Full text of Trust Indenture Act of 1939
The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
53 STAT.]
76TH CONG., 1ST SESS.-CHS. 410, 411-AUG. 2, 3, 1939
1149
(2) Any person violating the provisions of this section shall be
immediately removed from the position or office held by him, and
thereafter no part of the funds appropriated by any Act of Congress
for such position or office shall be used to pay the compensation of
such person.
Penalty for violation.
SEC. 10. All provisions of this Act shall be in addition to, not in
substitution for, of existing law.
SEC. 11. If any provision of this Act, or the application of such
provision to any person or circumstance, is held invalid, the remainder of the Act, and the application of such provision to other persons
or circumstances, shall not be affected thereby.
Approved, August 2, 1939, 11:50 a. m., E. S. T.
Provisions supplementary to existing
law.
Saving clause.
[CHAPTER 411]
AN ACT
To provide for the regulation of the sale of certain securities in interstate and
foreign commerce and through the mails, and the regulation of the trust indentures under which the same are issued, and for other purposes.
Be it enacted by the Senate and House of Representaties of the
UnitedStates of America in Congressassembled, That the Act entitled
"An Act to provide full and fair disclosure of the character of
securities sold in interstate and foreign commerce and through the
mails, and to prevent frauds in the sale thereof, and for other purposes , approved May 27, 1933, as amended, is amended by adding at
the end thereof the following:
August 3, 1939
[S. 2065
[Public, No. 263
48 Stat. 74.
15 U. S. C.§§ 77a77mm; Supp. IV, ch.
2A.
"TITLE III
"SHORT TITLE
"SEC. 301. This title, divided into sections as follows, may be cited
as the 'Trust Indenture Act of 1939':
TABLE OF CONTENTS
Sec. 301.
Sec. 302.
Sec. 303.
Sec. 304.
Sec. 305.
Sec. 300.
Sec. 307.
Sec. 308.
Sec. 309.
Sec. 310.
Sec.
Sec.
Sec.
Sec.
311.
312.
313.
314.
Sec. 315.
TITLE III
Short title.
Necessity for regulation.
Definitions.
Exempted securities anid transactions.
Securities required to be registered under Securities Act.
Securities not registered under Securities Act.
Qualification of indentures covering securities not required to be
registered.
Integration of procedure with Securities Act and other Acts.
When qualification becomes effective; effect of qualification.
Eligibility and disqualification of trustee.
(a) Persons eligible for appointment as trustee.
(b) Disqualification of trustee.
(c) Applicability of section.
Preferential collection of claims against obligor.
Bondholders' lists.
Reports by indenture trustee.
Reports by obligor; evidence of compliance with indenture provisions.
(a) Periodic reports.
(b) Evidence of recording of indenture.
(c) Evidence of compliance with conditions precedent.
(d) Certificates of fair value.
(e) Recitals as to basis of certificate or opinion.
(f) Parties may provide for additional evidence.
Duties and responsibility of the trustee.
(a) Duties prior to default.
(b) Notice of defaults.
(c) Duties of the trustee in case of default.
(d) Responsibility of the trustee.
(e) Undertaking for costs.
Trust
Indenture
1150
PUBLIC LAWS-CH. 411-AUG. 3, 1939
[53 STAT.
Sec. 316. Directions and waivers by bondholders; prohibition of impairment
of holder's right to payment.
Sec. 317. Special powers of trustee; duties of paying agents.
Sec. 318. Effect of prescribed indenture provisions.
Sec. 319. Rules, regulations, and orders.
Sec. 320. Hearings by Commission.
Sec. 321. Special powers of the Commission.
Sec. 322. Court review of orders; jurisdiction of offenses and suits.
Sec. 323. Liability for misleading statements.
Sec. 324. Unlawful representations.
Sec. 325. Penalties.
Sec. 326. Effect on existing law.
Sec. 327. Contrary stipulations void.
Sec. 328. Separability of provisions.
"NECESSITY
Necessity otr regulation declared.
48 Stat. 909.
15 U. s. o. 5 78jJ.
FOR REGULATION
"SEc. 302. (a) Upon the basis of facts disclosed by the reports
of the Securities and Exchange Commission made to the Congress
pursuant to section 211 of the Securities Exchange Act of 1934 and
otherwise disclosed and ascertained, it is hereby declared that the
national public interest and the interest of investors in notes, bonds,
debentures, evidences of indebtedness, and certificates of interest or
participation therein, which are offered to the public, are adversely
affected"(1) when the obligor fails to provide a trustee to protect and
enforce the rights and to represent the interests of such investors,
notwithstanding the fact that (A) individual action by such
investors for the purpose of protecting and enforcing their rights
is rendered impracticable by reason of the disproportionate
expense of taking such action, and (B) concerted action by such
investors in their common interest through representatives of
their own selection is impeded by reason of the wide dispersion
of such investors through many States, and by reason of the fact
that information as to the names and addresses of such investors
generally is not available to such investors;
"(2) when the trustee does not have adequate rights and powers,
or adequate duties and responsibilities, in connection with matters relating to the protection and enforcement of the rights of
such investors; when, notwithstanding the obstacles to concerted
action by such investors, and the general and reasonable assumption by such investors that the trustee is under an affirmative
duty to take action for the protection and enforcement of their
rights, trust indentures (A) generally provide that the trustee
shall be under no duty to take any such action, even in the event
of default, unless it receives notice of default, demand for action
and indemnity, from the holders of substantial percentages of
the securities outstanding thereunder, and (B) generally relieve
the trustee from liability even for its own negligent action or
failure to act;
"(3) when the trustee does not have resources commensurate
with its responsibilities, or has any relationship to or connection
with the obligor or any underwriter of any securities of the
obligor, or holds, beneficially or otherwise, any interest in the
obligor or any such underwriter, which relationship, connection,
or interest involves a material conflict with the interests of such
investors;
"(4) when the obligor is not obligated to furnish to the trustee
under the indenture and to such investors adequate current information as to its financial condition, and as to the performance
of its obligations with respect to the securities outstanding under
such indenture; or when the communication of such information
to such investors is impeded by the fact that information as to
53 STAT.]
76TH CONG., 1ST SESS.-CH. 411-AUG. 3, 1939
1151
the names and addresses of such investors generally is not
available to the trustee and to such investors;
"(5) when the indenture contains provisions which are misleading or deceptive, or when full and fair disclosure is not
made to prospective investors of the effect of important indenture
provisions; or
"(6) when, by reason of the fact that trust indentures are
commonly prepared by the obligor or underwriter in advance
of the public offering of the securities to be issued thereunder,
such investors are unable to participate in the preparation
thereof, and, by reason of their lack of understanding of the
situation, such investors would in any event be unable to procure
the correction of the defects enumerated in this subsection.
"(b) Practices of the character above enumerated have existed
to such an extent that, unless regulated, the public offering of notes,
bonds, debentures, evidences of indebtedness, and certificates of
interest or participation therein, by the use of means and instruments of transportation and communication in interstate commerce
and of the mails, is injurious to the capital markets, to investors, and
to the general public; and it is hereby declared to be the policy of this
title, in accordance with which policy all the provisions of this title
shall be interpreted, to meet the problems and eliminate the practices,
enumerated in this section, connected with such public offerings.
"'DEFINITIONS
"SEC. 303. When used in this title, unless the context otherwise
requires"(1) Any term defined in section 2 of the Securities Act of 1933,
as heretofore amended, and not otherwise defined in this section,
shall have the meaning assigned to such term in such section 2.
"(2) The term 'sale' or 'sell' shall include all transactions included
in such term as provided in paragraph (3) of section 2 of the Securities Act of 1933, as heretofore amended, except that a sale of a
certificate of interest or participation shall be deemed a sale of the
security or securities in which such certificate evidences an interest or
participation if and only if such certificate gives the holder thereof
the right to convert the same into such security or securities.
"(3) The term 'prospectus' shall have the meaning assigned to such
term in paragraph (10) of section 2 of the Securities Act of 1933,
as heretofore amended, except that in the case of securities which are
not registered under the Securities Act of 1933, such term shall not
include any communication (A) if it is proved that prior to or at
the same time with such communication a written statement meeting
the requirements of subsection (c) of section 305 was sent or given to
the persons to whom the communication was made, by the person
making such communication or his principal, or (B) if such communication states from whom such statement may be obtained and,
in addition, does no more than identify the security, state the price
thereof, and state by whom orders will be executed.
"(4) The term 'underwriter' means any person who has purchased
from an issuer with a view to, or sells for an issuer in connection with,
the distribution of any security, or participates or has a direct or
indirect participation in any such undertaking, or participates or has
a participation in the direct or indirect underwriting of any such
undertakng; but such term shall not include a person whose interest
is limited to a commission from an underwriter or dealer not in excess
of the usual and customary distributors' or sellers' commission.
"(5) The term 'director' means any director of a corporation, or
any individual performing similar functions with respect to any
organization whether incorporated or unincorporated.
Definitions.
Application of terms
defined in Securities
Act of 1933.
48 Stat. 74.
15U. .C. 77b.
"Sale"or "sell."
Exception.
"Pr(wpectus."
Exception.
"Underwriter."
Exception.
"Director."
1152
PUBLIC LAWS-CH. 411-AUG. 3, 1939
"Executiveofficer."
[53 STAT.
"(6) The term 'executive officer' means the president, every vice
president, every trust officer, the cashier, the secretary, and the
treasurer of a corporation, and any individual customarily performing similar functions with respect to any organization whether incor-
Ecepton.
porated or unincorporated, but shall not include the chairman of the
board of directors.
(7) The term 'indenture' means any mortgage, deed of trust, trust
or other indenture, or similar instrument or agreement (including any
supplement or amendment to any of the foregoing), under which
securities are outstanding or are to be issued, whether or not any
property, real or personal, is, or is to be, pledged, mortgaged, assigned,
or conveyed thereunder.
"ndenture
i
"applcation
fication."
"Iandenture
to
orqu
"(8) The term 'application' or 'application for qualification' means
the application provided for in section 307, and includes any amendment thereto and any report, document, or memorandum accompanying such application or incorporated therein by reference.
"(9) The term 'indenture to be qualified' means (A) the indenture
be
under which there has been or is to be issued a security in respect of
which a particular registration statement has been filed, or (B) the
indenture in respect of which a particular application has been filed.
tendenture
t"Indenture
trussecu-
"Obligor."
Exception.
"Paying aent."
"State."
"Commission."
"Voting security."
Designated Acts to
"1
us.
2A,2B;
"(10) The term 'indenture trustee' means each trustee under the
indenture to be qualified, and each successor trustee.
"(11) The term 'indenture security' means any security issued or
issuable under the indenture to be qualified.
"(12) The term 'obligor', when used with respect to any such
indenture security, means every person who is liable thereon, and, if
such security is a certificate of interest or participation, such term
means also every person who is liable upon the security or securities
in which such certificate evidences an interest or participation; but
such term shall not include the trustee under an indenture under
which certificates of interest or participation, equipment trust certificates, or like securities are outstanding.
"(13) The term 'paying agent', when used with respect to any
such indenture security, means any person authorized by an obligor
thereon (A) to pay the principal of or interest on such security on
behalf of such obligor, or (B) if such security is a certificate of
interest or participation, equipment trust certificate, or like security,
to make such payment on behalf of the trustee.
