance policies and procedures, in
accordance with Section 10-10 and subject to any rules adopted
by the Department, which policies and procedures must be
reviewed and approved by the registrant's board of directors
or an equivalent governing body of the registrant.
Section 10-10. Required policies and procedures.
(a) An applicant, before submitting an application, shall
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create and a registrant, during registration, shall maintain,
implement, update, and enforce, written compliance policies
and procedures for all of the following:
(1) A cybersecurity program.
(2) A business continuity program.
(3) A disaster recovery program.
(4) An anti-fraud program.
(5) An anti-money laundering and countering the
financing of terrorism program.
(6) An operational security program.
(7)(A) A program designed to ensure compliance with
this Act and other laws of this State or federal laws that
are relevant to the digital asset business activity
contemplated by the registrant with or on behalf of
residents and to assist the registrant in achieving the
purposes of other State laws and federal laws if violation
of those laws has a remedy under this Act.
(B) At a minimum, the program described by this
paragraph shall specify the policies and procedures that
the registrant undertakes to minimize the risk that the
registrant facilitates the exchange of unregistered
securities.
(8) A conflict of interest program.
(9) A request for assistance program to comply with
Section 5-20.
(10) Any other compliance program, policy, or
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procedure the Department establishes by rule as necessary
for the protection of residents or for the safety and
soundness of the registrant's business or to effectuate
the purposes of this Act.
(b) A policy required by subsection (a) shall be
maintained in a record and designed to be adequate for a
registrant's contemplated digital asset business activity with
or on behalf of residents, considering the circumstances of
all participants and the safe operation of the activity. Any
policy and implementing procedure shall be compatible with
other policies and the procedures implementing them and not
conflict with policies or procedures applicable to the
registrant under other State law.
(c) A registrant's anti-fraud program shall include, at a
minimum, all of the following:
(1) Identification and assessment of the material
risks of its digital asset business activity related to
fraud, which shall include any form of market manipulation
and insider trading by the registrant, its employees, its
associated persons, or its customers.
(2) Protection against any material risk related to
fraud identified by the Department or the registrant.
(3) Periodic evaluation and revision of the anti-fraud
program, policies, and procedures.
(d) A registrant's anti-money laundering and countering
the financing of terrorism program shall include, at a
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minimum, all of the following:
(1) Identification and assessment of the material
risks of its digital asset business activity related to
money laundering and financing of terrorist activity.
(2) Procedures, in accordance with federal law or
guidance published by federal agencies responsible for
enforcing federal law, pertaining to money laundering and
financing of terrorist activity.
(3) Filing reports under the Bank Secrecy Act, 31
U.S.C. 5311 et seq., or Chapter X of Title 31 of the Code
of Federal Regulations and other federal or State law
pertaining to the prevention or detection of money
laundering or financing of terrorist activity.
(e) A registrant's operational security program shall
include, at a minimum, reasonable and appropriate
administrative, physical, and technical safeguards to protect
the confidentiality, integrity, and availability of any
nonpublic information or digital asset it receives, maintains,
or transmits.
(f)(1) A registrant's cybersecurity program shall include,
at a minimum, all of the following:
(A) Maintaining, updating, and enforcing policies and
procedures designed to protect the confidentiality,
integrity, and availability of the registrant's
information systems and nonpublic information stored on
those information systems.
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(B) Implementing and maintaining a written policy or
policies, approved at least annually by an executive
officer or the registrant's board of directors, or an
appropriate committee thereof, or equivalent governing
body, setting forth the registrant's policies and
procedures for the protection of its information systems
and nonpublic information stored on those information
systems.
(C) Designating a qualified individual responsible for
overseeing and implementing the registrant's cybersecurity
program and enforcing its cybersecurity policy. The
individual must have adequate authority to ensure
cybersecurity risks are appropriately managed, including
the ability to direct sufficient resources to implement
and maintain a cybersecurity program. The individual may
be employed by the registrant, one of its affiliates, or a
service provider.
(2) To assist in carrying out this subsection, the
Department may adopt rules to define terms used in this
subsection and to establish specific requirements for the
required cybersecurity program, including, but not limited to,
rules related to:
(A) penetration testing and vulnerability assessment;
(B) audit trails;
(C) access privileges;
(D) application security;
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(E) risk assessment;
(F) cybersecurity personnel and intelligence;
(G) affiliates and service providers;
(H) authentication;
(I) data retention;
(J) training and monitoring;
(K) encryption;
(L) incident response;
(M) notice of cybersecurity events; and
(N) any other requirement necessary and appropriate
for the protection of residents or for the safety and
soundness of the registrant or to effectuate the purposes
of this subsection.
(g) The Department may require a registrant to file with
the Department a copy of any report it makes to a federal or
state authority.
(h) After the policies and procedures required under this
Article are created and approved by the registrant, the
registrant shall engage a qualified individual or individuals
with adequate authority and experience to monitor and
implement each policy and procedure, publicize it as
appropriate, recommend changes as necessary, and enforce it.
Article 15. Registration
Section 15-5. Registration required. A person shall not
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engage in digital asset business activity, or hold itself out
as being able to engage in digital asset business activity,
with or on behalf of a resident unless the person is registered
in this State by the Department under this Article, or the
person is exempt from registration pursuant to Section 1-10.
Section 15-10. Application.
(a) An application for a registration under this Act shall
meet all of the following requirements:
(1) The application shall be in a form and medium
prescribed by the Department. The Department may require
the filing of the application through a multistate
licensing system.
(2) The application shall provide all of the following
information relevant to the applicant's proposed digital
asset business activity:
(A) The legal name of the applicant, any current
or proposed business United States Postal Service
address of the applicant, and any fictitious or trade
name the applicant uses or plans to use in conducting
the applicant's digital asset business activity with
or on behalf of a resident.
(B) The legal name, any former or fictitious name,
and the residential and business United States Postal
Service address of any executive officer and
responsible individual of the applicant and any person
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that has control of the applicant.
(C) A description of the current and former
business of the applicant and any affiliate of the
applicant for the 5 years before the application is
submitted, or, if the business has operated for less
than 5 years, for the time the business has operated,
including its products and services, associated
internet website addresses and social media pages,
principal place of business, projected user base, and
specific marketing targets.
(D) A list of all of the following:
(i) Any digital asset, money service, or money
transmitter registration the applicant and any
affiliates hold in another state or from an agency
of the United States.
(ii) The date the registrations described in
subdivision (i) expire.
(iii) Any revocation, suspension, or other
disciplinary action taken against the applicant
and any affiliates in any state or by an agency of
the United States and any applications rejected by
any state or agency of the United States.
(E) A list of any criminal conviction, deferred
prosecution agreement, and pending criminal proceeding
in any jurisdiction against all of the following:
(i) The applicant.
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(ii) Any executive officer of the applicant.
(iii) Any responsible individual of the
applicant.
(iv) Any person that has control over the
applicant.
(v) Any affiliate of the applicant.
(F) A list of any litigation, arbitration, or
administrative proceeding in any jurisdiction in which
the applicant or an executive officer, responsible
individual, or affiliate of the applicant has been a
party for the 10 years before the application is
submitted determined to be material in accordance with
generally accepted accounting principles and, to the
extent the applicant or such other person would be
required to disclose the litigation, arbitration, or
administrative proceeding in the applicant's or such
other person's audited financial statements, reports
to equity owners, and similar statements or reports.
(G) A list of any bankruptcy or receivership
proceeding in any jurisdiction for the 10 years before
the application is submitted in which any of the
following was a debtor:
(i) The applicant.
(ii) An executive officer of the applicant.
(iii) A responsible individual of the
applicant.
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(iv) A person that has control over the
applicant.
(v) An affiliate of the applicant.
(H) The name and United States Postal Service
address of any bank or credit union in which the
applicant and any affiliates plan to deposit funds
obtained by digital asset business activity.
(I) The source of funds and credit to be used by
the applicant and any affiliate to conduct digital
asset business activity with or on behalf of a
resident.
(J) A current financial statement and other
documentation satisfactory to the Department
demonstrating that the applicant has the capital and
liquidity required by Section 20-5.
(K) The United States Postal Service address and
email address to which communications from the
Department can be sent.
(L) The name, United States Postal Service
address, and email address of the registered agent of
the applicant in this State.
(M) A copy of the certificate, or a detailed
summary acceptable to the Department, of coverage for
any liability, casualty, business interruption, or
cybersecurity insurance policy maintained by the
applicant for itself, an executive officer, a
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responsible individual, an affiliate, or the
applicant's users.
(N) If applicable, the date on which and the state
in which the applicant is formed and a copy of a
current certificate of good standing issued by that
state.
(O) If a person has control of the applicant and
the person's equity interests are publicly traded in
the United States, a copy of the audited financial
statement of the person for the most recent fiscal
year or most recent report of the person filed under
Section 13 of the Securities Exchange Act of 1934, 15
U.S.C. 78m.
(P) If a person has control of the applicant and
the person's equity interests are publicly traded
outside the United States, a copy of the audited
financial statement of the person for the most recent
fiscal year of the person or a copy of the most recent
documentation similar to that required in subparagraph
(O) filed with the foreign regulator in the domicile
of the person.
(Q) If the applicant is a partnership or a
member-managed limited liability company, the names
and United States Postal Service addresses of any
general partner or member.
(R) If the applicant is required to register with
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the Financial Crimes Enforcement Network of the United
States Department of the Treasury as a money service
business, evidence of the registration.
(S) A set of fingerprints for each executive
officer and responsible individual of the applicant.
(T) If available, for any executive officer and
responsible individual of the applicant, for the 10
years before the application is submitted, employment
history and history of any investigation of the
individual or legal proceeding to which the individual
was a party.
(U) The plans through which the applicant will
meet its obligations under Article 10.
(V) Any other information the Department requires
by rule.
(3) The application shall be accompanied by a
nonrefundable fee of $5,000 or the amount determined by
the Department to cover the costs of application review,
whichever is greater.
(b)(1) On receipt of a completed application, the
Department shall investigate all of the following:
(A) The financial condition and responsibility of the
applicant and any affiliate of the applicant.
(B) The relevant financial and business experience,
character, and general fitness of the applicant and any
affiliate of the applicant.
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(C) The competence, experience, character, and general
fitness of each executive officer and director, each
responsible individual, and any person that has control of
the applicant.
(2) On receipt of a completed application, the Department
may investigate the business premises of an applicant or an
affiliate of the applicant or require the submission of any
other documents or information the Department deems relevant
to the application.
(3) The investigation required by this subsection must
allow the Secretary to issue positive findings stating that
the financial condition, financial responsibility, competence,
experience, character, and general fitness of the applicant,
each executive officer and director, each responsible
individual, any person that has control of the applicant, and
any affiliate of the applicant are such as to command the
confidence of the community and to warrant belief that the
business will be operated honestly, fairly, and efficiently
within the purpose of this Act; if the Secretary does not so
find, he or she shall not issue the registration, and he or she
shall notify the applicant of the denial.
