Municipal Treasurers, Finance Officers,
Others of Similar Capacity . . .
DO YOU HAVE A CONFLICT?

We wish to call to your attention the provisions of Public Act 86-426 which became effective August 20, 1989. The Act contains certain revisions to, among other statutes, the provisions of the Investment of Public Funds Act, Chapter 85, Paragraph 902, Illinois Revised Statutes, 1987.

The first change in that section restricts the ability of municipalities to invest public funds in commercial paper investments.

The second change, which is potentially troublesome to you, effectively prohibits a municipality from doing business with a bank, savings and loan or other investment company if you are employed by or have an interest, either directly or indirectly, in that company. Specifically, the statute reads:

No person acting as treasurer, financial officer or who is employed in any similar capacity by or for a public agency shall, in any manner, have any interest, either directly or indirectly, in any investments in which the agency is authorized to invest or receive in any manner compensation of any kind from any investments in which the agency is authorized to invest or the sellers, sponsors or managers of such investment.

The Municipal League negotiated successfully a number of years ago for conflict of interest language designed to address the very subjects of this amendment. That language is presently contained in Chapter 24, Paragraph 3-14-4 and Chapter 102, Paragraph 3, Illinois Revised Statutes, 1987.

The provisions of Public Act 86-426, in the opinion of the League's Chief Counsel, effectively overrides those provisions in Chapter 24 and Chapter 102 which allow such investments in banks or other institutions wherein the treasurer or financial officer owns less than a 7 1/2% interest in that Company. This is particularly so in light of the language of Chapter 85, Paragraph 905 which states that this "act, with reference to any other statute, shall be deemed full and complete authority for the investment of public funds. . . ." Therefore, if your municipality presently has any investments which would be in conflict with this statute, we suggest you immediately remedy the problem by moving those investments or deposits to an institution in which the treasurer or financial officer has neither a direct nor an indirect interest.

Page 24 / Illinois Municipal Review / December 1989