"(14) The term 'State' means any State of the United States.
"(15) The term 'Commission' means the Securities and Exchange
Commission.
"(16) The term 'voting security' means any security presently
entitling the owner or holder thereof to vote in the direction or
management of the affairs of a person, or any security issued under
or pursuant to any trust, agreement, or arrangement whereby a
trustee or trustees or agent or agents for the owner or holder of
such security are presently entitled to vote in the direction or management of the affairs of a person; and a specified percentage of
the voting securities of a person means such amount of the outstanding voting securities of such person as entitles the holder or
holders thereof to cast such specified percentage of the aggregate
votes which the holders of all the outstanding voting securities of
such person are entitled to cast in the direction or management of
the affairs of such person.
"(17) The terms 'Securities Act of 1933', 'Securities Exchange
. cihs. Act of 1934', and 'Public Utility Holding Company Act of 1935'
shall be deemed to refer, respectively, to such Acts, as amended,
whether amended prior to or after the enactment of this title.
Supp. IV,
chs. 2A,'2B, 2C.
53 STAT.]
1153
76TH CONG., 1ST SESS.-CH. 411-AUG. 3, 1939
"(18) The term 'Bankruptcy Act' means the Act entitled 'An Act
"Bankruptcy
Ac"
to establish a uniform system of bankruptcy throughout the United 11u. s. c.;
States', approved July 1, 1898, as amended, whether amended prior S.c.,Supp. IV
to or after the enactment of this title.
1 v.
"EXEMPTED SECURITIES AND TRANSACTIONS
'SEC.
304. (a) The provisions of this title shall not apply to any anxtransacurtiones
of the following securities:
"(1) any security other than (A) a note, bond, debenture,
or evidence of indebtedness, whether or not secured, or (B) a
certificate of interest or participation in any such note, bond,
debenture, or evidence of indebtedness, or (C) a temporary
certificate for, or guarantee of, any such note, bond, debenture,
evidence of indebtedness, or certificate;
"(2) any certificate of interest or participation in two or
more securities having substantially different rights and privileges, or a temporary certificate for any such certificate;
"(3) any security which, prior to or within six months after
the enactment of this title, has been sold or disposed of by the
issuer or bona fide offered to the public, but this exemption shall
Typesexempt.
Certificates of inter-
Priorsale.
Nel
ofering
ex-
not apply to any new offering of any such security by an issuer
subsequent to such six months;
"(4) any security exempted from the provisions of the Secu-
fro
reittrexetoned
rities Act of 1933, as heretofore amended, by paragraph (2), der Securities Act of
(3), (4), (5), (6), (7), (8), or (11) of subsection 3 (a) thereof; 1933.
"(5) any security issued under a mortgage indenture as to Securityunder
which a contract of insurance under the National Housing Act to which insurance
is in effect; and any such security shall be deemed to be exempt under National Hous12 v. s. c. ch. 13;
from the provisions of the Securities Act of 1933 to the same
extent as though such security were specifically enumerated in Supp.V, ch.13.
section 3 (a) (2) of such Act;
"(6) any note, bond, debenture, or evidence of indebtedness eOiglations
issued or guaranteed by a foreign government or by a subdivi-
sion, department,
thereof;
municipality,
agency,
subdivisions,
of or-
etc.
or instrumentality
"(7) any guarantee of any security which is exempted by this
subsection;
"(8) any security which has been or is to be issued otherwise
(,uarantee of any
this sulsection.
Security other than
by
security exemrnlptedl
dution.
than under an indenture, but this exemption shall not be applied lin i
within a period of twelve consecutive months to more than
$250,000 aggregate principal amount of any securities of the
same issuer; or
indenture
"(9) any security whicl has been or is to be issued under an lhere
limits total outstand-
indenture which limits the aggregate principal amount of securi-
ties at any time outstanding thereunder to $1,000,000 or less, but
this exemption shall not be applied within a period of thirty-six
consecutive months to more than $1,000,000 aggregate principal
amount of securities of the same issuer.
In computing the aggregate principal amount of securities to which
the exemptions provided by paragraphs (8) and (9) may be applied,
securities to which the provisions of sections 305 and 306 would not
have applied, irrespective of the provisions of those paragraphs, shall
ing to $1,00o.000 or
ess.
be disregarded.
"(b) The provisions of sections 305 and 306 shall not apply (1)
to any of the transactions exempted from the provisions
5 of the Securities Act of 1933 by section 4 thereof, as
amended, or (2) to any transaction which would be so
but for the last sentence of paragraph (11) of section
Act.
of section
heretofore
exempted
2 of such
gaTd
cti
die-
15 u. s. C.
77d,
77e
48 staPP75.
15u.s.c.77b (I).
1154
Application by issuer for exemption of
offerings of certain
securities.
Findings by Commission.
Securities issued by
a person organized
under foreign government laws, etc.
PUBLIC LAWS-CH. 411-AUG. 3, 1939
[53 STAT.
"(c) The Commission shall, on application by the issuer and after
opportunity for hearing thereon, by order exempt from any one or
more provisions of this title any security issued or proposed to be
issued under any indenture under which, at the time such application
is filed, securities referred to in paragraph (3) of subsection (a) of
this section are outstanding, if and to the extent that the Commission
finds that compliance with such provision or provisions, through the
execution of a supplemental indenture or otherwise"(1) would require, by reason of the provisions of such indenture, or the provisions of any other indenture or agreement made
prior to the enactment of this title, or the provisions of any
applicable law, the consent of the holders of securities outstanding under any such indenture or agreement; or
(2) would impose an undue burden on the issuer, having due
regard to the public interest and the interests of investors.
"(d) The Commission may, on application by the issuer and after
opportunity for hearing thereon, by order exempt from any one or
more of the provisions of this title any security issued or proposed
to be issued by a person organized and existing under the laws of a
foreign government or a political subdivision thereof, if and to the
extent that the Commission finds that compliance with such provision
or provisions is not necessary in the public interest and for the protection of investors.
"SECURITIES REQUIRED TO BE REGISTERED UNDER SECURITIES AT
Registration statement to include designated items.
48 Stat. 78.
15 U. S. C. § 77g;
Supp. IV, § 77g.
Eligibility of trustee.
Analysis of indenture provisions with
respect to default.
Authentication and
delivery of indenture
securities, etc.
Release,etc.,ofproperty subject to lien.
Satisfaction and discharge of
indenture.
Evidence.
Segregation of Information and documents.
Designated sections
inapplicable.
48 Stat. 82,84, 87.
15 U. S.C. §§ 77k,l,
q, x.
Refusal to permit
registration statement
to become effective
if not conforming to
requirements.
"SEC. 305. (a) Subject to the provisions of section 304, a registration statement relating to a security shall include the following information and documents, as though such inclusion were required by
the provisions of section 7 of the Securities Act of 1933"(1) such information and documents as the Commission may
by rules and regulations prescribe in order to enable the Commission to determine whether any person designated to act as
trustee under the indenture under which such security has been
or is to be issued is eligible to act as such under subsection (a)
of section 310 or has a conflicting interest as defined in subsection
(b) of section 310; and
"(2) an analysis of any provisions of such indenture with
respect to (A) the definition of what shall constitute a default
under such indenture, and the withholding of notice to the
indenture security holders of any such default, (B) the authentication and delivery of the indenture securities and the application of the proceeds thereof, (C) the release or the release and
substitution of any property subject to the lien of the indenture,
(D) the satisfaction and discharge of the indenture, and (E) the
evidence required to be furnished by the obligor upon the indenture securities to the trustee as to compliance with the conditions
and covenants provided for in such indenture.
The information and documents required by paragraph (1) of this
subsection with respect to the person designated to act as indenture
trustee shall be contained in a separate part of such registration statement, which part shall be signed by such person. Such part of the
registration statement shall be deemed to be a document filed pursuant to this title, and the provisions of sections 11, 12, 17, and 24 of
the Securities Act of 1933 shall not apply to statements therein or
omissions therefrom.
"(b) The Commission shall issue an order prior to the effective
date of registration refusing to permit such a registration statement
to become effective, if it finds that"(1) the security to which such registration statement relates
has not been or is not to be issued under an indenture;
53 STAT.]
T7TH CONG., 1ST SESS.-CH. 411-AUG. 3, 1939
"(2) such indenture does not conform to the requirements of
sections 310 to 318, inclusive; or
"(3) any person designated as trustee under such indenture is
not eligible to act as such under subsection (a) of section 310 or
has any conflicting interest as defined in subsection (b) of section
310;
but no such order shall be issued except after notice and opportunity
for hearing within the periods and in the manner required with
respect to refusal orders pursuant to section 8 (b) of the Securities
Act of 1933. If and when the Commission deems that the objections
on which such order was based have been met, the Commission shall
enter an order rescinding such refusal order, and the registration
shall become effective at the time provided in section 8 (a) of the
Securities Act of 1933, or upon the date of such rescission, whichever
shall be the later.
"(c) A prospectus relating to any such security shall include, as
though such inclusion were required by section 10 of the Securities
Act of 1933, a written statement containing the analysis, set forth
in the registration statement, of any indenture provisions with
respect to the matters specified in paragraph (2) of subsection (a)
of this section, together with a supplementary analysis, prepared by
the Commission, of such provisions and of the effect thereof if, in the
opinion of the Commission, the inclusion of such supplementary
analysis is necessary or appropriate in the public interest or for the
protection of investors, and the Commission so declares by order after
notice and, if demanded by the issuer, opportunity for hearing thereon.
Such order shall be entered prior to the effective date of registration,
except that if opportunity for hearing thereon is demanded by the
issuer such order shall be entered within a reasonable time after such
opportunity for hearing.
"(d) The provisions of sections 11, 12, 17, and 24 of the Securities
Act of 1933, and the provisions of sections 323 and 325 of this title,
shall not apply to statements in or omissions from any analysis
required under the provisions of this section or section 306 or 307.
1155
Opportunity for
hearing.
48 Stat. 79.
15 U.S.C.§77h.
Prospectus relating
to such security, contents.
48 Stat. 81.
15 U. S. C. § 771.
Preparation of supplementary analysis.
Inapplicable provisions.
48 Stat. 82, 84, 87.
15 U. S. C. §§ 77k,
l,q, x.
Post, pp. 1176, 1177.
"SECURITIES NOT REGISTERED UNDER SECURITIES ACT
"SEC. 306. (a) In the case of any security which is not registered
under the Securities Act of 1933 and to which this subsection is
applicable notwithstanding the provisions of section 304, unless such
security has been or is to be issued under an indenture and an application for qualification is effective as to such indenture, it shall be
unlawful for any person, directly or indirectly"(1) to make use of any means or instruments of transportation
or communication in interstate commerce or of the mails to sell
such security through the use or medium of any prospectus or
otherwise; or
"(2) to carry or cause to be carried through the mails or in
interstate commerce, by any means or instruments of transportation, any such security for the purpose of sale or for delivery after
sale.
"(b) In the case of any security which is not registered under the
Securities Act of 1933, but which has been or is to be issued under
an indenture as to which an application for qualification is effective, it
shall be unlawful for any person, directly or indirectly"(1) to make use of any means or instruments of transportation
or communication in interstate commerce or of the mails to carry
or transmit any prospectus relating to any such security, unless
such prospectus includes or is accompanied by a written statement that meets the requirements of subsection (c) of section 305;
or
Application.