(c)(1) After completing the investigation required by
subsection (b), the Department shall send the applicant notice
of its decision to approve, conditionally approve, or deny the
application. If the Department does not receive notice from
the applicant that the applicant accepts conditions specified
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by the Department within 31 days following the Department's
notice of the conditions, the application shall be deemed
withdrawn.
(2) The Secretary may impose conditions on a registration
if the Secretary determines that those conditions are
necessary or appropriate. These conditions shall be imposed in
writing and shall continue in effect for the period prescribed
by the Secretary.
(d) A registration issued pursuant to this Act shall take
effect on the later of the following:
(1) The date the Department issues the registration.
(2) The date the registration provides the security
required by Section 20-5.
(e) In addition to the fee required by paragraph (3) of
subsection (a), an applicant shall pay the costs of the
Department's investigation under subsection (b).
(f) A registration issued pursuant to this Act shall
remain in full force and effect until it expires without
renewal, is surrendered by the registration, or revoked or
suspended as hereinafter provided.
(g)(1) The Department may issue a conditional registration
to an applicant who holds or maintains a registration to
conduct virtual currency business activity in the State of New
York pursuant to Part 200 of Title 23 of the New York Code of
Rules and Regulations, or a charter as a New York State limited
purpose trust company with approval to conduct virtual
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currency business under the New York Banking Law, if the
registration or approval was issued no later than the
effective date of this Act and the applicant pays all
appropriate fees and complies with the requirements of this
Act.
(2) A conditional registration issued pursuant to this
subsection shall expire at the earliest of the following:
(A) upon issuance of an unconditional registration;
(B) upon denial of a registration;
(C) upon revocation of a registration issued pursuant
to Part 200 of Title 23 of the New York Code of Rules and
Regulations or disapproval or revocation of a charter as a
New York State limited purpose trust company with approval
to conduct virtual currency business under the New York
Banking Law.
Section 15-15. Renewal.
(a) Registrations shall be subject to renewal every year
using a common renewal period as established by the Department
by rule. A registrant may apply for renewal of the
registration by submitting a renewal application under
subsection (b) and paying all applicable fees due to the
Department.
(b) The renewal application required by subsection (a)
shall be submitted in a form and medium prescribed by the
Department. The application shall contain all of the
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following:
(1) Either a copy of the registrant's most recent
reviewed annual financial statement, if the gross revenue
generated by the registrant's digital asset business
activity in this State was not more than $2,000,000 for
the fiscal year ending before the anniversary date of
issuance of its registration under this Act, or a copy of
the registrant's most recent audited annual financial
statement, if the registrant's digital asset business
activity in this State amounted to more than $2,000,000,
for the fiscal year ending before the anniversary date.
(2) If a person other than an individual has control
of the registrant, a copy of either of the following:
(A) The person's most recent reviewed annual
financial statement, if the person's gross revenue was
not more than $2,000,000 in the previous fiscal year
measured as of the anniversary date of issuance of its
registration under this Act.
(B) The person's most recent audited consolidated
annual financial statement, if the person's gross
revenue was more than $2,000,000 in the previous
fiscal year measured as of the anniversary date of
issuance of its registration under this Act.
(3) A description of any of the following:
(A) Any material change in the financial condition
of the registrant and any affiliate of the registrant.
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(B) Any material litigation related to the
registrant's digital asset business activity and
involving the registrant or an executive officer,
responsible individual, or affiliate of the
registrant.
(C) Any federal, state, or foreign investigation
involving the registrant or an executive officer,
responsible individual, or affiliate of the
registrant.
(D)(i) Any data security breach or cybersecurity
event involving the registrant.
(ii) A description of a data security breach
pursuant to this subparagraph does not constitute
disclosure or notification of a security breach
for purposes of any other law.
(4) Information or records required by Section 20-25
that the registrant has not reported to the Department.
(5) The number of digital asset business activity
transactions with or on behalf of residents for the period
since the later of the date the registration was issued or
the date the last renewal application was submitted.
(6)(A) The amount of United States dollar equivalent
of digital assets in the custody or control of the
registrant at the end of the last month that ends not later
than 30 days before the date of the renewal application.
(B) The total number of residents for whom the
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registrant had custody or control of United States
dollar equivalent of digital assets on that date.
(7) Evidence that the registrant is in compliance with
Section 5-10.
(8) Evidence that the registrant is in compliance with
Section 20-5.
(9) A list of all locations where the registrant
engages in digital asset business activity.
(10) Any other information the Department requires by
rule.
(c) If a registrant does not timely comply with this
Section, the Department may take enforcement actions provided
under Section 20-50. Notice or hearing is not required for a
suspension or revocation of a registration under this Act for
failure to pay a renewal fee, file a renewal application, or
otherwise comply with this Section.
(d) Suspension or revocation of a registration under this
Section does not invalidate a transfer or exchange of digital
assets for or on behalf of a resident made during the
suspension or revocation and does not insulate the registrant
from liability under this Act.
(e) For good cause, the Department, in its sole
discretion, may extend a period under this Section.
(f) A registrant that does not comply with this Section
shall cease digital asset business activities with or on
behalf of a resident. A registrant ceasing an activity or
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activities regulated by this Act and desiring to no longer be
registered shall so inform the Department in writing and, at
the same time, convey any registration issued and all other
symbols or indicia of registration. The registrant shall
include a plan for the withdrawal from regulated business,
including a timetable for the disposition of the business, and
comply with the surrender guidelines or requirements of the
Department.
Section 15-20. Nontransferable registration. A
registration under this Act is not transferable or assignable.
Article 20. Supervision
Section 20-5. Surety bond; capital and liquidity
requirements.
(a)(1)(A) A registrant shall maintain a surety bond or
trust account in United States dollars in a form and amount as
determined by the Department for the protection of residents
that engage in digital asset business activity with the
registrant.
(B) If a registrant maintains a trust account
pursuant to this Section, that trust account shall be
maintained with a qualified custodian.
(2) Security deposited under this Section shall be for
the benefit of a claim against the registrant on account
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of the registrant's digital asset business activity with
or on behalf of a resident.
(3) Security deposited under this Section shall cover
claims for the period the Department specifies by rule and
for an additional period the Department specifies after
the registrant ceases to engage in digital asset business
activity with or on behalf of a resident.
(4) The Department may require the registrant to
increase the amount of security deposited under this
Section, and the registrant shall deposit the additional
security not later than 15 days after the registrant
receives notice in a record of the required increase.
(5) The Department may permit a registrant to
substitute or deposit an alternate form of security
satisfactory to the Department if the registrant at all
times complies with this Section.
(b) In addition to the security required under subsection
(a), a registrant shall maintain at all times capital and
liquidity, each in an amount and form as the Department
determines is sufficient to ensure the financial integrity of
the registrant and its ongoing operations based on an
assessment of the specific risks applicable to the registrant.
In determining the minimum amount of capital and liquidity
that shall be maintained by a registrant, the Department may
consider factors, including, but not limited to, all of the
following:
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(1) The composition of the registrant's total assets,
including the position, size, quality, liquidity, risk
exposure, and price volatility of each type of asset.
(2) The composition of the registrant's total
liabilities, including the size and repayment timing of
each type of liability.
(3) The actual and expected volume of the registrant's
digital asset business activity.
(4) The amount of leverage employed by the registrant.
(5) The liquidity position of the registrant.
(6) The financial protection that the registrant
provides pursuant to subsection (a).
(7) The types of entities to be serviced by the
registrant.
(8) The types of products or services to be offered by
the registrant.
(9) Arrangements adopted by the registrant for the
protection of its customers in the event of the
registrant's insolvency.
(c) A registrant shall hold liquidity required to be
maintained in accordance with this Section in the form of cash
or high-quality liquid assets, as defined by the Department
and in proportions determined by the Department.
(d) The Department may require a registrant to increase
the capital or liquidity required under this Section. A
registrant shall submit evidence satisfactory to the
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Department that it has additional capital or liquidity
required pursuant to this subsection not later than 15 days
after the registrant receives notice in a record of the
required increase.
Section 20-10. Examination.
(a)(1)(A) The Department may, at any time and from time to
time, examine the business and any office, within or outside
this State, of any covered person, or any agent of a covered
person, in order to ascertain (i) the financial condition of
the covered person, (ii) the safety and soundness of the
conduct of its business, (iii) the policies of its management,
(iv) whether the business is being conducted in a lawful
manner, (v) whether all digital asset business activity is
properly accounted for, and (vi) such other matters as the
Department may determine, including, but not limited to, any
activities of the covered person outside the State if in the
Department's judgment such activities may affect the covered
person's digital asset business activity.
(B) The directors, officers, and employees of a
covered person, or agent of a covered person, being
examined by the Department shall exhibit to the
Department, on request, any or all of the covered
person's accounts, books, correspondence, memoranda,
papers, and other records and shall otherwise
facilitate the examination so far as it may be in their
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power to do so.
(C) The covered person shall permit and assist the
Department to examine an affiliate or service provider
of the covered person when, in the Department's
judgment, it is necessary or advisable to do so.
(2) The Department may examine a covered person, its
affiliate, or service provider pursuant to this paragraph
without prior notice to the covered person, affiliate, or
service provider.
(b) A covered person shall pay the necessary costs of an
examination under this Section.
Section 20-15. Books and records.
(a) A registrant shall maintain, for all digital asset
business activity with or on behalf of a resident for 5 years
after the date of the activity, a record of all of the
following:
(1) Any transaction of the registrant with or on
behalf of the resident or for the registrant's account in
this State, including all of the following:
(A) The identity of the resident.
(B) The form of the transaction.
(C) The amount, date, and payment instructions
given by the resident.
(D) The account number, name, and physical address
of:
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(i) the parties to the transaction that are
customers or account holders of the registrant;
and
(ii) to the extent practicable, any other
parties to the transaction.
(2) The aggregate number of transactions and aggregate
value of transactions by the registrant with, or on behalf
of, the resident and for the registrant's account in this
State expressed in United States dollar equivalent of
digital assets for the previous 12 calendar months.
(3) Any transaction in which the registrant exchanged
one form of digital asset for fiat currency or another
form of digital asset with or on behalf of the resident.
(4) A general ledger maintained at least monthly that
lists all assets, liabilities, capital, income, and
expenses of the registrant.
(5) Any report of condition or other reports to the
Department, at such times and in such form, as the
Department may request.
(6) Bank statements and bank reconciliation records
for the registrant and the name, account number, and
United States Postal Service address of any bank or credit
union the registrant uses in the conduct of its digital
asset business activity with or on behalf of the resident.
(7) A report of any dispute with a resident.
(b) A registrant shall maintain records required by
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subsection (a) in a form that enables the Department to
determine whether the registrant is in compliance with this
Act, any court order, and the laws of this State.
(c) If a registrant maintains records outside this State
that pertain to transactions with or on behalf of a resident,
the registrant shall make the records available to the
Department not later than 3 days after request, or, on a
determination of good cause by the Department, in its sole
discretion, at a later time.
(d) All records maintained by a registrant, any affiliate,
or any service provider are subject to inspection by the
Department.