Prohibitions affecting interstate commerce and the mails.
Transmission of
prospectus, etc.
Transporting
of such security for
sale or delivery after
sale.
Unregistered securities issued, etc., under indenture to
which application for
qualification effective.
Unlawful acts.
Transmittal of prospectus; exception.
PUBLIC LAWS-CH. 411-AUG. 3, 1939
Carrying, for sale or
delivery after sale.
" (2) to carry or to cause to be carried through the mails or in
interstate commerce any such security for the purpose of sale or
for delivery after sale, unless accompanied or preceded by a
written statement that meets the requirements of subsection (c)
of section 305.
"QUALIFICATION
Qualification of indentures covering securities not required
to be registered.
Application form,
etc.
Inclusion of other
information and documents.
Withdrawal permitted.
Availability of registration information.
Post, p. 1174.
Application effective on filing, etc.
Filing fee.
Period for qualification.
48 Stat. 79.
15 U.S. C. 77h.
15 U.S.C. chs. 2A,
2B; Supp, IV, chs.
2A, 2B, 2C.
OF INDENTURES COVERING SECURITIES NOT REQUIRED TO
BE REGISTERED
"SEC. 307. (a) In the case of any security which is not required to
be registered under the Securities Act of 1933 and to which subsection
(a) of section 306 is applicable notwithstanding the provisions of section 304, an application for qualification of the indenture under which
such security has been or is to be issued shall be filed with the Commission by the issuer of such security. Each such application shall be in
such form, and shall be signed in such manner, as the Commission
may by rules and regulations prescribe as necessary or appropriate in
the public interest or for the protection of investors. Each such
application shall include the information and documents required by
subsection (a) of section 305. The information and documents
required by paragraph (1) of such subsection with respect to the
person designated to act as indenture trustee shall be contained in a
separate part of such application, which part shall be signed by such
person. Each such application shall also include such of the other
information and documents which would be required to be filed in
order to register such indenture security under the Securities Act
of 1933 as the Commission may by rules and regulations prescribe as
necessary or appropriate in the public interest or for the protection
of investors. An application may be withdrawn by the applicant at
any time prior to the effective date thereof. Subject to the provisions
of section 321, the information and documents contained in or filed
with any application shall be made available to the public under such
regulations as the Commission may prescribe, and copies thereof,
photostatic or otherwise, shall be furnished to every applicant therefor at such reasonable charge as the Commission may prescribe.
"(b) The filing with the Commission of an application, or of an
amendment to an application, shall be deemed to have taken place
upon the receipt thereof by the Commission, but, in the case of an
application, only if it is accompanied or preceded by payment to the
Commission of a filing fee in the amount of $100, such payment to be
made in cash or by United States postal money order or certified or
bank check, or in such other medium of payment as the Commission
may authorize by rule and regulation.
"(c) The provisions of section 8 of the Securities Act of 1933 and
the provisions of subsection (b) of section 305 of this title shall apply
with respect to every such application, as though such application
were a registration statement filed pursuant to the provisions of
such Act.
"INTEGRATION
Integration of procedure with other
Acts.
[53 STAT.
OF PROCEDURE WITH SECURITIES ACT AND OTHER ACTS
"SEC. 308. (a) The Commission, by such rules and regulations or
orders as it deems necessary or appropriate in the public interest or
for the protection of investors, shall authorize the filing of any information or documents required to be filed with the Commission under
this title, or under the Securities Act of 1933, the Securities Exchange
Act of 1934, or the Public Utility Holding Company Act of 1935, by
incorporating by reference any information or documents on file with
the Commission under this title or under any such Act.
53 STAT.]
76TH CONG., 1ST SESS.-CH. 411-AUG. 3, 1939
"(b) The Commission, by such rules and regulations or orders as
it deems necessary or appropriate in the public interest or for the
protection of investors, shall provide for the consolidation of applications, reports, and proceedings under this title with registration statements, applications, reports, and proceedings under the Securities
Act of 1933, the Securities Exchange Act of 1934, or the Public
Utility Holding Company Act of 1935.
"WHEN QUALIFICATION
1157
Consolidation of applications, reports, etc.
BECOMES EFFECTIVE; EFFECT OF QUALIFICATION
"SEC. 309. (a) The indenture under which a security has been or
is to be issued shall be deemed to have been qualified under this title"(1) when registration becomes effective as to such security; or
"(2) when an application for the qualification of such indenture becomes effective, pursuant to section 307.
"(b) After qualification has become effective as to the indenture
under which a security has been or is to be issued, no stop order shall
be issued pursuant to section 8 (d) of the Securities Act of 1933,
suspending the effectiveness of the registration statement relating to
such security or of the application for qualification of such indenture,
except on one or more of the grounds specified in section 8 of such
Act.
"(c) The making, amendment, or rescission of a rule, regulation,
or order under the provisions of this title (except to the extent
authorized by subsection (a) of section 314 with respect to rules and
regulations prescribed pursuant to such subsection) shall not affect
the qualification, form, or interpretation of any indenture as to which
qualification became effective prior to the making, amendment, or
rescission of such rule, regulation, or order.
"(d) No trustee under an indenture which has been qualified under
this title shall be subject to any liability because of any failure of
such indenture to comply with any of the provisions of this title,
or any rule, regulation, or order thereunder.
"(e) Nothing in this title shall be construed as empowering the
Commission to conduct an investigation or other proceeding for the
plupose of determining whether the provisions of an indenture which
has been qualified under this title are being complied with, or to
When qualification
becomes effective.
Limitation on issuance of stop order.
48 Stat. 79.
15 U.S.C.§77h (d).
Indenture not affected by subsequent
rule, etc.; exception.
Post, p. 1167.
Liability of trustee
for noncompliance of
indenture.
Powers of (oinmission to enllifore provisions of ilnlIetIluret
enforce such provisions.
4"EJIGIBIITY
ANT) IISQlTALIFI('ATION
OF TItUSTEE
"Persons Eligible for Appointment as Trustee
"SEC. 310. (a) (1) Tlhe indenture to be qualified shall require
that there shall at all times be one or more trustees thereunder, at
least one of whom shall at all times be a corporation organized and
doing business under the laws of the United States or of any State
or Territory or of the District of Columbia (referred to in this title
as the institutional trustee), which (A) is authorized under such
laws to exercise corporate trust powers, and (B)
At least one trustee
under the indenture
to be government supervised corporation.
is subject to super-
vision or examination by Federal, State, Territorial, or District of
Columbia authority.
"(2) The indenture to be qualified shall require that such institutional trustee shall have at all times a combined capital and surplus
of a specified minimum amount, which shall not be less than $150,000.
If such institutional trustee publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising
or examining authority, the indenture may provide that, for the
purposes of this paragraph, the combined capital and surplus of
Institutional trustee, financial status.
E vidence of.
PUBLIC LAWS-CH. 411-AUG. 3, 1939
Co-trustees.
Rights of trustee in
case of certificates of
interest.
Disqualification of
trustee.
Conflicting interest.
Failure to comply
with certain provisions.
Petition for removal.
Trusteeship under
another indenture
made by same obligor;
exceptions.
Provso.
Qualifying provisions.
[53 STAT.
such trustee shall be deemed to be its combined capital and surplus
as set forth in its most recent report of condition so published.
"(3) If the indenture to be qualified requires or permits the
appointment of one or more co-trustees in addition to such institutional trustee, such indenture shall provide that the rights, powers,
duties, and obligations conferred or imposed upon the trustees or
any of them shall be conferred or imposed upon and exercised or
performed by such institutional trustee, or such institutional trustee
and such co-trustees jointly, except to the extent that under any law
of any jurisdiction in which any particular act or acts are to be
performed, such institutional trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers,
duties, and obligations shall be exercised and performed by such
co-trustees.
"(4) In the case of certificates of interest or participation, the
indenture to be qualified shall require that the indenture trustee
or trustees have the legal power to exercise all of the rights, powers,
and privileges of a holder of the security or securities in which such
certificates evidence an interest or participation.
"Disqualification of Trustee
"(b) The indenture to be qualified shall provide that if any indenture trustee has or shall acquire any conflicting interest as hereinafter defined, (i) such trustee shall, within ninety days after
ascertaining that it has such conflicting interest, either eliminate such
conflicting interest or resign, such resignation to become effective
upon the appointment of a successor trustee and such successor's
acceptance of such appointment, and the obligor upon the indenture
securities shall take prompt steps to have a successor appointed in
the manner provided
the indenture;
in
and (ii) in the event that
such trustee shall fail to comply with the provisions of clause (i)
of this subsection, such trustee shall, within ten days after the expiration of such ninety-day period, transmit notice of such failure
to the indenture security holders in the manner and to the extent
provided in subsection (c) of section 313; and (iii) subject to the
provisions of subsection (e) of section 315, any security holder who
has been a bona fide holder of indenture securities for at least six
months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of such
trustee, and the appointment of a successor, if such trustee fails,
after written request therefor by such holder, to comply with the
provisions of clause (i) of this subsection. For the purposes of
this subsection, an indenture trustee shall be deemed to have a conflicting interest if"(1) such trustee is trustee under another indenture under
which any other securities, or certificates of interest or participation in any other securities, of an obligor upon the indenture
securities are outstanding unless (A) the indenture securities are
collateral trust notes under which the only collateral consists of
securities issued under such other indenture, or (B) such other
indenture is a collateral trust indenture under which the only
collateral consists of indenture securities, or (C) such obligor
has no substantial unmortgaged assets and is engaged primarily
in the business of owning, or of owning and developing and/or
operating, real estate, and the indenture to be qualified and such
other indenture are secured by wholly separate and distinct parcels of real estate: Provided, That the indenture to be qualified
may contain a provision excluding from the operation of this
53 STAT.]
1159
76TH CONG., 1ST SESS.-CH. 411-AUG. 3, 1939
paragraph another indenture or indentures under which other
securities, or certificates of interest or participation in other
securities, of such an obligor are outstanding, if (i) the indenture
to be qualified and such other indenture or indentures are wholly
unsecured, and such other indenture or indentures are specifically
described in the indenture to be qualified or are thereafter qualified under this title, unless the Commission shall have found and
declared by order pursuant to subsection (b) of section 305 or
subsection (c) of section 307 that differences exist between the
provisions of the indenture to be qualified and the provisions
of such other indenture or indentures which are so likely to
involve a material conflict of interest as to make it necessary in
the public interest or for the protection of investors to disqualify
such trustee from acting as such under one of such indentures,
or (ii) the issuer shall have sustained the burden of proving, on
application to the Commission and after opportunity for hearing
thereon, that trusteeship under the indenture to be qualified and
such other indenture is not so likely to involve a material conflict
of interest as to make it necessary in the public interest or for
the protection of investors to disqualify such trustee from acting
as such under one of such indentures;
"(2) such trustee or any of its directors or executive officers
is an obligor upon the indenture securities or an underwriter
for such an obligor;
"(3) such trustee directly or indirectly controls or is directly
or indirectly controlled by or is under direct or indirect common
control with an obligor upon the indenture securities or an underwriter for such an obligor;
"(4) such trustee or any of its directors or executive officers
is a director, officer, partner, employee, appointee, or representative of an obligor upon the indenture securities, or of an underwriter (other than the trustee itself) for such an obligor who is
currently engaged in the business of underwriting, except that
(A) one individual may be a director and/or an executive officer
of the trustee and a director and/or an executive officer of such
obligor, but may not be at the same time an executive officer of
both the trustee and of such obligor, and (B) if and so long as
the number of directors of the trustee in office is more than nine,
one additional individual may be a director and/or an executive
officer of the trustee and a director of such obligor, and (C)
such trustee may be designated by any such obligor or by any
underwriter for any such obligor, to act in the capacity of
transfer agent, registrar, custodian, paying agent, fiscal agent,
escrow agent, or depositary, or in any other similar capacity,
or, subject to the provisions of paragraph (1) of this subsection,
to act as trustee, whether under an indenture or otherwise;
"(5) 10 per centum or more of the voting securities of such
trustee is beneficially owned either by an obligor upon the indenture securities or by any director, partner, or executive officer
thereof, or 20 per centum or more of such voting securities is
beneficially owned, collectively, by any two or more of such persons; or 10 per centum or more of the voting securities of such
trustee is beneficially owned either by an underwriter for any
such obligor or by any director, partner, or executive officer
thereof, or is beneficially owned, collectively, by any two or more
such persons;
"(6) such trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default as herein-
Ante, p. 1154.
Ante, p. 1156.
Trustee or any of
Its officers an obligor
upon indenture securities, etc.
Where trustee controls or is controlled
by or with obligor,
etc.
Officers of both parties.
Exceptions.
Beneficial
ownership, restrictions.
Beneficial ownership, etc., ofsecurities
as collateral security
for obligation in default.
PUBLIC LAWS-CH. 411-AUG. 3, 1939
Ownership in a representative capacity.
Check of holdings.
Check wh3n principal or interest in default under indenture.
Status of securities.
Construction of percentage specifcations.
'Security" and "securities" defined.
[53 STAT.
after defined, (A) 5 per centum or more of the voting securities,
or 10 per centum or more of any other class of security of an
obligor upon the indenture securities, not including indenture
securities and securities issued under any other indenture under
which such trustee is also trustee, or (B) 10 per centum or more
of any class of security of an underwriter for any such obligor;
"(7) such trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default as hereinafter defined, 5 per centum or more of the voting securities of
any person who, to the knowledge of the trustee, owns 10 per
centum or more of the voting securities of, or controls directly
or indirectly or is under direct or indirect common control with,
an obligor upon the indenture securities;
"(8) such trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default as hereinafter defined, 10 per centum or more of any class of security
of any person who, to the knowledge of the trustee, owns 50 per
centum or more of the voting securities of an obligor upon the
indenture securities; or
"(9) such trustee owns, on May 15 in any calendar year, in
the capacity of executor, administrator, testamentary or inter
vivos trustee, guardian, committee or conservator, or in any other
similar capacity, an aggregate of 25 per centum or more of the
voting securities, or of any class of security, of any person, the
beneficial ownership of a specified percentage of which would
have constituted a conflicting interest under paragraph (6), (7),
or (8) of this subsection. The indenture to be qualified may
provide, as to any such securities of which the indenture trustee
acquired ownership through becoming executor, administrator,
or testamentary trustee of an estate which included them, that
the provisions of the preceding sentence shall not apply, for a
period of not more than two years from the date of such acquisition, to the extent that such securities included in such estate
do not exceed 25 per centum of such voting securities or 25 per
centum of any such class of security. The indenture to be qualified shall provide that promptly after May 15 in each calendar
year, the trustee shall make a check of its holdings of such seeurities in any of the above-mentioned capacities as of such May
15. Such indenture shall also provide that if the obligor upon
the indenture securities fails to make payment in full of principal
or interest under such indenture when and as the same becomes
due and payable, and such failure continues for thirty days
thereafter, the trustee shall make a prompt check of its holdings
of such securities in any of the above-mentioned capacities as of
the date of the expiration of such thirty-day period, and after
such date, notwithstanding the foregoing provisions of this paragraph, all such securities so held by the trustee, with sole or
]oint control over such securities vested in it, shall be considered
as though beneficially owned by such trustee, for the purposes
of paragraphs (6), (7), and (8) of this subsection.
"The indenture to be qualified shall provide that the specification
of percentages in paragraphs (5) to (9), inclusive, of this subsection
shall not be construed as indicating that the ownership of such percentages of the securities of a person is or is not necessary or sufficient
to constitute direct or indirect control for the purposes of paragraph
(3) or (7) of this subsection.
"For the purposes of paragraphs (6), (7), (8), and (9) of this
subsection, (A) the terms 'security' and 'securities' shall include only
53 STAT.]
1161
76TH CONG., 1ST SESS.-CH. 411-AUG. 3, 1939
such securities as are generally known as corporate securities, but shall
not include any note or other evidence of indebtedness issued to evidence an obligation to repay moneys lent to a person by one or more
banks, trust companies, or banking firms, or any certificate of interest or participation in any such note or evidence of indebtedness;
(B) an obligation shall be deemed to be in default when a default in
payment of principal shall have continued for thirty days or more,
and shall not have been cured; and (C) the indenture trustee shall not
be deemed the owner or holder of (i) any security which it holds
as collateral security (as trustee or otherwise) for an obligation which
is not in default as above defined, or (ii) any security which it holds
as collateral security under the indenture to be qualified, irrespective
of any default thereunder, or (iii) any security which it holds
as agent for collection, or as custodian, escrow agent, or depositary,
or in any similar representative capacity.
"For the purposes of this subsection, the term 'underwriter' when
used with reference to an obligor upon the indenture securities means
every person who, within three years prior to the time as of which
the determination is made, was an underwriter of any security of
such obligor outstanding at such time.
obligation
When
deemed to be in default.
Trustee not owner
of collateral security
it holds.
"Underwriter"
fined.
de-
"Applicability of Section
"(c) The Public Utility Holding Company Act of 1935 shall not
be held to establish or authorize the establishment of any standards
regarding the eligibility and qualifications of any trustee or prospective trustee under an indenture to be qualified under this title, or
regarding the provisions to be included in any such indenture with
respect to the eligibility and qualifications of the trustee thereunder,
other than those established by the provisions of this section.
"PREFERENTIAL
COLLECTION
OF CLAIMS
AGAINST
Standards for eligibility, etc., of trustees,
applicability of section.
49 Stat. 803.
15 U. 8. C., Supp.
IV, §§ 79-79z-6.
OBLIGOR
"SEc. 311. (a) Subject to the provisions of subsection (b) of this
section, the indenture to be qualified shall provide that if the indenture trustee shall be, or shall become, a creditor, directly or indirectly,
secured or unsecured, of an obligor upon the indenture securities,
within four months prior to a default as defined in the last paragraph
of this subsection, or subsequent to such a default, then, unless and
until such default shall be cured, such trustee shall set apart and
hold in a special account for the benefit of the trustee individually
and the indenture security holders"(1) an amount equal to any and all reductions in the amount
due and owing upon any claim as such creditor in respect of
principal or interest, effected after the beginning of such four
months' period and valid as against such obligor and its other
creditors, except any such reduction resulting from the receipt or
disposition of any property described in paragraph (2) of this
subsection, or from the exercise of any right of set-off which the
trustee could have exercised if a petition in bankruptcy had been
filed by or against such obligor upon the date of such default;
and
"(2) all property received in respect of any claim as such
creditor, either as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such four
months' period, or an amount equal to the proceeds of any such
property, if disposed of, subject, however, to the rights, if any, of
such obligor and its other creditors in such property or such
proceeds.
Trustee as creditor
of obligor.
Special account for
Individual benefit of
trustee, etc.
PUBLIC LAWS-CH. 411-AUG. 3, 1939
Rights of trustee.
Retention of payments by person other
than obligor.
Proceeds of bona
fide sale to third person.
reDistributions
ceived in bankruptcy,
etc.
Realizations upon
certain property.
Payments against
property release.
Status of property
substituted.
Apportionment of
proceeds of special account between trustee
and security holders.
Term "dividends"
construed.
[53 STAT.
"Nothing herein contained shall affect the right of the indenture
trustee"(A) to retain for its own account (i) payments made on
account of any such claim by any person (other than such
obligor) who is liable thereon, and (ii) the proceeds of the
bona fide sale of any such claim by the trustee to a third person,
and (iii) distributions made in cash, securities, or other property in respect of claims filed against such obligor in bankruptcy
or receivership or in proceedings for reorganization pursuant to
the Bankruptcy Act or applicable State law;
"(B) to realize, for its own account, upon any property held
by it as security for any such claim, if such property was so held
prior to the beginning of such four months' period;
"(C) to realize, for its own account, but only to the extent of
the claim hereinafter mentioned, upon any property held by it
as security for any such claim, if such claim was created after
the beginning of such four months' period and such property was
received as security therefor simultaneously with the creation
thereof, and if the trustee shall sustain the burden of proving
that at the time such property was so received the trustee had
no reasonable cause to believe that a default as defined in the last
paragraph of this subsection would occur within four months;
or
"(D) to receive payment on any claim referred to in paragraph (B) or (C), against the release of any property held as
security for such claim as provided in paragraph (B) or (C),
as the case may be, to the extent of the fair value of such
property.
For the purposes of paragraphs (B), (C), and (D), property substituted after the beginning of such four months' period for property
held as security at the time of such substitution shall, to the extent
of the fair value of the property released, have the same status as
the property released, and, to the extent that any claim referred to
in any of such paragraphs is created in renewal of or in substitution
for or for the purpose of repaying or refunding any preexisting claim
of the indenture trustee as such creditor, such claim shall have the
same status as such preexisting claim.
"The indenture to be qualified shall provide that, if the trustee shall
be required to account, the funds and property held in such special
account and the proceeds thereof shall be apportioned between the
trustee and the indenture security holders in such manner that the
trustee and the indenture security holders realize, as a result of
payments from such special account and payments of dividends on
claims filed against such obligor in bankruptcy or receivership or in
proceedings for reorganization pursuant to the Bankruptcy Act or
applicable State law, the same percentage of their respective claims,
figured before crediting to the claim of the trustee anything on
account of the receipt by it from such obligor of the funds and
property in such special account and before crediting to the respective
claims of the trustee and the indenture security holders dividends on
claims filed against such obligor in bankruptcy or receivership or in
proceedings for reorganization pursuant to the Bankruptcy Act or
applicable State law, but after crediting thereon receipts on account
of the indebtedness represented by their respective claims from all
sources other than from such dividends and from the funds and
property so held in such special account. As used in this paragraph, with respect to any claim, the term 'dividends' shall include
any distribution with respect to such claim, in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy
Act or applicable State law, whether such distribution is made in
53 STAT.]
76TH CONG., 1ST SESS.-CH. 411-AUG. 3, 1939
cash, securities, or other property, but shall not include any such distribution with respect to the secured portion, if any, of such claim.
The court in which such bankruptcy, receivership, or proceeding for
reorganization is pending shall have jurisdiction (i) to apportion
between the indenture trustee and the indenture security holders, in
accordance with the provisions of this paragraph, the funds and
property held in such special account and the proceeds thereof, or
(ii) in lieu of such apportionment, in whole or in part, to give to the
provisions of this paragraph due consideration in determining the
fairness of the distributions to be made to the indenture trustee and
the indenture security holders with respect to their respective claims,
in which event it shall not be necessary to liquidate or to appraise the
value of any securities or other property held in such special account
or as security for any such claim, or to make a specific allocation of
such distributions as between the secured and unsecured portions of
such claims, or otherwise to apply the provisions of this paragraph
as a mathematical formula.