Section 20-20. Regulatory cooperation. The Department may
cooperate, coordinate, jointly examine, consult, and share
records and other information with the appropriate regulatory
agency of another state, a self-regulatory organization,
federal or state regulator of banking or non-depository
institutions, or a regulator of a jurisdiction outside the
United States, concerning the affairs and conduct of a covered
person, affiliate, or service provider in this State.
Section 20-25. Material business changes.
(a) A registrant shall file with the Department a report
of the following, as may be applicable:
(1) A material change in information in the
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application for a registration under this Act or the most
recent renewal report of the registrant under this Act.
(2) A material change in the registrant's business for
the conduct of its digital asset business activity with or
on behalf of a resident.
(3) A change of an affiliate, executive officer,
responsible individual, or person in control of the
registrant.
(b) A report required by this Section shall be filed not
later than 15 days after the change described in subsection
(a).
Section 20-30. Change in control.
(a) As used in this Section, "proposed person to be in
control" means the person that would control a registrant
after a proposed transaction that would result in a change in
control of the registrant.
(b) The following rules apply in determining whether a
person has control over a registrant:
(1) There is a rebuttable presumption of control if a
person directly or indirectly owns, controls, holds with
the power to vote, or holds proxies representing 10% or
more of the then outstanding voting securities issued by
the registrant.
(2) A person has control over a registrant if the
person's voting power in the registrant constitutes or
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will constitute at least 25% of the total voting power of
the registrant.
(3) There is a rebuttable presumption of control if
the person's voting power in another person constitutes or
will constitute at least 10% of the total voting power of
the other person and the other person's voting power in
the registrant constitutes at least 10% of the total
voting power of the registrant.
(4) There is no presumption of control solely because
an individual is an executive officer of the registrant.
(c) Before a proposed change in control of a registrant,
the proposed person to be in control shall submit to the
Department in a record all of the following:
(1) An application in a form and medium prescribed by
the Department.
(2) The information and records that Section 15-10
would require if the proposed person to be in control
already had control of the registrant.
(d) The Department shall not approve an application unless
the Secretary finds all of the following:
(1) The proposed person to be in control and all
executive officers of the proposed person to be in
control, if any, are of good character and sound financial
standing.
(2) The proposed person to be in control is competent
to engage in digital asset business activity.
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(3) It is reasonable to believe that, if the person
acquires control of the registrant, the proposed person to
be in control and the registrant will comply with all
applicable provisions of this Act and any rules or order
issued under this Act.
(4) Any plans by the proposed person to be in control
to change the business, corporate structure, or management
of the registrant are not detrimental to the safety and
soundness of the registrant.
(e) The Department, in accordance with Section 15-10,
shall approve, approve with conditions, or deny an application
for a change in control of a registrant. The Department, in a
record, shall send notice of its decision to the registrant
and the person that would be in control if the Department had
approved the change in control. If the Department denies the
application, the registrant shall abandon the proposed change
in control or cease digital asset business activity with or on
behalf of residents.
(f) If the Department applies a condition to approval of a
change in control of a registrant, and the Department does not
receive notice of the applicant's acceptance of the condition
specified by the Department not later than 31 days after the
Department sends notice of the condition, the application is
deemed denied. If the application is deemed denied, the
registrant shall abandon the proposed change in control or
cease digital asset business activity with or on behalf of
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residents.
(g) The Department may revoke or modify a determination
under subsection (d), after notice and opportunity to be
heard, if, in its judgment, revocation or modification is
consistent with this Act.
(h) If a change in control of a registrant requires
approval of another regulatory agency, and the action of the
other agency conflicts with that of the Department, the
Department shall confer with the other agency. If the proposed
change in control cannot be completed because the conflict
cannot be resolved, the registrant shall abandon the change in
control or cease digital asset business activity with or on
behalf of residents.
Section 20-35. Mergers.
(a) Before a proposed merger or consolidation of a
registrant with another person, the registrant shall submit
all of the following, as applicable, to the Department:
(1) An application in a form and medium prescribed by
the Department.
(2) The plan of merger or consolidation in accordance
with subsection (e).
(3) In the case of a registrant, the information
required by Section 15-10 concerning the person that would
be the surviving entity in the proposed merger or
consolidation.
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(b) If a proposed merger or consolidation would change the
control of a registrant, the registrant shall comply with
Section 20-30 and this Section.
(c) The Department, in accordance with Section 15-10,
shall approve, conditionally approve, or deny an application
for approval of a merger or consolidation of a registrant. The
Department, in a record, shall send notice of its decision to
the registrant and the person that would be the surviving
entity. If the Department denies the application, the
registrant shall abandon the merger or consolidation or cease
digital asset business activity with or on behalf of
residents.
(d) The Department may revoke or modify a determination
under paragraph (c), after notice and opportunity to be heard,
if, in its judgment, revocation or modification is consistent
with this Act.
(e) A plan of merger or consolidation of a registrant with
another person shall do all of the following:
(1) Describe the effect of the proposed transaction on
the registrant's conduct of digital asset business
activity with or on behalf of residents.
(2) Identify each person to be merged or consolidated
and the person that would be the surviving entity.
(3) Describe the terms and conditions of the merger or
consolidation and the mode of carrying it into effect.
(f) If a merger or consolidation of a registrant and
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another person requires approval of another regulatory agency,
and the action of the other agency conflicts with that of the
Department, the Department shall confer with the other agency.
If the proposed merger or consolidation cannot be completed
because the conflict cannot be resolved, the registrant shall
abandon the merger or consolidation or cease digital asset
business activity with or on behalf of residents.
(g) The Department may condition approval of an
application under subsection (a). If the Department does not
receive notice from the parties that the parties accept the
Department's condition not later than 31 days after the
Department sends notice in a record of the condition, the
application is deemed denied. If the application is deemed
denied, the registrant shall abandon the merger or
consolidation or cease digital asset business activity with,
or on behalf of, residents.
(h) If a registrant acquires substantially all of the
assets of a person, whether or not the person's registration
was approved by the Department, the transaction is subject to
this Section.
Section 20-40. Investigation of complaints. The Secretary
shall be authorized at all times to maintain staff and
facilities adequate to receive, record, and investigate
complaints and inquiries made by any person concerning this
Act and any covered persons, affiliates, and service providers
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under this Act. Each such person shall open their books,
records, documents, and offices wherever situated to the
Secretary or his or her appointees as needed to facilitate
such investigations.
Section 20-45. Additional investigation and examination
authority. In addition to any authority allowed under this Act
or other applicable law, the Secretary shall have the
authority to conduct investigations and examinations as
follows:
(1) For purposes of initial registration, renewal,
suspension, conditioning, revocation or termination, or
general or specific inquiry or investigation to determine
compliance with this Act, the Secretary shall have the
authority to access, receive, and use any books, accounts,
records, files, documents, information, or evidence,
including, but not limited to, the following:
(A) criminal, civil, and administrative history
information, including nonconviction data as specified
in the Criminal Code of 2012;
(B) personal history and experience information,
including independent credit reports obtained from a
consumer reporting agency described in Section 603(p)
of the federal Fair Credit Reporting Act; and
(C) any other documents, information, or evidence
the Secretary deems relevant to the inquiry or
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investigation, regardless of the location, possession,
control, or custody of the documents, information, or
evidence.
(2) For the purposes of investigating violations or
complaints arising under this Act or for the purposes of
examination, the Secretary may review, investigate, or
examine any covered person, affiliate, service provider,
individual, or person subject to this Act as often as
necessary in order to carry out the purposes of this Act.
The Secretary may direct, subpoena, or order the
attendance of and examine under oath all persons whose
testimony may be required about the transactions or the
business or subject matter of any such examination or
investigation, and may direct, subpoena, or order the
person to produce books, accounts, records, files, and any
other documents the Secretary deems relevant to the
inquiry.
(3) Each covered person, affiliate, service provider,
individual, or person subject to this Act shall make
available to the Secretary upon request the books and
records relating to the operations of the registrant,
affiliate, individual, or person subject to this Act. The
Secretary shall have access to those books and records and
interview the officers, principals, employees, independent
contractors, agents, and customers of the covered person,
affiliate, service provider, individual, or person subject
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to this Act concerning their business.
(4) Each covered person, affiliate, service provider,
individual, or person subject to this Act shall make or
compile reports or prepare other information as directed
by the Secretary in order to carry out the purposes of this
Section, including, but not limited to:
(A) accounting compilations;
(B) information lists and data concerning
transactions in a format prescribed by the Secretary;
or
(C) other information deemed necessary to carry
out the purposes of this Section.
(5) In making any examination or investigation
authorized by this Act, the Secretary may control access
to any documents and records of the covered person or
person under examination or investigation. The Secretary
may take possession of the documents and records or place
a person in exclusive charge of the documents and records
in the place where they are usually kept. During the
period of control, no person shall remove or attempt to
remove any of the documents or records, except pursuant to
a court order or with the consent of the Secretary. Unless
the Secretary has reasonable grounds to believe the
documents or records of the covered person or person under
examination or investigation have been or are at risk of
being altered or destroyed for purposes of concealing a
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violation of this Act, the covered person or owner of the
documents and records shall have access to the documents
or records as necessary to conduct its ordinary business
affairs.
(6) In order to carry out the purposes of this
Section, the Secretary may:
(A) retain attorneys, accountants, or other
professionals and specialists as examiners, auditors,
or investigators to conduct or assist in the conduct
of examinations or investigations;
(B) enter into agreements or relationships with
other government officials, regulatory associations,
or self-regulatory organizations in order to improve
efficiencies and reduce regulatory burden by sharing
resources, standardized or uniform methods or
procedures, and documents, records, information, or
evidence obtained under this Section;
(C) use, hire, contract, or employ public or
privately available analytical systems, methods, or
software to examine or investigate the covered person,
affiliate, service provider, individual, or person
subject to this Act;
(D) accept and rely on examination or
investigation reports made by other government
officials, within or outside this State; or
(E) accept audit reports made by an independent
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certified public accountant for the covered person,
affiliate, service provider, individual, or person
subject to this Act in the course of that part of the
examination covering the same general subject matter
as the audit and may incorporate the audit report in
the report of the examination, report of
investigation, or other writing of the Secretary.
(7) The authority of this Section shall remain in
effect, whether such a covered person, affiliate, service
provider, individual, or person subject to this Act acts
or claims to act under any licensing or registration law
of this State or claims to act without the authority.
(8) No covered person, affiliate, service provider,
individual, or person subject to investigation or
examination under this Section may knowingly withhold,
abstract, remove, mutilate, destroy, or secrete any books,
records, computer records, or other information.
Section 20-50. Enforcement actions.
(a) As used in this Article, "enforcement action" means an
action including, but not limited to, all of the following:
(1) Suspending or revoking a registration under this
Act.
(2) Ordering a person to cease and desist from doing
digital asset business activity with or on behalf of a
resident.
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(3) Requesting the court to appoint a receiver for the
assets of a person doing digital asset business activity
with or on behalf of a resident.
(4) Requesting the court to issue temporary,
preliminary, or permanent injunctive relief against a
person doing digital asset business activity with or on
behalf of a resident.
(5) Assessing a civil penalty under Section 20-70.
(6) Recovering on the security under Section 20-5 and
initiating a plan to distribute the proceeds for the
benefit of a resident injured by a violation of this Act,
or law of this State other than this Act that applies to
digital asset business activity with or on behalf of a
resident.
(7) Imposing necessary or appropriate conditions on
the conduct of digital asset business activity with or on
behalf of a resident.
(8) Seeking restitution on behalf of a resident if the
Department shows economic injury due to a violation of
this Act.
(b) The Department may enter into a consent order with a
person regarding an enforcement action.
(c) This Section does not provide a private right of
action to a resident, provided this Section does not preclude
an action by a resident to enforce rights under Article 5 or
subsection (a) of Section 20-5.
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Section 20-55. Violations.
(a) The Department may take an enforcement action against
a covered person or any person otherwise subject to this Act in
any of the following instances:
(1) The covered person or person violates this Act, a
rule adopted or order issued under this Act, or a State or
federal law or regulation that applies to digital asset
business activity of the violator with or on behalf of a
resident.
(2) The covered person or person does not cooperate
with an examination or investigation by the Department,
fails to pay a fee, or fails to submit a report or
documentation.
(3) The covered person or person, in the conduct of
its digital asset business activity with or on behalf of a
resident, has engaged, is engaging, or is about to engage
in any of the following:
(A) An unsafe, unsound, or unlawful act or
practice.
(B) An unfair, deceptive, or abusive act or
practice.
(C) Fraud, misrepresentation, deceit, or
negligence.
(D) Misappropriation of fiat currency, a digital
asset, or other value.
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(4) An agency of the United States or another state
takes an action against the covered person or person that
would constitute an enforcement action if the Department
had taken the action.
(5) The covered person or person is convicted of a
crime related to its digital asset business activity with
or on behalf of a resident or involving fraud or felonious
activity that, as determined by the Department, makes the
covered person or person unsuitable to engage in digital
asset business activity.
(6) Any of the following occurs:
(A) The covered person or person becomes
insolvent.
(B) The covered person or person makes a general
assignment for the benefit of its creditors.
(C) The covered person or person becomes the
debtor, alleged debtor, respondent, or person in a
similar capacity in a case or other proceeding under
any bankruptcy, reorganization, arrangement,
readjustment, insolvency, receivership, dissolution,
liquidation, or similar law, and does not obtain from
the court, within a reasonable time, confirmation of a
plan or dismissal of the case or proceeding.
(D) The covered person or person applies for, or
permits the appointment of, a receiver, trustee, or
other agent of a court for itself or for a substantial
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part of its assets.
(7) The covered person or person makes a
misrepresentation to the Department.
(b) If the Secretary finds, as the result of examination,
investigation, or review of reports submitted by a registrant,
that the business and affairs of a registrant are not being
conducted in accordance with this Act, the Secretary may
notify the registrant of the correction necessary. If a
registrant fails to correct such violations, the Secretary may
issue an order requiring immediate correction and compliance
with this Act and may specify a reasonable date for
performance.
Section 20-60. Hearings.
(a) Except as provided in subsection (b), the Department
may take an enforcement action only after notice and
opportunity for a hearing as appropriate in the circumstances.
All hearings provided for in this Act shall be conducted in
accordance with Title 38, Part 100 of the Illinois
Administrative Code, and the Secretary shall have all the
powers granted therein.
(b)(1)(A) The Department may take an enforcement action,
other than the imposition of a civil penalty under Section
20-70, without notice if the circumstances require action
before notice can be given.
(B) A person subject to an enforcement action
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pursuant to this subsection shall have the right to an
expedited post-action hearing by the Department unless
the person has waived the hearing.
(2)(A) The Department may take an enforcement action,
other than the imposition of a civil penalty under Section
20-70, after notice and without a prior hearing if the
circumstances require action before a hearing can be held.
(B) A person subject to an enforcement action
pursuant to this subsection shall have the right to an
expedited post-action hearing by the Department unless
the person has waived the hearing.
(3) The Department may take an enforcement action
after notice and without a hearing if the person subject
to the enforcement action does not timely request a
hearing.
Section 20-65. Hearing rules.
(a) The Department may, in accordance with the Illinois
Administrative Procedure Act, adopt rules to provide for
review within the Department of the Secretary's decisions
affecting the rights of persons or entities under this Act.
The review shall provide for, at a minimum:
(1) appointment of a hearing officer;
(2) appropriate procedural rules, specific deadlines
for filings, and standards of evidence and of proof; and
(3) provision for apportioning costs among parties to
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the appeal.
(b) All final administrative decisions of the Department
under this Act, all amendments and modifications of final
administrative decisions, and any rules adopted by the
Department pursuant to this Act shall be subject to judicial
review pursuant to the provisions of the Administrative Review
Law.
Section 20-70. Civil penalties.
(a) If a person other than a registrant has engaged, is
engaging, or is about to engage in digital asset business
activity with or on behalf of a resident in violation of this
Act, the Department may assess a civil penalty against the
person in an amount not to exceed $100,000 for each day the
person is in violation of this Act.
(b) If a person violates a provision of this Act, the
Department may assess a civil penalty in an amount not to
exceed $25,000 for each day of violation or for each act or
omission in violation, except that a fine may be imposed not to
exceed $75,000 for each day of violation or for each act or
omission in violation related to fraud, misrepresentation,
deceit, or negligence.
(c) A civil penalty under this Section continues to accrue
until the date the violation ceases.
(d) A civil penalty under this Section is cumulative to
any civil penalties enforceable by the Department under any
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other law.
Section 20-75. Subpoena power.
(a) The Secretary shall have the power to issue and to
serve subpoenas and subpoenas duces tecum to compel the
attendance of witnesses and the production of all books,
accounts, records, and other documents and materials relevant
to an examination or investigation. The Secretary, or his or
her duly authorized representative, shall have power to
administer oaths and affirmations to any person.
(b) In the event of noncompliance with a subpoena or
subpoena duces tecum issued or caused to be issued by the
Secretary, the Secretary may, through the Attorney General or
the State's Attorney of the county in which the person
subpoenaed resides or has its principal place of business,
petition the circuit court of the county for an order
requiring the subpoenaed person to appear and testify and to
produce such books, accounts, records, and other documents as
are specified in the subpoena duces tecum. The court may grant
injunctive relief restraining the person from advertising,
promoting, soliciting, entering into, offering to enter into,
continuing, or completing any digital asset business activity.
The court may grant other relief, including, but not limited
to, the restraint, by injunction or appointment of a receiver,
of any transfer, pledge, assignment, or other disposition of
the person's assets or any concealment, alteration,
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destruction, or other disposition of books, accounts, records,
or other documents and materials as the court deems
appropriate, until the person has fully complied with the
subpoena or subpoena duces tecum and the Secretary has
completed an investigation or examination.
(c) If it appears to the Secretary that the compliance
with a subpoena or subpoena duces tecum issued or caused to be
issued by the Secretary pursuant to this Section is essential
to an investigation or examination, the Secretary, in addition
to the other remedies provided for in this Act, may, through
the Attorney General or the State's Attorney of the county in
which the subpoenaed person resides or has its principal place
of business, apply for relief to the circuit court of the
county. The court shall thereupon direct the issuance of an
order against the subpoenaed person requiring sufficient bond
conditioned on compliance with the subpoena or subpoena duces
tecum. The court shall cause to be endorsed on the order a
suitable amount of bond or payment pursuant to which the
person named in the order shall be freed, having a due regard
to the nature of the case.
(d) In addition, the Secretary may, through the Attorney
General or the State's Attorney of the applicable county, seek
a writ of attachment or an equivalent order from the circuit
court having jurisdiction over the person who has refused to
obey a subpoena, who has refused to give testimony, or who has
refused to produce the matters described in the subpoena duces
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tecum.
Section 20-80. Civil actions.
(a) The Department may bring a civil action in accordance
with the following:
(1) If a person violates any provision of this Act, a
rule or final order, or condition imposed in writing by
the Department, the Department through the Attorney
General or the State's Attorney of the county in which any
such violation occurs may bring an action in the circuit
court to enjoin the acts or practices or to enforce
compliance with this Act or any rule or order adopted
pursuant to this Act. Upon a proper showing, a permanent
or preliminary injunction, restraining order, or writ of
mandate shall be granted and a receiver, monitor,
conservator, or other designated fiduciary or officer of
the court may be appointed for the defendant or the
defendant's assets, or any other ancillary relief may be
granted as appropriate. A receiver, monitor, conservator,
or other designated fiduciary or officer of the court
appointed by the circuit court pursuant to this Section
may, with the approval of the court, exercise any or all of
the powers of the defendant's officers, directors,
partners, trustees, or persons who exercise similar powers
and perform similar duties, including the filing of a
petition for bankruptcy. No action at law or in equity may
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be maintained by any party against the Secretary, a
receiver, monitor, conservator, or other designated
fiduciary or officer of the court, by reason of their
exercising these powers or performing these duties
pursuant to the order of, or with the approval of, the
circuit court.
(2) The Secretary may include in any action relief
authorized by Section 20-50. The circuit court shall have
jurisdiction to award additional relief.
(3) In any action brought by the Department, the
Department may recover its costs and attorney's fees in
connection with prosecuting the action if the Department
is the prevailing party in the action.
(b) The Attorney General may enforce a violation of
Article 5 as an unlawful practice under the Consumer Fraud and
Deceptive Business Practices Act.
(c) A claim of violation of Article 5 may be asserted in a
civil action. Additionally, a prevailing resident may be
awarded reasonable attorney's fees and court costs.
Article 30. Additional Procedural Provisions
Section 30-5. Confidential supervisory information.
(a) Confidential supervisory information shall, unless
made a matter of public record, not be subject to disclosure
under the Freedom of Information Act, and shall only be
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subject to disclosure pursuant to subpoena or court order as
provided in subsection (e).
(b) All records of communications or summaries of
communications between employees, agents, or representatives
of the Department and employees, agents, or representatives of
other governmental agencies, a provider of any multistate
licensing system, or associations or organizations
representing federal, state, or local law enforcement or
regulatory agencies or providers of any multistate licensing
system, pursuant to any regulatory or supervision activity
under this Act (1) shall not be subject to disclosure under the
Freedom of Information Act, and (2) to the extent the records
contain confidential supervisory information, shall only be
subject to disclosure pursuant to subpoena or court order as
provided in subsection (e).
(c) All confidential supervisory information received from
other governmental agencies, a multistate licensing system
provider, or associations or organizations consisting of
employees, agents, or representatives of such agencies or
providers, shall not be subject to disclosure under the
Freedom of Information Act, and only subject to disclosure
pursuant to subpoena or court order as provided in subsection
(e).