"Any indenture trustee who has resigned or been removed after the
beginning of such four months' period shall be subject to the provisions of this subsection as though such resignation or removal had
not occurred. Any indenture trustee who has resigned or been
removed prior to the beginning of such four months' period shall be
subject to the provisions of this subsection if and only if the following
conditions exist"(i) the receipt of property or reduction of claim which would
have given rise to the obligation to account, if such indenture
trustee had continued as trustee, occurred after the beginning of
such four months' period; and
"(ii) such receipt of property or reduction of claim occurred
within four months after such resignation or removal.
"As used in this subsection, the term 'default' means any failure to
make payment in full of principal or interest, when and as the same
becomes due and payable, under any indenture which has been qualified under this title, and under which the indenture trustee is trustee
and the person of whom the indenture trustee is directly or indirectly
a creditor is an obligor; and the term 'indenture security holder'
means all holders of securities outstanding under any such indenture
under which any such default exists.
"(b) The indenture to be qualified may contain provisions excluding from the operation of subsection (a) of this section a creditor
relationship arising from"(1) the ownership or acquisition of securities issued under any
indenture, or any security or securities having a maturity of one
year or more at the time of acquisition by the indenture trustee;
"(2) advances authorized by a receivership or bankruptcy
court of competent jurisdiction, or by the indenture, for the purpose of preserving the property subject to the lien of the indenture or of discharging tax liens or other prior liens or encumbrances on the trust estate, if notice of such advance and of the
circumstances surrounding the making thereof is given to the
indenture security holders, at the time and in the manner provided in the indenture;
"(3) disbursements made in the ordinary course of business
in the capacity of trustee under an indenture, transfer agent,
registrar, custodian, paying agent, fiscal agent or depositary, or
other similar capacity;
"(4) an indebtedness created as a result of services rendered
or premises rented; or an indebtedness created as a result of
goods or securities sold in a cash transaction as defined in the
indenture;
98907°-39-PT 2---42
1163
Items not included.
Court jurisdiction.
Apportionment between trustee and
security holders of
funds in special account, etc.
Consideration in determining fairness of
distributions made to
trustee, etc.
Resignations, etc.,
provisions governing.
"Default" defined.
"Indenture security
holder."
Exclusions,
creditor relationship arising from specified
classes.
Certain
securities
having maturity of
one year or more.
Advances
authorized by receivership,
etc.
Advance notice to
be given.
Disbursements
in
ordinary business.
Personal services,
rents, etc.
1164
PUBLIC LAWS-CH. 411-AUG. 3, 1939
Stock, etc., og core-
banking.
41 Stat. 378.
C.
11-
12 US.
§
63; upp. IV,
613Self-liquidating pa-
per,
coepnyiretc.d
ldnue
or sale ofsecurities
No adverse action to
be taken in certain
49 Stat. 803. s
15 . s. c., upp.
IV, ch. 2C.
panere endenguC
l
trusteefor debtor.
Agreement
to be
bound
by provisions
of designated sections.
Tersen.
49
stat. 804.
15 U. S. C. Supp.
79b (a).
IV, I
"(5) the ownership of stock or of other securities of a corporation organized under the provisions of section 25 (a) of the
Federal Reserve Act, as amended, which is directly or indirectly
a creditor of an obligor upon the indenture securities; or
"(6) the acquisition, ownership, acceptance, or negotiation of
any drafts, bills of exchange, acceptances, or obligations which
fall within the classification of self-liquidating paper as defined
in the indenture.
(C) In the exercise by the Commission of any jurisdiction under
the Public Utility Holding Company Act of 1935 regarding the issue
or sale, by any registered holding company or a subsidiary company
thereof, of any security of such issuer or seller or of any other company to a person which is trustee under an indenture or indentures
of such issuer or seller or other company, or of a subsidiary or asso-
ciate company or affiliate of such issuer or seller or other company
(whether or not such indenture or indentures are qualified or to be
qualified under this title), the fact that such trustee will thereby
become a creditor, directly or indirectly, of any of the foregoing
shall not constitute a ground for the Commission taking adverse
action with respect to any application or declaration, or limiting the
scope of any rule or regulation which would otherwise permit such
transaction to take effect; but in any case in which such trustee is
trustee under an indenture of the company of which it will thereby
become a creditor, or of any subsidiary company thereof, this subsection shall not prevent the Commission from requiring (if such
requirement would be authorized under the provisions of the Public
Utility Holding Company Act of 1935) that such trustee, as such,
shall effectively and irrevocably agree in writing, for the benefit of
the holders from time to time of the securities from time to time outstanding under such indenture, to be bound by the provisions of this
section, subsection (c) of section 315, and, in case of default (as such
term is defined in such indenture), subsection (d) of section 315, as
fully as though such provisions were included in such indenture.
For the purposes of this subsection the terms 'registered holding comassociate company', and 'affiliate shall
'subsidiaryctivecompany,
any',,aSuty
n' 'aanaia
shall
have the respective meanings assigned to such terms in section 2 (a)
of the Public Utility Holding Company Act of 1935.
"BONDHOLDERS
Periodic filing
of
information
by obligor with trustee.
AcceSsthereto
[53 STAT.
LISTS
"SEC. 312. (a) The indenture to be qualified shall contain provisions requiring each obligor upon the indenture securities to furnish
or cause to be furnished to the institutional trustee thereunder at
stated intervals of not more than six months, and at such other times
as such trustee may request in writing, all information in the possession or control of such obligor, or of any of its paying agents, as to
the names and addresses of the indenture security holders, and requiring such trustee to preserve, in as current a form as is reasonably
practicable, all such information so furnished to it or received by it
in the capacity of paying agent.
"(b) The indenture to be qualified shall also contain provisions
requiring that, within five business days after the receipt by the institutional trustee of a written application by any three or more indenture security holders stating that the applicants desire to communicate with other indenture security holders with respect to their rights
under such indenture or under the indenture securities, and accompanied by a copy of the form of proxy or other communication
which such applicants propose to transmit, and by reasonable proof
that each such applicant has owned an indenture security for a period
53 STAT.]
76TH CONG.,
1ST
of at least six months preceding the date of such application, such
institutional trustee shall, at its election, either"(1) afford to such applicants access to all information so furnished to or received by such trustee; or
"(2) inform such applicants as to the approximate number of
indenture security holders according to the most recent information so furnished to or received by such trustee, and as to the
approximate cost of mailing to such indenture security holders
the form of proxy or other communication, if any, specified in
such application.
If such trustee shall elect not to afford to such applicants access to
such information, such trustee shall, upon the written request of such
applicants, mail to all such indenture security holders copies of the
form of proxy or other communication which is specified in such
request, with reasonable promptness after a tender to such trustee of
the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of such mailing, unless within five
days after such tender, such trustee shall mail to such applicants,
and file with the Commission together with a copy of the material to
be mailed, a written statement to the effect that, in the opinion of
such trustee, such mailing would be contrary to the best interests
of the indenture security holders or would be in violation of applicable law. Such written statement shall specify the basis of such
opinion. After opportunity for hearing upon the objections specified
in the written statement so filed, the Commission may, and if
demanded by such trustee or by such applicants shall, enter an order
either sustaining one or more of such objections or refusing to sustain
any of them. If the Commission shall enter an order refusing to
sustain any of such objections, or if, after the entry of an order sustaining one or more of such objections, the Commission shall find,
after notice and opportunity for hearing, that all objections so sustained have been met, and shall enter an order so declaring, such
trustee shall mail copies of such material to all such indenture security holders with reasonable promptness after the entry of such order
and the renewal of such tender.
"(c) The disclosure of any such information as to the names and
addresses of the indenture security holders in accordance with the
provisions of this section, regardless of the source from which such
information was derived, sha'll not be deemed to be a violation of
any existing law, or of any law hereafter enacted which does not
specifically refer to this section, nor shall such trustee be held accountable by reason of mailing any material pursuant to a request made
under subsection (b) of this section.
"REPORTS
1165
SESS.-CH. 411-AUG. 3, 1939
BY INDENTURE
If trustee elects not
to afford access.
Intervention
by Commission.
1)isclosure not
dl*etled violation of
law.
Protection of trustee
from accountability.
TRUSTEE
"SEC. 313. (a) The indenture to be qualified shall contain provisions requiring the indenture trustee to transmit to the indenture
security holders as hereinafter provided, at stated intervals of not
more than 12 months, a brief report with respect to"(1) its eligibility and its qualifications under section 310, or
in lieu thereof, if to the best of its knowledge it has continued to
be eligible and qualified under such section, a written statement
to such effect;
"(2) the character and amount of any advances made by it,
as indenture trustee, which remain unpaid on the date of such
report, and for the reimbursement of which it claims or may
claim a lien or charge, prior to that of the indenture securities,
on the trust estate or on property or funds held or collected by
it as such trustee, if such advances so remaining unpaid aggre-
Reports by indenture trustee.
Eligibility and qualifications.
Unpaid advances;
character and
amount.
1166
Obligor's debts,
amount, interest rate,
maturity, etc.
Exception.
Property and funds
in hand.
Releases and substitutions not previously reported.
Additional
issues
not previously reported.
Any material action
taken, etc.
Additional reports.
Releases, etc.
Unpaid advances,
character and
amount.
Additional parties
to whom reports to be
transmitted.
PUBLIC LAWS-CH. 411-AUG. 3, 1939
[53 STAT.
gate more than one-half of 1 per centum of the principal amount
of the indenture securities outstanding on such date;
"(3) the amount, interest rate, and maturity date of all other
indebtedness owing to it in its individual capacity, on the date of
such report, by the obligor upon the indenture securities, with
a brief description of any property held as collateral security
therefor, except an indebtedness based upon a creditor relationship arising in any manner described in paragraphs (2), (3),
(4), or (6) of subsection (b) of section 311;
"(4) the property and funds physically in its possession as
indenture trustee on the date of such report;
"(5) any release, or release and substitution, of property subject to the lien of the indenture (and the consideration therefor,
if any) which it has not previously reported;
"(6) any additional issue of indenture securities which it has
not previously reported; and
"(7) any action taken by it in the performance of its duties
under the indenture which it has not previously reported and
which in its opinion materially affects the indenture securities
or the trust estate, except action in respect of a default, notice of
which has been or is to be withheld by it in accordance with an
indenture provision authorized by subsection (b) of section 315.
"(b) The indenture to be qualified shall also contain provisions
requiring the indenture trustee to transmit to the indenture security
holders as hereinafter provided, within the times hereinafter specified,
a brief report with respect to"(1) the release, or release and substitution, of property subject to the lien of the indenture (and the consideration therefor,
if any) unless the fair value of such property, as set forth in
the certificate or opinion required by paragraph (1) of subsection (d) of section 314, is less than 10 per centum of the principal
amount of indenture securities outstanding at the time of such
release, or such release and substitution, such report to be so
transmitted within 90 days after such time; and
"(2) the character and amount of any advances made by it as
such since the date of the last report transmitted pursuant to the
provisions of subsection (a) (or if no such report has yet been
so transmitted, since the date of execution of the indenture), for
the reimbursement of which it claims or may claim a lien or
charge, prior to that of the indenture securities, on the trust
estate or on property or funds held or collected by it as such
trustee, and which it has not previously reported pursuant to this
paragraph, if such advances remaining unpaid at any time aggregate more than 10 per centum of the principal amount of indenture securities outstanding at such time, such report to be so
transmitted within 90 days after such time.