(d) The sharing of any confidential supervisory
information under this Act with governmental agencies,
providers of any multistate licensing system, or associations
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or organizations consisting of employees, agents, or
representatives of such federal, state, or local law
enforcement or regulatory agencies, shall not result in the
loss of privilege arising under federal or state law, or the
loss of confidentiality protections provided by federal law or
state law, and are only subject to disclosure pursuant to
subpoena or court order as provided in subsection (e).
(e) Confidential supervisory information may not be
disclosed to anyone other than the regulated person, law
enforcement officials or other regulatory agencies that have
an appropriate regulatory interest as determined by the
Secretary, or to a party presenting a lawful subpoena, order,
or other judicial or administrative process to the Secretary.
The Secretary may immediately appeal to the court of
jurisdiction the disclosure of such confidential supervisory
information and seek a stay of the subpoena pending the
outcome of the appeal. Reports required of regulated persons
by the Secretary under this Act and results of examinations
performed by the Secretary under this Act shall be the
property of only the Secretary but may be shared with the
regulated person. Access under this Act to the books and
records of each regulated person shall be limited to the
Secretary and his agents as provided in this Act and to the
regulated person and its authorized agents and designees. No
other person shall have access to the books and records of a
regulated person under this Act. Any person upon whom a demand
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for production of confidential supervisory information is
made, whether by subpoena, order, or other judicial or
administrative process, must withhold production of the
confidential supervisory information and must notify the
Secretary of the demand, at which time the Secretary is
authorized to intervene for the purpose of enforcing the
limitations of this Section or seeking the withdrawal or
termination of the attempt to compel production of the
confidential supervisory information. The Secretary may impose
any conditions and limitations on the disclosure of
confidential supervisory information that are necessary to
protect the confidentiality of such information. Except as
authorized by the Secretary, no person obtaining access to
confidential supervisory information may make a copy of the
confidential supervisory information. The Secretary may
condition a decision to disclose confidential supervisory
information on entry of a protective order by the court or
administrative tribunal presiding in the particular case or on
a written agreement of confidentiality. In a case in which a
protective order or agreement has already been entered between
parties other than the Secretary, the Secretary may
nevertheless condition approval for release of confidential
supervisory information upon the inclusion of additional or
amended provisions in the protective order. The Secretary may
authorize a party who obtained the records for use in one case
to provide them to another party in another case, subject to
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any conditions that the Secretary may impose on either or both
parties. The requester shall promptly notify other parties to
a case of the release of confidential supervisory information
obtained and, upon entry of a protective order, shall provide
copies of confidential supervisory information to the other
parties.
(f) The Secretary is authorized to enter agreements or
sharing arrangements with other governmental agencies,
providers of any multistate licensing system, or associations
or organizations representing governmental agencies or
providers of any multistate licensing system. Notwithstanding
the foregoing, the provisions of this Section shall apply
regardless of the existence of any such agreement or sharing
arrangement.
(g) This Section in no way limits any right, privilege, or
authority that the Department has pursuant to any other
applicable law. This Section does not in any way limit any
privilege arising under federal or state law or other
exemption from disclosure pursuant to the Freedom of
Information Act.
(h) Notwithstanding the foregoing, whenever the Secretary
determines, in his or her sole discretion, that it is in the
public's interest, he or she may publicly disclose information
or documents obtained under this Act, unless otherwise
prohibited by law.
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Section 30-10. Additional rulemaking authority.
(a) In addition to such powers and rulemaking authority as
may be prescribed elsewhere in this Act or other financial
laws administered by the Department, the Department is hereby
authorized and empowered to adopt rules consistent with the
purposes of this Act, including, but not limited to:
(1) rules in connection with the activities of covered
persons, affiliates, and service providers as may be
necessary and appropriate for the protection of residents;
(2) rules to define the terms used in this Act and as
may be necessary and appropriate to interpret and
implement the provisions of this Act;
(3) rules as may be necessary for the administration
and enforcement of this Act;
(4) rules to set and collect fees necessary to
administer and enforce this Act;
(5) rules in connection with the activities of covered
persons, affiliates, and service providers as may be
necessary and appropriate for the safety and soundness of
such covered persons and affiliates and the stability of
the financial system in this State; and
(6) rules in connection with the adoption of
reciprocity agreements between the Department and the
appropriate licensing agency of another state to register
a covered person on an expedited basis.
(b) The Secretary is hereby authorized and empowered to
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make specific rulings, demands, and findings that he or she
deems necessary for the proper conduct of the registrants and
affiliates thereof.
Article 35. Miscellaneous Provisions
Section 35-5. No evasion.
(a) It shall be unlawful to engage in any device,
subterfuge, or pretense to willfully evade or attempt to evade
the requirements of this Act or any rule or order issued by the
Department hereunder.
(b) Any financial product, service, or transaction that is
willfully structured to evade or attempt to evade the
definitions of digital asset or digital asset business
activity is a digital asset or digital asset business
activity, respectively, for purposes of this Act.
Section 35-10. Construction; severability.
(a) The provisions of this Act shall be liberally
construed to effectuate its purposes.
(b) The provisions of this Act are severable under Section
1.31 of the Statute on Statutes.
(c) To the extent that any provision of this Act is
preempted by federal law, the provision shall not apply and
shall not be enforced solely as to the extent of the preemption
and not as to other circumstances, persons, or applications.
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Section 35-15. Transition period.
(a) A covered person engaging in digital asset business
activity without a registration under this Act shall not be
considered in violation of Section 15-5 or 5-25 until July 1,
2027.
(b) A covered person engaging in digital asset business
activity shall not be considered in violation of Sections 5-5,
5-10, and 5-20 until January 1, 2027.
(c) A covered exchange shall not be considered in
violation of Section 5-15 until January 1, 2027.
(d) Notwithstanding the foregoing, the Department may
adopt rules pursuant to this Act upon this Act becoming law
with such rules not to take effect earlier than January 1,
2026.".
Article 90. Amendatory provisions
Section 90-5. The Freedom of Information Act is amended by
changing Section 7.5 as follows:
(5 ILCS 140/7.5)
Sec. 7.5. Statutory exemptions. To the extent provided for
by the statutes referenced below, the following shall be
exempt from inspection and copying:
(a) All information determined to be confidential
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under Section 4002 of the Technology Advancement and
Development Act.
(b) Library circulation and order records identifying
library users with specific materials under the Library
Records Confidentiality Act.
(c) Applications, related documents, and medical
records received by the Experimental Organ Transplantation
Procedures Board and any and all documents or other
records prepared by the Experimental Organ Transplantation
Procedures Board or its staff relating to applications it
has received.
(d) Information and records held by the Department of
Public Health and its authorized representatives relating
to known or suspected cases of sexually transmitted
infection or any information the disclosure of which is
restricted under the Illinois Sexually Transmitted
Infection Control Act.
(e) Information the disclosure of which is exempted
under Section 30 of the Radon Industry Licensing Act.
(f) Firm performance evaluations under Section 55 of
the Architectural, Engineering, and Land Surveying
Qualifications Based Selection Act.
(g) Information the disclosure of which is restricted
and exempted under Section 50 of the Illinois Prepaid
Tuition Act.
(h) Information the disclosure of which is exempted
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under the State Officials and Employees Ethics Act, and
records of any lawfully created State or local inspector
general's office that would be exempt if created or
obtained by an Executive Inspector General's office under
that Act.
(i) Information contained in a local emergency energy
plan submitted to a municipality in accordance with a
local emergency energy plan ordinance that is adopted
under Section 11-21.5-5 of the Illinois Municipal Code.
(j) Information and data concerning the distribution
of surcharge moneys collected and remitted by carriers
under the Emergency Telephone System Act.
(k) Law enforcement officer identification information
or driver identification information compiled by a law
enforcement agency or the Department of Transportation
under Section 11-212 of the Illinois Vehicle Code.
(l) Records and information provided to a residential
health care facility resident sexual assault and death
review team or the Executive Council under the Abuse
Prevention Review Team Act.
(m) Information provided to the predatory lending
database created pursuant to Article 3 of the Residential
Real Property Disclosure Act, except to the extent
authorized under that Article.
(n) Defense budgets and petitions for certification of
compensation and expenses for court appointed trial
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counsel as provided under Sections 10 and 15 of the
Capital Crimes Litigation Act (repealed). This subsection
(n) shall apply until the conclusion of the trial of the
case, even if the prosecution chooses not to pursue the
death penalty prior to trial or sentencing.
(o) Information that is prohibited from being
disclosed under Section 4 of the Illinois Health and
Hazardous Substances Registry Act.
(p) Security portions of system safety program plans,
investigation reports, surveys, schedules, lists, data, or
information compiled, collected, or prepared by or for the
Department of Transportation under Sections 2705-300 and
2705-616 of the Department of Transportation Law of the
Civil Administrative Code of Illinois, the Regional
Transportation Authority under Section 2.11 of the
Regional Transportation Authority Act, or the St. Clair
County Transit District under the Bi-State Transit Safety
Act (repealed).
(q) Information prohibited from being disclosed by the
Personnel Record Review Act.
(r) Information prohibited from being disclosed by the
Illinois School Student Records Act.
(s) Information the disclosure of which is restricted
under Section 5-108 of the Public Utilities Act.
(t) (Blank).
(u) Records and information provided to an independent
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team of experts under the Developmental Disability and
Mental Health Safety Act (also known as Brian's Law).
(v) Names and information of people who have applied
for or received Firearm Owner's Identification Cards under
the Firearm Owners Identification Card Act or applied for
or received a concealed carry license under the Firearm
Concealed Carry Act, unless otherwise authorized by the
Firearm Concealed Carry Act; and databases under the
Firearm Concealed Carry Act, records of the Concealed
Carry Licensing Review Board under the Firearm Concealed
Carry Act, and law enforcement agency objections under the
Firearm Concealed Carry Act.
(v-5) Records of the Firearm Owner's Identification
Card Review Board that are exempted from disclosure under
Section 10 of the Firearm Owners Identification Card Act.
(w) Personally identifiable information which is
exempted from disclosure under subsection (g) of Section
19.1 of the Toll Highway Act.
(x) Information which is exempted from disclosure
under Section 5-1014.3 of the Counties Code or Section
8-11-21 of the Illinois Municipal Code.
(y) Confidential information under the Adult
Protective Services Act and its predecessor enabling
statute, the Elder Abuse and Neglect Act, including
information about the identity and administrative finding
against any caregiver of a verified and substantiated
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decision of abuse, neglect, or financial exploitation of
an eligible adult maintained in the Registry established
under Section 7.5 of the Adult Protective Services Act.
(z) Records and information provided to a fatality
review team or the Illinois Fatality Review Team Advisory
Council under Section 15 of the Adult Protective Services
Act.
(aa) Information which is exempted from disclosure
under Section 2.37 of the Wildlife Code.
(bb) Information which is or was prohibited from
disclosure by the Juvenile Court Act of 1987.
(cc) Recordings made under the Law Enforcement
Officer-Worn Body Camera Act, except to the extent
authorized under that Act.
(dd) Information that is prohibited from being
disclosed under Section 45 of the Condominium and Common
Interest Community Ombudsperson Act.
(ee) Information that is exempted from disclosure
under Section 30.1 of the Pharmacy Practice Act.
(ff) Information that is exempted from disclosure
under the Revised Uniform Unclaimed Property Act.
(gg) Information that is prohibited from being
disclosed under Section 7-603.5 of the Illinois Vehicle
Code.
(hh) Records that are exempt from disclosure under
Section 1A-16.7 of the Election Code.
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SB1797 Enrolled LRB104 09833 BAB 19901 b
(ii) Information which is exempted from disclosure
under Section 2505-800 of the Department of Revenue Law of
the Civil Administrative Code of Illinois.
(jj) Information and reports that are required to be
submitted to the Department of Labor by registering day
and temporary labor service agencies but are exempt from
disclosure under subsection (a-1) of Section 45 of the Day
and Temporary Labor Services Act.
(kk) Information prohibited from disclosure under the
Seizure and Forfeiture Reporting Act.
(ll) Information the disclosure of which is restricted
and exempted under Section 5-30.8 of the Illinois Public
Aid Code.
(mm) Records that are exempt from disclosure under
Section 4.2 of the Crime Victims Compensation Act.
(nn) Information that is exempt from disclosure under
Section 70 of the Higher Education Student Assistance Act.
(oo) Communications, notes, records, and reports
arising out of a peer support counseling session
prohibited from disclosure under the First Responders
Suicide Prevention Act.
(pp) Names and all identifying information relating to
an employee of an emergency services provider or law
enforcement agency under the First Responders Suicide
Prevention Act.
(qq) Information and records held by the Department of
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SB1797 Enrolled LRB104 09833 BAB 19901 b
Public Health and its authorized representatives collected
under the Reproductive Health Act.
(rr) Information that is exempt from disclosure under
the Cannabis Regulation and Tax Act.
(ss) Data reported by an employer to the Department of
Human Rights pursuant to Section 2-108 of the Illinois
Human Rights Act.
(tt) Recordings made under the Children's Advocacy
Center Act, except to the extent authorized under that
Act.
(uu) Information that is exempt from disclosure under
Section 50 of the Sexual Assault Evidence Submission Act.
(vv) Information that is exempt from disclosure under
subsections (f) and (j) of Section 5-36 of the Illinois
Public Aid Code.
(ww) Information that is exempt from disclosure under
Section 16.8 of the State Treasurer Act.
(xx) Information that is exempt from disclosure or
information that shall not be made public under the
Illinois Insurance Code.
(yy) Information prohibited from being disclosed under
the Illinois Educational Labor Relations Act.
(zz) Information prohibited from being disclosed under
the Illinois Public Labor Relations Act.
(aaa) Information prohibited from being disclosed
under Section 1-167 of the Illinois Pension Code.
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(bbb) Information that is prohibited from disclosure
by the Illinois Police Training Act and the Illinois State
Police Act.
(ccc) Records exempt from disclosure under Section
2605-304 of the Illinois State Police Law of the Civil
Administrative Code of Illinois.
(ddd) Information prohibited from being disclosed
under Section 35 of the Address Confidentiality for
Victims of Domestic Violence, Sexual Assault, Human
Trafficking, or Stalking Act.
(eee) Information prohibited from being disclosed
under subsection (b) of Section 75 of the Domestic
Violence Fatality Review Act.
(fff) Images from cameras under the Expressway Camera
Act. This subsection (fff) is inoperative on and after
July 1, 2025.
(ggg) Information prohibited from disclosure under
paragraph (3) of subsection (a) of Section 14 of the Nurse
Agency Licensing Act.
(hhh) Information submitted to the Illinois State
Police in an affidavit or application for an assault
weapon endorsement, assault weapon attachment endorsement,
.50 caliber rifle endorsement, or .50 caliber cartridge
endorsement under the Firearm Owners Identification Card
Act.
(iii) Data exempt from disclosure under Section 50 of
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SB1797 Enrolled LRB104 09833 BAB 19901 b
the School Safety Drill Act.
(jjj) Information exempt from disclosure under Section
30 of the Insurance Data Security Law.
(kkk) Confidential business information prohibited
from disclosure under Section 45 of the Paint Stewardship
Act.
(lll) Data exempt from disclosure under Section
2-3.196 of the School Code.
(mmm) Information prohibited from being disclosed
under subsection (e) of Section 1-129 of the Illinois
Power Agency Act.
(nnn) Materials received by the Department of Commerce
and Economic Opportunity that are confidential under the
Music and Musicians Tax Credit and Jobs Act.
(ooo) Data or information provided pursuant to Section
20 of the Statewide Recycling Needs and Assessment Act.
(ppp) Information that is exempt from disclosure under
Section 28-11 of the Lawful Health Care Activity Act.
(qqq) Information that is exempt from disclosure under
Section 7-101 of the Illinois Human Rights Act.
(rrr) Information prohibited from being disclosed
under Section 4-2 of the Uniform Money Transmission
Modernization Act.
(sss) Information exempt from disclosure under Section
40 of the Student-Athlete Endorsement Rights Act.
(ttt) Audio recordings made under Section 30 of the
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SB1797 Enrolled LRB104 09833 BAB 19901 b
Illinois State Police Act, except to the extent authorized
under that Section.
(uuu) Information prohibited from being disclosed
under Section 30-5 of the Digital Assets Regulation Act.
(Source: P.A. 102-36, eff. 6-25-21; 102-237, eff. 1-1-22;
102-292, eff. 1-1-22; 102-520, eff. 8-20-21; 102-559, eff.
8-20-21; 102-813, eff. 5-13-22; 102-946, eff. 7-1-22;
102-1042, eff. 6-3-22; 102-1116, eff. 1-10-23; 103-8, eff.
6-7-23; 103-34, eff. 6-9-23; 103-142, eff. 1-1-24; 103-372,
eff. 1-1-24; 103-472, eff. 8-1-24; 103-508, eff. 8-4-23;
103-580, eff. 12-8-23; 103-592, eff. 6-7-24; 103-605, eff.
7-1-24; 103-636, eff. 7-1-24; 103-724, eff. 1-1-25; 103-786,
eff. 8-7-24; 103-859, eff. 8-9-24; 103-991, eff. 8-9-24;
103-1049, eff. 8-9-24; 103-1081, eff. 3-21-25.)
Section 90-10. The State Finance Act is amended by adding
Section 5.1030 as follows:
(30 ILCS 105/5.1030 new)
Sec. 5.1030. The Consumer Protection Fund.
Section 90-15. The Illinois Banking Act is amended by
changing Sections 2 and 30 as follows:
(205 ILCS 5/2) (from Ch. 17, par. 302)
Sec. 2. General definitions. In this Act, unless the
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SB1797 Enrolled LRB104 09833 BAB 19901 b
context otherwise requires, the following words and phrases
shall have the following meanings:
"Accommodation party" shall have the meaning ascribed to
that term in Section 3-419 of the Uniform Commercial Code.
"Action" in the sense of a judicial proceeding includes
recoupments, counterclaims, set-off, and any other proceeding
in which rights are determined.
"Affiliate facility" of a bank means a main banking
premises or branch of another commonly owned bank. The main
banking premises or any branch of a bank may be an "affiliate
facility" with respect to one or more other commonly owned
banks.
"Appropriate federal banking agency" means the Federal
Deposit Insurance Corporation, the Federal Reserve Bank of
Chicago, or the Federal Reserve Bank of St. Louis, as
determined by federal law.
"Bank" means any person doing a banking business whether
subject to the laws of this or any other jurisdiction.
A "banking house", "branch", "branch bank", or "branch
office" shall mean any place of business of a bank at which
deposits are received, checks paid, or loans made, but shall
not include any place at which only records thereof are made,
posted, or kept. A place of business at which deposits are
received, checks paid, or loans made shall not be deemed to be
a branch, branch bank, or branch office if the place of
business is adjacent to and connected with the main banking
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premises, or if it is separated from the main banking premises
by not more than an alley; provided always that (i) if the
place of business is separated by an alley from the main
banking premises there is a connection between the two by
public or private way or by subterranean or overhead passage,
and (ii) if the place of business is in a building not wholly
occupied by the bank, the place of business shall not be within
any office or room in which any other business or service of
any kind or nature other than the business of the bank is
conducted or carried on. A place of business at which deposits
are received, checks paid, or loans made shall not be deemed to
be a branch, branch bank, or branch office (i) of any bank if
the place is a terminal established and maintained in
accordance with paragraph (17) of Section 5 of this Act, or
(ii) of a commonly owned bank by virtue of transactions
conducted at that place on behalf of the other commonly owned
bank under paragraph (23) of Section 5 of this Act if the place
is an affiliate facility with respect to the other bank.
"Branch of an out-of-state bank" means a branch
established or maintained in Illinois by an out-of-state bank
as a result of a merger between an Illinois bank and the
out-of-state bank that occurs on or after May 31, 1997, or any
branch established by the out-of-state bank following the
merger.
"Bylaws" means the bylaws of a bank that are adopted by the
bank's board of directors or shareholders for the regulation
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and management of the bank's affairs. If the bank operates as a
limited liability company, however, "bylaws" means the
operating agreement of the bank.
"Call report fee" means the fee to be paid to the
Commissioner by each State bank pursuant to paragraph (a) of
subsection (3) of Section 48 of this Act.
"Capital" includes the aggregate of outstanding capital
stock and preferred stock.
"Cash flow reserve account" means the account within the
books and records of the Commissioner of Banks and Real Estate
used to record funds designated to maintain a reasonable Bank
and Trust Company Fund operating balance to meet agency
obligations on a timely basis.
"Charter" includes the original charter and all amendments
thereto and articles of merger or consolidation.
"Commissioner" means the Commissioner of Banks and Real
Estate, except that beginning on April 6, 2009 (the effective
date of Public Act 95-1047), all references in this Act to the
Commissioner of Banks and Real Estate are deemed, in
appropriate contexts, to be references to the Secretary of
Financial and Professional Regulation.
"Commonly owned banks" means 2 or more banks that each
qualify as a bank subsidiary of the same bank holding company
pursuant to Section 18 of the Federal Deposit Insurance Act;
"commonly owned bank" refers to one of a group of commonly
owned banks but only with respect to one or more of the other
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banks in the same group.
"Community" means a city, village, or incorporated town
and also includes the area served by the banking offices of a
bank, but need not be limited or expanded to conform to the
geographic boundaries of units of local government.
"Company" means a corporation, limited liability company,
partnership, business trust, association, or similar
organization and, unless specifically excluded, includes a
"State bank" and a "bank".
"Consolidating bank" means a party to a consolidation.
"Consolidation" takes place when 2 or more banks, or a
trust company and a bank, are extinguished and by the same
process a new bank is created, taking over the assets and
assuming the liabilities of the banks or trust company passing
out of existence.
"Continuing bank" means a merging bank, the charter of
which becomes the charter of the resulting bank.
"Converting bank" means a State bank converting to become
a national bank, or a national bank converting to become a
State bank.
"Converting trust company" means a trust company
converting to become a State bank.
"Court" means a court of competent jurisdiction.