"(c) The indenture to be qualified shall also provide that reports
pursuant to this section shall be transmitted by mail"(1) to all registered holders of indenture securities, as the
names and addresses of such holders appear upon the registration
books of the obligor upon the indenture securities;
"(2) to such holders of indenture securities as have, within the
two years preceding such transmission, filed their names and
addresses with the indenture trustee for that purpose; and
"(3) except in the case of reports pursuant to subsection (b)
of this section, to all holders of indenture securities whose names
and addresses have been furnished to or received by the indenture
trustee pursuant to section 312.
53 STAT.]
76TH CONG., 1ST SESS.-CH. 411-AUG. 3, 1939
"(d) The indenture to be qualified shall also provide that a copy
of each such report shall, at the time of such transmission to indenture
security holders, be filed with each stock exchange upon which the
indenture securities are listed, and also with the Commission.
"REPORTS
1167
Copies to stock exchanges and Commission.
BY OBLIGOR; EVIDENCE OF COMPLIANCE WITH INDENTURE
PROVISIONS
"Periodic Reports
"SEC. 314. (a) The indenture to be qualified shall contain provisions
requiring each person who, as set forth in the registration statement
or application, is or is to be an obligor upon the indenture securities
covered thereby"(1) to file with the indenture trustee copies of the annual
reports and of the information, documents, and other reports (or
copies of such portions of any of the foregoing as the Commission may by rules and regulations prescribe) which such obligor
is required to file with the Commission pursuant to section 13 or
section 15 (d) of the Securities Exchange Act of 1934; or, if the
obligor is not required to file information, documents, or reports
pursuant to either of such sections, then to file with the indenture
trustee and the Commission, in accordance with rules and regulations prescribed by the Commission, such of the supplementary
and periodic information, documents, and reports which may be
required pursuant to section 13 of the Securities Exchange Act of
1934, in respect of a security listed and registered on a national
securities exchange as may be prescribed in such rules and regulations;
"(2) to file with the indenture trustee and the Commission, in
accordance with rules and regulations prescribed by the Commission, such additional information, documents, and reports with
respect to compliance by such obligor with the conditions and
covenants provided for in the indenture, as may be required by
such rules and regulations, including, in the case of annual reports,
if required by such rules and regulations, certificates or opl)ions
of independent public accountants, conlforming to the requirements of subsection (e) of this section, as to compliance with conditions or covenants, compliance with which is subject to verification by accountants, but no such certificate or opinion shall be
required as to any matter specified in clauses (A), (B), or (C)
of paragraph (3) of subsection (c); and
(3) to transmit to the holders of the indenture securities upon
which such person is an obligor, in the manner and to the extent
provided in subsection (c) of section 313, such summaries of any
information, documents, and reports required to be filed by such
obligor pursuant to the provisions of paragraph (1) or (2) of
this subsection as may be required by rules and regulations prescribed by the Commission.
The rules and regulations prescribed under this subsection shall be
such as are necessary or appropriate in the public interest or for the
protection of investors, having due regard to the types of indentures,
and the nature of the business of the class of obligors affected thereby,
and the amount of indenture securities outstanding under such indentures, and, in the case of any such rules and regulations prescribed
after the indentures to which they apply have been qualified under
this title, the additional expense, if any, of complying with such rules
and regulations. Such rules and regulations may be prescribed either
before or after qualification becomes effective as to any such indenture.
Periodic reports by
obligor.
Annual reports, etc.,
to trustee.
48 Stat. 894; 49 Stat.
1379.
15 U. S. C. 6 78m;
Snpp. IV, §5 78m, 780
(d).
Additional information, etc., to trustee
and Commission.
Transmission
of summaries of reports, etc., to security
holders.
Rules and regulations.
PUBLIC LAWS-CH. 411-AUG. 3, 1939
[53 STAT.
"Evidence of Recording of Indenture
Evidence of recording of indenture.
Opinion of counsel
as to proper recording, etc.
Opinion of counsel
as to maintenance of
lien.
Evi
of copliance with condi-
tions precedent
"Evidence of Compliance With Conditions Precedent
) The indenture to be qualified shall contain provisions requiring
the obligor upon the indenture securities to furnish to the indenture
or opin-
trustee evidence of compliance with the conditions precedent, if any,
provided for in the indenture (including any covenants compliance
with which constitutes a condition precedent) which relate to the
authentication and delivery of the indenture securities, to the release
or the release and substitution of property subject to the lien of
the indenture, to the satisfaction and discharge of the indenture, or
to any other action to be taken by the indenture trustee at the request
or upon the application of such obligor. Such evidence shall consist
of the following:
"(1) certificates or opinions made by officers of such obligor
-
who are specified in the indenture, stating that such conditions
Requirements.
Certificates
"(b) If the indenture to be qualified is or is to be secured by the
mortgage or pledge of property, such indenture shall contain provisions requiring the obligor upon the indenture securities to furnish to
the indenture trustee"(1) promptly after the execution and delivery of the indenture, an opinion of counsel (who may be of counsel for such
obligor) either stating that in the opinion of such counsel the
indenture has been properly recorded and filed so as to make
effective the lien intended to be created thereby, and reciting the
details of such action, or stating that in the opinion of such
counsel no such action is necessary to make such lien effective;
and
"(2) at least annually after the execution and delivery of the
indenture, an opinion of counsel (who may be of counsel for such
obligor) either stating that in the opinion of such counsel such
action has been taken with respect to the recording, filing, re-recording, and refiling of the indenture as is necessary to maintain
the lien of such indenture, and reciting the details of such action,
or stating that in the opinion of such counsel no such action is
necessary to maintain such lien.
crs of obligor.
Opinion ofcounsel.
precedent have been complied with;
"(2) an opinion of counsel (who may be of counsel for such
obligor) stating that in his opinion such conditions precedent
Certificate or opin-
have been complied with; and
"(3) in the case of conditions precedent compliance with which
when subject to verifcation.
is subject to verification by accountants (such as conditions with
respect to the preservation of specified ratios, the amount of net
ion of an accountant,
quick assets, negative-pledge clauses, and other similar specific
conditions), a certificate or opinion of an accountant, who, in
the case of any such conditions precedent to the authentication
and delivery of indenture securities, and not otherwise, shall be
an independent public accountant selected or approved by the
indenture trustee in the exercise of reasonable care, if the aggregate principal amount of such indenture securities and of other
identure securities authenticated and delivered since the commencement of the then current calendar year (other than those
with respect to which a certificate or opinion of an accountant
is not required, or with respect to which a certificate or opinion
of an independent public accountant has previously been furnished) is 10 per centum or more of the aggregate amount of the
indenture securities at the time outstanding; but no certificate
or opinion need be made by any person other than an officer or
53 STAT.]
1169
76TH CONG., 1ST SESS.-CH. 411-AUG. 3, 1939
employee of such obligor who is specified in the indenture, as
to (A) dates or periods not covered by annual reports required
to be filed by the obligor, in the case of conditions precedent
which depend upon a state of facts as of a date or dates or for
a period or periods different from that required to be covered
by such annual reports, or (B) the amount and value of property
additions, except as provided in paragraph (3) of subsection
(d), or (C) the adequacy of depreciation, maintenance, or
repairs.
"Certificates of Fair Value
"(d) If the indenture to be qualified is or is to be secured by the
mortgage or pledge of property' or securities, such indenture shall
contain provisions"(1) requiring the obligor upon the indenture securities to
furnish to the indenture trustee a certificate or opinion of an
engineer, appraiser, or other expert as to the fair value of any
property or securities to be released from the lien of the indenture, which certificate or opinion shall state that in the opinion
of the person making the same the proposed release will not
impair the security under such indenture in contravention of the
provisions thereof, and requiring further that such certificate or
opinion shall be made by an independent engineer, appraiser, or
other expert, if the fair value of such property or securities and
of all other property or securities released since the commencement of the then current calendar year, as set forth in the certificates or opinions required by this paragraph, is 10 per centum
or more of the aggregate principal amount of the indenture
securities at the time outstanding; but such a certificate or opinion of an independent engineer, appraiser, or other expert shall
not be required in the case of any release of property or securities, if the fair value thereof as set forth in the certificate or
opinion required by this paragraph is less than $25,000 or less
than 1 per centum of the aggregate principal amount of the
indenture securities at the time outstanding;
securities to
"(2) requiring the obligor upon the inidenlturel
furnish to the indenture trustee a certificate or opinion of an
engineer, appraiser, or other expert as to the fair value to sueht
obligor of aniy securities (other than indentlure securities and
securities secured by a lien prior to the lien of the indenture upon
property subject to the lien of the indenture), the deposit of
which with the trustee is to be made the basis for the authentication and delivery of indenture securities, the withdrawal of
cash constituting a part of the trust estate or the release of
property or securities subject to the lien of the indenture, and
requiring further that if the fair value to such obligor of such
securities and of all other such securities made the basis of any
such authentication and delivery, withdrawal, or release since the
commencement of the then current calendar year, as set forth
in the certificates or opinions required by this paragraph, is 10
per centum or more of the aggregate principal amount of the
indenture securities at the time outstanding. such certificate or
opinion shall be made by an independent engineer, appraiser, or
other expert and, in the case of the authentication and delivery
of indenture securities, shall cover the fair value to such obligor
of all other such securities so deposited since the commencement
of the current calendar year as to which a certificate or opinion
of an independent engineer, appraiser, or other expert has not
previously been furnished; but such a certificate of an inde-
Certificates of fair
value; provisions required.
Certificate or opinion of engineer, etc.,
that proposed release
will not impair security.
Expert opinion required if fair value
of property released
during any calendar
year reaches total of 10
percent of principal.
Exceptions.
Where deposit
of
seclcritlis A itl trustie
rllvry
i of ilrides
st ulritivs, etrc.
PUBLIC LAWS-CH. 411-AUG. 3, 1939
Where securities are
to be delivered, etc.,
on basis of subjection
of property to lien.
Certificate or opin-
ion by independent
engineer, etc., to
cover fair value.
By personnel of
obligor, if so provided
in indenture.
Exception.
Recitals as to basis
of certificate or opinion.
[53 STAT.
pendent engineer, appraiser, or other expert shall not be required
with respect to any securities so deposited, if the fair value
thereof to such obligor as set forth in the certificate or opinion
required by this paragraph is less than $25,000 or less than 1 per
centum of the aggregate principal amount of the indenture
securities at the time outstanding; and
"(3) requiring the obligor upon the indenture securities to
furnish to the indenture trustee a certificate or opinion of an
engineer, appraiser, or other expert as to the fair value to such
obligor of any property the subjection of which to the lien of
the indenture is to be made the basis for the authentication and
delivery of indenture securities, the withdrawal of cash constituting a part of the trust estate, or the release of property or
securities subject to the lien of the indenture, and requiring further that if
"(A) within six months prior to the date of acquisition
thereof by such obligor, such property has been used or
operated, by a person or persons other than such obligor, in
a business similar to that in which it has been or is to be
used or operated by such obligor, and
"(B) the fair value to such obligor of such property as
set forth in such certificate or opinion is not less than
$25,000 and not less than 1 per centum of the aggregate
principal amount of the indenture securities at the time
outstanding,
such certificate or opinion shall be made by an independent
engineer, appraiser, or other expert and, in the case of the
authentication and delivery of indenture securities, shall cover
the fair value to the obligor of any property so used or operated
which has been so subjected to the lien of the indenture since
the commencement of the then current calendar year, and as
to which a certificate or opinion of an independent engineer,
appraiser, or other expert has not previously been furnished.