"Director" means a member of the board of directors of a
bank. In the case of a manager-managed limited liability
company, however, "director" means a manager of the bank and,
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in the case of a member-managed limited liability company,
"director" means a member of the bank. The term "director"
does not include an advisory director, honorary director,
director emeritus, or similar person, unless the person is
otherwise performing functions similar to those of a member of
the board of directors.
"Director of Banking" means the Director of the Division
of Banking of the Department of Financial and Professional
Regulation.
"Eligible depository institution" means an insured savings
association that is in default, an insured savings association
that is in danger of default, a State or national bank that is
in default or a State or national bank that is in danger of
default, as those terms are defined in this Section, or a new
bank as that term is defined in Section 11(m) of the Federal
Deposit Insurance Act or a bridge bank as that term is defined
in Section 11(n) of the Federal Deposit Insurance Act or a new
federal savings association authorized under Section
11(d)(2)(f) of the Federal Deposit Insurance Act.
"Fiduciary" means trustee, agent, executor, administrator,
committee, guardian for a minor or for a person under legal
disability, receiver, trustee in bankruptcy, assignee for
creditors, or any holder of similar position of trust.
"Financial institution" means a bank, savings bank,
savings and loan association, credit union, or any licensee
under the Consumer Installment Loan Act or the Sales Finance
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Agency Act and, for purposes of Section 48.3, any proprietary
network, funds transfer corporation, or other entity providing
electronic funds transfer services, or any corporate
fiduciary, its subsidiaries, affiliates, parent company, or
contractual service provider that is examined by the
Commissioner. For purposes of Section 5c and subsection (b) of
Section 13 of this Act, "financial institution" includes any
proprietary network, funds transfer corporation, or other
entity providing electronic funds transfer services, and any
corporate fiduciary.
"Foundation" means the Illinois Bank Examiners' Education
Foundation.
"General obligation" means a bond, note, debenture,
security, or other instrument evidencing an obligation of the
government entity that is the issuer that is supported by the
full available resources of the issuer, the principal and
interest of which is payable in whole or in part by taxation.
"Guarantee" means an undertaking or promise to answer for
payment of another's debt or performance of another's duty,
liability, or obligation whether "payment guaranteed" or
"collection guaranteed".
"In danger of default" means a State or national bank, a
federally chartered insured savings association, or an
Illinois state chartered insured savings association with
respect to which the Commissioner or the appropriate federal
banking agency has advised the Federal Deposit Insurance
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Corporation that:
(1) in the opinion of the Commissioner or the
appropriate federal banking agency,
(A) the State or national bank or insured savings
association is not likely to be able to meet the
demands of the State or national bank's or savings
association's obligations in the normal course of
business; and
(B) there is no reasonable prospect that the State
or national bank or insured savings association will
be able to meet those demands or pay those obligations
without federal assistance; or
(2) in the opinion of the Commissioner or the
appropriate federal banking agency,
(A) the State or national bank or insured savings
association has incurred or is likely to incur losses
that will deplete all or substantially all of its
capital; and
(B) there is no reasonable prospect that the
capital of the State or national bank or insured
savings association will be replenished without
federal assistance.
"In default" means, with respect to a State or national
bank or an insured savings association, any adjudication or
other official determination by any court of competent
jurisdiction, the Commissioner, the appropriate federal
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banking agency, or other public authority pursuant to which a
conservator, receiver, or other legal custodian is appointed
for a State or national bank or an insured savings
association.
"Insured savings association" means any federal savings
association chartered under Section 5 of the federal Home
Owners' Loan Act and any State savings association chartered
under the Illinois Savings and Loan Act of 1985 or a
predecessor Illinois statute, the deposits of which are
insured by the Federal Deposit Insurance Corporation. The term
also includes a savings bank organized or operating under the
Savings Bank Act.
"Insured savings association in recovery" means an insured
savings association that is not an eligible depository
institution and that does not meet the minimum capital
requirements applicable with respect to the insured savings
association.
"Issuer" means for purposes of Section 33 every person who
shall have issued or proposed to issue any security; except
that (1) with respect to certificates of deposit, voting trust
certificates, collateral-trust certificates, and certificates
of interest or shares in an unincorporated investment trust
not having a board of directors (or persons performing similar
functions), "issuer" means the person or persons performing
the acts and assuming the duties of depositor or manager
pursuant to the provisions of the trust, agreement, or
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instrument under which the securities are issued; (2) with
respect to trusts other than those specified in clause (1)
above, where the trustee is a corporation authorized to accept
and execute trusts, "issuer" means the entrusters, depositors,
or creators of the trust and any manager or committee charged
with the general direction of the affairs of the trust
pursuant to the provisions of the agreement or instrument
creating the trust; and (3) with respect to equipment trust
certificates or like securities, "issuer" means the person to
whom the equipment or property is or is to be leased or
conditionally sold.
"Letter of credit" and "customer" shall have the meanings
ascribed to those terms in Section 5-102 of the Uniform
Commercial Code.
"Main banking premises" means the location that is
designated in a bank's charter as its main office.
"Maker or obligor" means for purposes of Section 33 the
issuer of a security, the promisor in a debenture or other debt
security, or the mortgagor or grantor of a trust deed or
similar conveyance of a security interest in real or personal
property.
"Merged bank" means a merging bank that is not the
continuing, resulting, or surviving bank in a consolidation or
merger.
"Merger" includes consolidation.
"Merging bank" means a party to a bank merger.
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"Merging trust company" means a trust company party to a
merger with a State bank.
"Mid-tier bank holding company" means a corporation that
(a) owns 100% of the issued and outstanding shares of each
class of stock of a State bank, (b) has no other subsidiaries,
and (c) 100% of the issued and outstanding shares of the
corporation are owned by a parent bank holding company.
"Municipality" means any municipality, political
subdivision, school district, taxing district, or agency.
"National bank" means a national banking association
located in this State and after May 31, 1997, means a national
banking association without regard to its location.
"Out-of-state bank" means a bank chartered under the laws
of a state other than Illinois, a territory of the United
States, or the District of Columbia.
"Parent bank holding company" means a corporation that is
a bank holding company as that term is defined in the Illinois
Bank Holding Company Act of 1957 and owns 100% of the issued
and outstanding shares of a mid-tier bank holding company.
"Person" means an individual, corporation, limited
liability company, partnership, joint venture, trust, estate,
or unincorporated association.
"Public agency" means the State of Illinois, the various
counties, townships, cities, towns, villages, school
districts, educational service regions, special road
districts, public water supply districts, fire protection
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districts, drainage districts, levee districts, sewer
districts, housing authorities, the Illinois Bank Examiners'
Education Foundation, the Chicago Park District, and all other
political corporations or subdivisions of the State of
Illinois, whether now or hereafter created, whether herein
specifically mentioned or not, and shall also include any
other state or any political corporation or subdivision of
another state.
"Public funds" or "public money" means current operating
funds, special funds, interest and sinking funds, and funds of
any kind or character belonging to, in the custody of, or
subject to the control or regulation of the United States or a
public agency. "Public funds" or "public money" shall include
funds held by any of the officers, agents, or employees of the
United States or of a public agency in the course of their
official duties and, with respect to public money of the
United States, shall include Postal Savings funds.
"Published" means, unless the context requires otherwise,
the publishing of the notice or instrument referred to in some
newspaper of general circulation in the community in which the
bank is located at least once each week for 3 successive weeks.
Publishing shall be accomplished by, and at the expense of,
the bank required to publish. Where publishing is required,
the bank shall submit to the Commissioner that evidence of the
publication as the Commissioner shall deem appropriate.
"Qualified financial contract" means any security
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contract, commodity contract, forward contract, including spot
and forward foreign exchange contracts, repurchase agreement,
swap agreement, and any similar agreement, any option to enter
into any such agreement, including any combination of the
foregoing, and any master agreement for such agreements. A
master agreement, together with all supplements thereto, shall
be treated as one qualified financial contract. The contract,
option, agreement, or combination of contracts, options, or
agreements shall be reflected upon the books, accounts, or
records of the bank, or a party to the contract shall provide
documentary evidence of such agreement.
"Recorded" means the filing or recording of the notice or
instrument referred to in the office of the Recorder of the
county wherein the bank is located.
"Resulting bank" means the bank resulting from a merger or
conversion.
"Secretary" means the Secretary of Financial and
Professional Regulation, or a person authorized by the
Secretary or by this Act to act in the Secretary's stead.
"Securities" means stocks, bonds, debentures, notes, or
other similar obligations.
"Special purpose trust company" means a special purpose
trust company under Article IIA of the Corporate Fiduciary
Act.
"Stand-by letter of credit" means a letter of credit under
which drafts are payable upon the condition the customer has
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defaulted in performance of a duty, liability, or obligation.
"State bank" means any banking corporation that has a
banking charter issued by the Commissioner under this Act.
"State Banking Board" means the State Banking Board of
Illinois.
"Subsidiary" with respect to a specified company means a
company that is controlled by the specified company. For
purposes of paragraphs (8) and (12) of Section 5 of this Act,
"control" means the exercise of operational or managerial
control of a corporation by the bank, either alone or together
with other affiliates of the bank.
"Surplus" means the aggregate of (i) amounts paid in
excess of the par value of capital stock and preferred stock;
(ii) amounts contributed other than for capital stock and
preferred stock and allocated to the surplus account; and
(iii) amounts transferred from undivided profits.
"Tier 1 Capital" and "Tier 2 Capital" have the meanings
assigned to those terms in regulations promulgated for the
appropriate federal banking agency of a state bank, as those
regulations are now or hereafter amended.
"Trust company" means a limited liability company or
corporation incorporated in this State for the purpose of
accepting and executing trusts.
"Undivided profits" means undistributed earnings less
discretionary transfers to surplus.
"Unimpaired capital and unimpaired surplus", for the
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purposes of paragraph (21) of Section 5 and Sections 32, 33,
34, 35.1, 35.2, and 47 of this Act means the sum of the state
bank's Tier 1 Capital and Tier 2 Capital plus such other
shareholder equity as may be included by regulation of the
Commissioner. Unimpaired capital and unimpaired surplus shall
be calculated on the basis of the date of the last quarterly
call report filed with the Commissioner preceding the date of
the transaction for which the calculation is made, provided
that: (i) when a material event occurs after the date of the
last quarterly call report filed with the Commissioner that
reduces or increases the bank's unimpaired capital and
unimpaired surplus by 10% or more, then the unimpaired capital
and unimpaired surplus shall be calculated from the date of
the material event for a transaction conducted after the date
of the material event; and (ii) if the Commissioner determines
for safety and soundness reasons that a state bank should
calculate unimpaired capital and unimpaired surplus more
frequently than provided by this paragraph, the Commissioner
may by written notice direct the bank to calculate unimpaired
capital and unimpaired surplus at a more frequent interval. In
the case of a state bank newly chartered under Section 13 or a
state bank resulting from a merger, consolidation, or
conversion under Sections 21 through 26 for which no preceding
quarterly call report has been filed with the Commissioner,
unimpaired capital and unimpaired surplus shall be calculated
for the first calendar quarter on the basis of the effective
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date of the charter, merger, consolidation, or conversion.