If the indenture to be qualified so provides, any such certificate or
opinion may be made by an officer or employee of the obligor upon
the indenture securities who is specified in the indenture, except in
cases in which this subsection requires that such certificate or opinion
be made by an independent person. In such cases, such certificate
or opinion shall be made by an independent engineer, appraiser, or
other expert selected or approved by the indenture trustee in the
exercise of reasonable care.
"Recitals as to Basis of Certificate or Opinion
"(e) Each certificate or opinion with respect to compliance with
a condition or covenant provided for in the indenture shall include
(1) a statement that the person making such certificate or opinion
has read such covenant or condition; (2) a brief statement as to the
nature and scope of the examination or investigation upon which
the statements or opinions contained in such certificate or opinion
are based; (3) a statement that, in the opinion of such person, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as
to whether or not, in the opinion of such person, such condition or
covenant has been complied with.
"Parties May Provide for Additional Evidence
vide for addition
evidence.
(f) Nothing in this section shall be construed either as requiring
the inclusion in the indenture to be qualified of provisions that the
53 STAT.]
1171
76TH CONG., IST SESS.-CH. 411-AUG. 3, 1939
obligor upon the indenture securities shall furnish to the indenture
trustee any other evidence of compliance with the conditions and
covenants provided for in the indenture than the evidence specified
in this section, or as preventing the inclusion of such provisions in
such indenture, if the parties so agree.
"'DUTIES AND RESPONSIBILITY
OF THE TRUSTEE
"Duties Prior to Default
"SEc. 315. (a) The indenture to be qualified may provide that,
prior to default (as such term is defined in such indenture)"(1) the indenture trustee shall not be liable except for the
performance of such duties as are specifically set out in such
indenture; and
"(2) the indenture trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions
expressed therein, in the absence of bad faith on the part of
such trustee, upon certificates or opinions conforming to the
requirements of the indenture;
but such indenture shall contain provisions requiring the indenture
trustee to examine the evidence furnished to it pursuant to section
314 to determine whether or not such evidence conforms to the
requirements of the indenture.
Trustee's duties prior to default.
"Notice of Defaults
"(b) The indenture to be qualified shall contain provisions requiring the indenture trustee to give to the indenture security holders, in
the manner and to the extent provided in subsection (c) of section
313, notice of all defaults known to the trustee, within ninety days
after the occurrence thereof: Provided, That such indenture may
provide that, except in the case of default in the payment of the principal of or interest on any indenture security, or in the payment of
any sinking or purchase fund installment, the trustee shall be protected in withholding such notice if and so long as the board of
directors, the executive committee, or a trust committee of directors
and/or responsible officers, of the trustee in good faith determine that
the withholding of such notice is in the interests of the indenture
security holders.
"Duties of the Trustee in Case of Default
"(c) The indenture to be qualified shall contain provisions requiring the indenture trustee to exercise in case of default (as such term
is defined in such indenture) such of the rights and powers vested
in it by such indenture, and to use the same degree of care and skill
in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
Notice of defaults.
Proviso.
Conditions for withholding.
Duties of the trustee in case of default.
"Responsibility of the Trustee
"(d) The indenture to be qualified shall not contain any provisions
relieving the indenture trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct,
except that"(1) such indenture may contain the provisions authorized by
paragraphs (1) and (2) of subsection (a) of this section;
"(2) such indenture may contain provisions protecting the
indenture trustee from liability for any error of judgment made
in good faith by a responsible officer or officers of such trustee,
unless it shall be proved that such trustee was negligent in ascertaining the pertinent facts; and
Liability for negligence, etc.
Exceptions.
1172
PUBLIC LAWS-CH. 411-AUG. 3, 1939
[53 STAT.
"(3) such indenture may contain provisions protecting the
indenture trustee with respect to any action taken or omitted
to be taken by it in good faith in accordance with the direction
of the holders of not less than a majority in principal amount
of the indenture securities at the time outstanding (determined
as provided in subsection (a) of section 316) relating to the
time, method, and place of conducting any proceeding for any
remedy available to such trustee, or exercising any trust or power
conferred upon such trustee, under such indenture.
"Undertaking for Costs
Undertaking for
costs, provisions included.
Proiso.
Exceptions.
"(e) The indenture to be qualified may contain provisions to the
effect that all parties thereto, including the indenture security holders,
agree that the court may in its discretion require, in any suit for the
enforcement of any right or remedy under such indenture, or in any
suit against the trustee for any action taken or omitted by it as trustee,
the filing by any party litigant in such suit of an undertaking to
pay the costs of such suit, and that such court may in its discretion
assess reasonable costs, including reasonable attorneys' fees, against
any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant:
Provided,That the provisions of this subsection shall not apply to any
suit instituted by such trustee, to any suit instituted by any indenture
security holder, or group of indenture security holders, holding in
the aggregate more than 10 per centum in principal amount of the
indenture securities outstanding, or to any suit instituted by any
indenture security holder for the enforcement of the payment of the
principal of or interest on any indenture security, on or after the
respective due dates expressed in such indenture security.
"DIRECTIONS AND WAIVERS BY BONDHOLDERS; PROHIBITION OF IMPAIRMENT
OF HOLDER'S RIGHT TO PAYMENT
Directions
waivers
holders.
by
Direction
and
bond-
of
pro-
available to trustee,
etc.
Consent to waiver
of past default.
Consent
to
post-
ponement of any Interest
payment for
designated period.
"SEC.
316. (a) The indenture to be qualified may contain pro-
visions"(1)
authorizing the holders of not less than a majority in
principal amount of the indenture securities at the time outstanding (A) to direct the time, method, and place of conducting any proceeding for any remedy available to such trustee, or
exercising any trust or power conferred upon such trustee under
such indenture, or (B) on behalf of the holders of all such
indenture securities, to consent to the waiver of any past default
and its consequences; or
"(2) authorizing the holders of not less than 75 per centum in
principal amount of the indenture securities at the time outstanding to consent on behalf of the holders of all such indenture
securities to the postponement of any interest payment for a
period not exceeding three years from its due date.
Exclusion of securi- For the purposes of this subsection and paragraph (3) of subsection
ties owned by obligor,
etc., in determining (d) of section 315, in determining whether the holders of the required
whetherrequired er principal amount of indenture securities have concurred in any such
direction or consent, indenture securities owned by any obligor upon
Qualification.
the indenture securities, or by any person directly or indirectly controlling or controlled by or under direct or indirect common control
with any such obligor, shall be disregarded, except that for the purposes of determining whether the indenture trustee shall be protected
n relying on any such direction or consent, only indenture securities
which such trustee knows are so owned shall be so disregarded.
53 STAT.]
1173
76TH CONG., 1ST SESS.-CH. 411-AUG. 3, 1939
"(b) The indenture to be qualified shall provide that, notwithstanding any other provision thereof, the right of any holder of any
indenture security to receive payment of the principal of and interest
on such indenture security, on or after the respective due dates
expressed in such indenture security, or to institute suit for the
enforcement of any such payment on or after such respective dates,
shall not be impaired or affected without the consent of such holder,
except as to a postponement of an interest payment consented to as
provided in paragraph (2) of subsection (a), and except that such
indenture may contain provisions limiting or denying the right of any
such holder to institute any such suit, if and to the extent that the
institution or prosecution thereof or the entry of judgment therein
would, under applicable law, result in the surrender, impairment,
waiver, or loss of the lien of such indenture upon any property
subject to such lien.
Designated rights
not impaired.
"SPECIAL POWERS OF TRUSTEE; DU'LES OF PAYING AGENTS
"SEC. 317. (a) The indenture to be qualified shall contain
provisions"(1) authorizing the indenture trustee, in the case of a default
in payment of the principal of any indenture security, when and
as the same shall become due and payable, or in the case of a
default in payment of the interest on any such security, when
and as the same shall become due and payable and the continuance of such default for such period as may be prescribed in such
indenture, to recover judgment, in its own name and as trustee
of an express trust, against the obligor upon the indenture
securities for the whole amount of such principal and interest
remaining unpaid; and
"(2) authorizing such trustee to file such proofs of claim and
other papers or documents as may be necessary or advisable in
order to have the claims of such trustee and of the indenture
security holders allowed in any judicial proceedings relative to
the obligor upon the indenture securities, its creditors, or its
property.
"(b) The indenture to be qualified shall provide that each paying
agent shall hold in trust for the benefit of the indenture security
holders or the indenture trustee all sums held by such paying agent
for the payment of the principal of or interest on the indenture securities, and shall give to such trustee notice of any default by any
obligor upon the indenture securities in the making of any such
payment.
Indenture to contain designated provisions.
Power of trustee to
recover judgment for
principal and interest
unpaid.
To file proofs of
claim, etc., in judicial
proceedings on behalf
of security holders.
Payments to
held in trust.
he
"'EFFECT OF PRESCRIBED INDENTURE PROVISIONS
318. (a) The indenture to be qualified shall provide that if
any provision thereof limits, qualifies, or conflicts with another provision which is required to be included in such indenture by any of
sections 310 to 317, inclusive, such required provision shall control.
"(b) The indenture to be qualified may contain, in addition to
provisions specifically authorized under this title to be included
therein, any other provisions the inclusion of which is not in contravention of any provision of this title.
"SEC.
Effect of prescribed
indenture provisions.
Inclusion
provisions.
of other
"RULES, REGULATIONS, AND ORDERS
"SEC. 319. (a) The Commission shall have authority from time to
time to make, issue, amend, and rescind such rules and regulations
and such orders as it may deem necessary or appropriate in the
public interest or for the protection of investors to carry out the pro-
Authority of Commission.
1174
Scope.
When effective.
49 Stat. 600.
44 U. S. C., Supp.
IV, §§ 301-314.
Exemption from liability for action taken in good faith in
conforming to any
rule, etc.
PUBLIC LAWS-CH. 411-AUG. 3, 1939
[53 STAT.
visions of this title, including rules and regulations defining accounting, technical, and trade terms used in this title. Among other
things, the Commission shall have authority, (1) by rules and regulations, to prescribe for the purposes of section 310 (b) the method (to
be fixed in indentures to be qualified under this title) of calculating
percentages of voting securities and other securities; (2) by rules
and regulations, to prescribe the definitions of the terms 'cash transaction' and 'self-liquidating paper' which shall be included in indentures to be qualified under this title, which definitions shall include
such of the creditor relationships referred to in paragraphs (4) and
(6) of subsection (b) of section 311 as to which the Commission determines that the application of subsection (a) of such section is not
necessary in the public interest or for the protection of investors,
having due regard for the purposes of such subsection; and (3) for
the purposes of this title, to prescribe the form or forms in which
information required in any statement, application, report, or other
document filed with the Commission shall be set forth. For the purpose of its rules or regulations the Commission may classify persons, securities, indentures, and other matters within its jurisdiction
and prescribe different requirements for different classes of persons,
securities, indentures, or matters.
"(b) Subject to the provisions of the Federal Register Act and
regulations prescribed under the authority thereof, the rules and
regulations of the Commission under this title shall be effective upon
publication in the manner which the Commission shall prescribe, or
upon such later date as may be provided in such rules and regulations.
"(c) No provision of this title imposing any liability shall apply
to any act done or omitted in good faith in conformity with any rule,
regulation, or order of the Commission, notwithstanding that such
rule, regulation, or order may, after such act or omission, be
amended or rescinded or be determined by judicial or other authority
to be invalid for any reason.
"HEARINGS BY COMMISSION
Hearings.
"SEC. 320. Hearings may be public and may be held before the
Commission, any member or members thereof, or any officer or officers
of the Commission designated by it, and appropriate records thereof
shall be kept.
"SPECIAL POWERS OF THE COMMISSION
Power to summon
witnesses; production
of books, etc.
Powers with respect
to investigations and
hearings.
48 Stat. 86, 87.
15 U. S. C. § 77t,
77v (b), (c); Supp. IV,
§ 77t, 77v.
Designated ofices to
make available reports, records, etc.
"SEC. 321. (a) For the purpose of any investigation or any other
proceeding which, in the opinion of the Commission, is necessary and
proper for the enforcement of this title, any member of the Commission, or any officer thereof designated by it, is empowered to administer oaths and affirmations, subpena witnesses, compel their attendance, take evidence, and require the production of any books, papers,
correspondence, memoranda, contracts, agreements, or other records
which the Commission deems relevant or material to the inquiry.
Such attendance of witnesses and the production of any such books,
papers, correspondence, memoranda, contracts, agreements, or other
records may be required from any place in the United States or in
any Territory at any designated place of investigation or hearing.
In addition, the Commission shall have the powers with respect to
investigations and hearings, and with respect to the enforcement of,
and offenses and violations under, this title and rules and regulations
and orders prescribed under the authority thereof, provided in sections 20, 22 (b), and 22 (c) of the Securities Act of 1933.
"(b) The Treasury Department, the Comptroller of the Currency,
the Board of Governors of the Federal Reserve System, the Federal
53 STAT.]
1175
76TH CONG., 1ST SESS.-CH. 411-AUG. 3, 1939
Reserve Banks, and the Federal Deposit Insurance Corporation are
hereby authorized, under such conditions as they may prescribe, to
make available to the Commission such reports, records, or other
information as they may have available with respect to trustees or
prospective trustees under indentures qualified or to be qualified
under this title, and to make through their examiners or other
employees for the use of the Commission, examinations of such trustees or prospective trustees. Every such trustee or prospective trustee shall, as a condition precedent to qualification of such indenture,
consent that reports of examinations by Federal, State, Territorial,
or District authorities may be furnished by such authorities to the
Commission upon request therefor.
"Notwithstanding any provision of this title, no report, record, or
other information made available to the Commission under this subsection, no report of an examination made under this subsection for
the use of the Commission, no report of an examination made of any
trustee or prospective trustee by any Federal, State, Territorial, or
District authority having jurisdiction to examine or supervise such
trustee, no report made by any such trustee or prospective trustee to
any such authority, and no correspondence between any such authority
and any such trustee or prospective trustee, shall be divulged or made
known or available by the Commission or any member, officer, agent,
or employee thereof, to any person other than a member officer
agent, or employee of the Commission: Provided, That the Commission may make available to the Attorney General of the United
States, in confidence, any information obtained from such records,
reports of examination, other reports, or correspondence, and deemed
necessary by the Commission, or requested by him, for the purpose
of enabling him to perform his duties under this title.
"(c) Any investigation of a prospective trustee, or any proceeding
or requirement for the purpose of obtaining information regarding
a prospective trustee, under any provision of this title, shall be
limited"(1) to determining whether such prospective trustee is qualified to act as trustee under the provisions of subsection (b) of
section 310;
"(2) to requiring the inclusion in the registration statement
or application of information with respect to the eligibility of
such prospective trustee under paragraph (1) of subsection (a)
of such section 310; and
"(3) to requiring the inclusion in the registration statement or
application of the most recent published report of condition of
such prospective trustee, as described in paragraph (2) of such
subsection (a), or, if the indenture does not contain the provision
with respect to combined capital and surplus authorized by the
last sentence of paragraph (2) of subsection (a) of such section
310, to determining whether such prospective trustee is eligible
to act as such under such paragraph (2).
"(d) The provisions of section 4 (b) of the Securities Exchange
Act of 1934 shall be applicable with respect to the power off the
Commission to appoint and fix the compensation of such officers,
attorneys, examiners, and other experts, and such other officers and
employees, as may be necessary for carrying out its functions under
this title.
Consent by trustee
as condition precedent
to qualification of indenture.
Restriction on unauthorized divulging
ofinformation.
Prordo.
Disclosure to Attor.
ney General.
Investigation
of prospective trustee;
powers limited.
Employment of offecers. experts, etc.
48 Stat. 885.
15 U.S. C. § 7d (b).
"COURT REVIEW OF ORDERS; JURISDICTION OF OFFENSES AND SUITS
"SEC. 322. (a) Orders of the Commission under this title (including orders pursuant to the provisions of sections 305 (b) and 307 (c))
Court review of
orders.
1176
8
Sta.
PUBLIC LAWS-CH. 411-AUG. 3, 1939
8.
77i.
fesesadntio
utsof
fenses and suits.
48 Stat.86
15U.s.c. 77v(a);
Supp. IV, 77v.
[53 STAT.
shall be subject to review in the same manner, upon the same conditions, and to the same extent, as provided in section 9 of the Securities Act of 1933, with respect to orders of the Commission under such
Act.
"(b) Jurisdiction of offenses and violations under, and jurisdiction
and venue of suits and actions brought to enforce any liability cre-
ated by, this title, or any rules or regulations or orders prescribed
under the authority thereof, shall be as provided in section 22 (a)
of the Securities Act of 1933.
"LIABILITY FOR MISLEADING STATEMENTS
Liability
for
mis-
leading statements.
Rights and remedies
herein to be additional.
48 Stat. 74, 881;
49 Stat. 803.
15 U. . C. chs. 2A,
2B; Supp. IV, chs.
2A, 2B, 20.
"SEC. 323. (a) Any person who shall make or cause to be made
any statement in any application, report, or document filed with the
Commission pursuant to any provisions of this title, or any rule, regulation, or order thereunder, which statement was at the time and in
the light of the circumstances under which it was made false or misleading with respect to any material fact, or who shall omit to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading, shall be liable to any person
(not knowing that such statement was false or misleading or of such
omission) who, in reliance upon such statement or omission, shall
have purchased or sold a security issued under the indenture to
which such application, report, or document relates, for damages
caused by such reliance, unless the person sued shall prove that he
acted in good faith and had no knowledge that such statement was
false or misleading or of such omission. A person seeking to enforce
such liability may sue at law or in equity in any court of competent
jurisdiction. In any such suit the court may, in its discretion, require
an undertaking for the payment of the costs of such suit and assess
reasonable costs, including reasonable attorneys' fees, against either
party litigant, having due regard to the merits and good faith of the
suit or defense. No action shall be maintained to enforce any liability
created under this section unless brought within one year after the
discovery of the facts constituting the cause of action and within
three years after such cause of action accrued.
"(b) The rights and remedies provided by this title shall be in
addition to any and all other rights and remedies that may exist
under the Securities Act of 1933, or the Securities Exchange Act of
1934, or the Public Utility Holding Company Act of 1935, or otherwise at law or in equity; but no person permitted to maintain a suit
for damages under the provisions of this title shall recover, through
satisfaction of judgment in one or more actions, a total amount in
excess of his actual damages on account of the act complained of.
"UNLAWFUL REPRESENTATIONS
Unlawful
tations.
represen-
"SEC. 324. It shall be unlawful for any person in issuing or selling
any security to represent or imply in any manner whatsoever that
any action or failure to act by the Commission in the administration
of this title means that the Commission has in any way passed upon
the merits of, or given approval to, any trustee, indenture or security,
or any transaction or transactions therein, or that any such action or
failure to act with regard to any statement or report filed with or
examined by the Commission pursuant to this title or any rule, regulation, or order thereunder, has the effect of a finding by the Commission that such statement or report is true and accurate on its face
or that it is not false or misleading.
53 STAT.]
1177
76TH CONG., 1ST SESS.-CHS. 411, 412-AUG. 3, 1939
"PENALTIES
"SEC. 325. Any person who willfully violates any provision of this
title or any rule, regulation, or order thereunder, or any person who
willfully, in any application, report, or document filed or required
to be filed under the provisions of this title or any rule, regulation,
or order thereunder, makes any untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, shall upon
conviction be fined not more than $5,000 or imprisoned not more than
five years, or both.
Penalties.
"EFFECT ON EXISTING LAW
"SEC. 326. Except as otherwise expressly provided, nothing in this
title shall affect (1) the jurisdiction of the Commission under the
Securities Act of 1933, or the Securities Exchange Act of 1934, or
the Public Utility Holding Company Act of 1935, over any person,
security, or contract, or (2) the rights, obligations, duties, or liabilities of any person under such Acts; nor shall anything in this title
affect the jurisdiction of any other commission, board agency, or
officer of the United States or of any State or political subdivision
of any State, over any person or security, insofar as such jurisdiction
does not conflict with any provision of this title or any rule, regulation, or order thereunder.
Effect on existing
law.
48 Stat. 74, 881;
49 Stat. 803.
15 U.S. C. chs. 2A,
2B; Supp. IV, chs
2A, 2B, 2C.
"CONTRARY STIPULATIONS VOID
"SEC. 327. Any condition, stipulation, or provision binding any person to waive compliance with any provision of this title or with any
rule, regulation, or order thereunder shall be void.
Contrary
tions void.
stipula-
"SEPARABILITY OF PROVISIONS
"SEC. 328. If any provision of this title or the application of such
provision to any person or circumstance shall be held invalid, the
remainder of the title and the application of such provision to
persons or circumstances other than those as to which it is held
invalid shall not be affected thereby."
Approved, August 3, 1939.
Separability of provisions.
[CHAPTER 412]
AN ACT
Providing for the exchange of certain park lands at the northern boundary of
Piney Branch Parkway, near Argyle Terrace, for other lands more suitable for
the use and development of Piney Branch Parkway.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That in order to
better adjust the boundaries of Piney Branch Parkway and to make
said parkway more usable and more readily developed, the Secretary
of the Interior is authorized to convey, by and on behalf of the
United States of America, to the owners of parcel 69/47, or to such
party or parties as said owners shall designate, the title of the United
States in and to a triangular piece of land containing approximately
twenty-two thousand square feet at the northern boundary of Piney
Branch Parkway near Argyle Terrace and abutting parcel 69/47:
Provided, That the owners of said parcel 69/47 shall furnish the
United States of America with a good and sufficient title in fee simple,
free of all encumbrances, to a triangular piece of land containing
August 3, 139
Is. 2666]
(Public, No. 254]
District of Columbia.
Exchange of certain
park lands in, authorized.
Location.
Provso.
Condition.
@FedFRASER