(Source: P.A. 95-924, eff. 8-26-08; 95-1047, eff. 4-6-09;
96-1000, eff. 7-2-10; 96-1163, eff. 1-1-11; revised 8-6-24.)
(205 ILCS 5/30) (from Ch. 17, par. 337)
Sec. 30. Conversion; merger with trust company or special
purpose trust company. Upon approval by the Commissioner a
trust company having power so to do under the law under which
it is organized may convert into a state bank or may merge into
a state bank as prescribed by this Act; except that the action
by a trust company shall be taken in the manner prescribed by
and shall be subject to limitations and requirements imposed
by the law under which it is organized which law shall also
govern the rights of its dissenting stockholders. The rights
of dissenting stockholders of a state bank shall be governed
by Section 29 of this Act. The conversion or merger procedure
shall be:
(1) In the case of a merger, the board of directors of both
the merging trust company and the merging bank by a majority of
the entire board in each case shall approve a merger agreement
which shall contain:
(a) The name and location of the merging bank and of
the merging trust company and a list of the stockholders
of each as of the date of the merger agreement;
(b) With respect to the resulting bank (i) its name
and place of business; (ii) the amount of capital, surplus
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and reserve for operating expenses; (iii) the classes and
the number of shares of stock and the par value of each
share; (iv) the charter which is to be the charter of the
resulting bank, together with the amendments to the
continuing charter and to the continuing by-laws; and (v)
a detailed financial statement showing the assets and
liabilities after the proposed merger;
(c) Provisions governing the manner of converting the
shares of the merging bank and of the merging trust
company into shares of the resulting bank;
(d) A statement that the merger agreement is subject
to approval by the Commissioner and by the stockholders of
the merging bank and the merging trust company, and that
whether approved or disapproved, the parties thereto will
pay the Commissioner's expenses of examination;
(e) Provisions governing the manner of disposing of
the shares of the resulting bank not taken by the
dissenting stockholders of the merging trust company; and
(f) Such other provisions as the Commissioner may
reasonably require to enable him to discharge his duties
with respect to the merger.
(2) After approval by the board of directors of the
merging bank and of the merging trust company, the merger
agreement shall be submitted to the Commissioner for approval
together with the certified copies of the authorizing
resolution of each board of directors showing approval by a
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majority of each board.
(3) After receipt by the Commissioner of the papers
specified in subsection (2), he shall approve or disapprove
the merger agreement. The Commissioner shall not approve the
agreement unless he shall be of the opinion and finds:
(a) That the resulting bank meets the requirements of
this Act for the formation of a new bank at the proposed
place of business of the resulting bank;
(b) That the same matters exist in respect of the
resulting bank which would have been required under
Section 10 of this Act for the organization of a new bank;
and
(c) That the merger agreement is fair to all persons
affected. If the Commissioner disapproves the merger
agreement, he shall state his objections in writing and
give an opportunity to the merging bank and the merging
trust company to obviate such objections.
(4) To be effective, if approved by the Commissioner, a
merger of a bank and a trust company where there is to be a
resulting bank must be approved by the affirmative vote of the
holders of at least two-thirds of the outstanding shares of
stock of the merging bank entitled to vote at a meeting called
to consider such action, unless holders of preferred stock are
entitled to vote as a class in respect thereof, in which event
the proposed merger shall be adopted upon receiving the
affirmative vote of the holders of at least two-thirds of the
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outstanding shares of each class of shares entitled to vote as
a class in respect thereof and of the total outstanding shares
entitled to vote at such meeting and must be approved by the
stockholders of the merging trust company as provided by the
Act under which it is organized. The prescribed vote by the
merging bank and the merging trust company shall constitute
the adoption of the charter and by-laws of the continuing
bank, including the amendments in the merger agreement, as the
charter and by-laws of the resulting bank. Written or printed
notice of the meeting of the stockholders of the merging bank
shall be given to each stockholder of record entitled to vote
at such meeting at least thirty days before such meeting and in
the manner provided in this Act for the giving of notice of
meetings of stockholders. The notice shall state that
dissenting stockholders of the merging trust company will be
entitled to payment of the value of those shares which are
voted against approval of the merger, if a proper demand is
made on the resulting bank and the requirements of the Act
under which the merging trust company is organized are
satisfied.
(5) Unless a later date is specified in the merger
agreement, the merger shall become effective upon the filing
with the Commissioner of the executed merger agreement,
together with copies of the resolutions of the stockholders of
the merging bank and the merging trust company approving it,
certified by the president or a vice-president or, the cashier
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and also by the secretary or other officer charged with
keeping the records. The charter of the merging trust company
shall thereupon automatically terminate. The Commissioner
shall thereupon issue to the continuing bank a certificate of
merger which shall specify the name of the merging trust
company, the name of the continuing bank and the amendments to
the charter of the continuing bank provided for by the merger
agreement. Such certificate shall be conclusive evidence of
the merger and of the correctness of all proceedings therefor
in all courts and places including the office of the Secretary
of State, and said certificate shall be recorded.
(6) In the case of a conversion, a trust company shall
apply for a charter by filing with the Commissioner:
(a) A certificate signed by its president, or a
vice-president, and by a majority of the entire board of
directors setting forth the corporate action taken in
compliance with the provisions of the Act under which it
is organized governing the conversion of a trust company
to a bank or governing the merger of a trust company into
another corporation;
(b) The plan of conversion and the proposed charter
approved by the stockholders for the operation of the
trust company as a bank. The plan of conversion shall
contain (i) the name and location proposed for the
converting trust company; (ii) a list of its stockholders
as of the date of the stockholders' approval of the plan of
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conversion; (iii) the amount of its capital, surplus and
reserve for operating expenses; (iv) the classes and the
number of shares of stock and the par value of each share;
(v) the charter which is to be the charter of the resulting
bank; and (vi) a detailed financial statement showing the
assets and liabilities of the converting trust company;
(c) A statement that the plan of conversion is subject
to approval by the Commissioner and that, whether approved
or disapproved, the converting trust company will pay the
Commissioner's expenses of examination; and
(d) Such other instruments as the Commissioner may
reasonably require to enable him to discharge his duties
with respect to the conversion.
(7) After receipt by the Commissioner of the papers
specified in subsection (6), he shall approve or disapprove
the plan of conversion. The Commissioner shall not approve the
plan of conversion unless he shall be of the opinion and finds:
(a) That the resulting bank meets the requirements of
this Act for the formation of a new bank at the proposed
place of business of the resulting bank;
(b) That the same matters exist in respect of the
resulting bank which would have been required under
Section 10 of this Act for the organization of a new bank;
and
(c) That the plan of conversion is fair to all persons
affected.
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If the commissioner disapproves the plan of conversion, he
shall state his objections in writing and give an opportunity
to the converting trust company to obviate such objections.
(8) Unless a later date is specified in the plan of
conversion, the conversion shall become effective upon the
Commissioner's approval, and the charter proposed in the plan
of conversion shall constitute the charter of the resulting
bank. The Commissioner shall issue a certificate of conversion
which shall specify the name of the converting trust company,
the name of the resulting bank and the charter provided for by
said plan of conversion. Such certificate shall be conclusive
evidence of the conversion and of the correctness of all
proceedings therefor in all courts and places including the
office of the Secretary of State, and such certificate shall
be recorded.
(8.5) A special purpose trust company under Article IIA of
the Corporate Fiduciary Act may merge with a State bank or
convert to a State bank as if the special purpose trust company
were a trust company under Article II of the Corporate
Fiduciary Act, subject to rules adopted by the Department.
(9) In the case of either a merger or a conversion under
this Section 30, the resulting bank shall be considered the
same business and corporate entity as each merging bank and
merging trust company or as the converting trust company with
all the property, rights, powers, duties and obligations of
each as specified in Section 28 of this Act.
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(Source: P.A. 91-357, eff. 7-29-99.)
Section 90-20. The Corporate Fiduciary Act is amended by
changing Sections 1-5.08, 2-1, 4-1, 4-2, 4-5, 4A-15, and 5-1
and by adding Article IIA as follows:
(205 ILCS 620/1-5.08) (from Ch. 17, par. 1551-5.08)
Sec. 1-5.08. "Foreign corporation" means:
(a) any bank, savings and loan association, savings bank,
or other corporation, limited liability company, or other
entity now or hereafter organized under the laws of any state
or territory of the United States of America, including the
District of Columbia, other than the State of Illinois;
(b) any national banking association having its principal
place of business in any state or territory of the United
States of America, including the District of Columbia, other
than the State of Illinois; and
(c) any federal savings and loan association or federal
savings bank having its principal place of business in any
state or territory of the United States of America, including
the District of Columbia, other than the State of Illinois.
(Source: P.A. 91-97, eff. 7-9-99.)
(205 ILCS 620/2-1) (from Ch. 17, par. 1552-1)
Sec. 2-1. (a) Any corporation which has been or shall be
incorporated under the general corporation laws of this State
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and any limited liability company established under the
Limited Liability Company Act for the purpose of accepting and
executing trusts, and any state bank, state savings and loan
association, state savings bank, or other special corporation
now or hereafter authorized by law to accept or execute
trusts, may be appointed to act as a fiduciary in any capacity
a natural person or corporation may act, and shall include,
but not be limited to, acting as assignee or trustee by deed,
and executor, guardian or trustee by will, custodian under the
Illinois Uniform Transfers to Minors Act and such appointment
shall be of like force as in case of appointment of a natural
person and shall be designated a corporate fiduciary.
(b) No corporate fiduciary shall dissolve or cease its
corporate existence without prior notice to and approval by
the Commissioner and compliance with the requirements of
Section 7-1 of this Act.
(Source: P.A. 100-863, eff. 8-14-18.)
(205 ILCS 620/Art. IIA heading new)
ARTICLE IIA. SPECIAL PURPOSE TRUST COMPANY
AUTHORITY AND ORGANIZATION
(205 ILCS 620/2A-1 new)
Sec. 2A-1. Purpose. The General Assembly finds that
corporate fiduciaries perform a vital service in the custody,
safekeeping, and management of physical assets, traditional
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electronic assets, and emerging digital assets for customers;
that it is in the public interest that trust companies may be
organized for the special purpose of providing fiduciary
custodial services and related services to customers; that the
operation of special purpose trust companies is impressed with
a public interest such that it should be supervised as an
activity under this Act; and that such special purpose trust
companies should obtain their authority, conduct their
operations, and be supervised as corporate fiduciaries as
provided in this Act.
(205 ILCS 620/2A-2 new)
Sec. 2A-2. Special purpose trust company. Any corporation
that has been or shall be incorporated under the general
corporation laws of this State and any limited liability
company established under the Limited Liability Company Act
for the special purpose of providing fiduciary custodial
services or providing other like or related services as
specified by rule, consistent with this Article, may be
appointed to act as a fiduciary with respect to such services
and shall be designated a special purpose trust company.
(205 ILCS 620/2A-3 new)
Sec. 2A-3.