Page images
PDF
EPUB

(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, 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;

(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; or

(6) the acquisition, ownership, acceptance, or negotiation of any drafts, bills of exchange, acceptances, or obligations which fall within the classifica

tion of self-liquidating paper as defined in the indenture. The Commission shall by rules and regulations prescribe the definitions of the terms "cash transaction” and “self-liquidating paper” which shall be included in any such indenture, and shall in such definitions include such of the creditor relationships referred to in paragraphs (4) and (6) of this subsection to which the Commission determines that the application of subsection (c) of this section is not necessary in the public interest and for the protection of investors, having due regard to the purposes of such subsection.

Reports by Qbligor and Indenture Trustee (e) The indenture to be qualified shall contain provisions

(1) requiring each obligaor to file with the trustee and the Commission such annual and other reports, including such information with respect to the performance by such obligor of its obligations under the indenture, as the Commission may from time to time prescribe by rule or regulation as necessary or appropriate in the public interest or for the protection of investors, and

(2) requiring the indenture trustee to file with the Commission such annual and other reports with respect to its eligibility and its qualifications under subsections (a) and (b), respectively, of this section, the properties and funds held by it under the indenture, and its administration of the trust, and such notices of the issuance of additional indenture securities, of the release and substitution of property subject to the lien of the indenture, and of the making of advances by it to any obligor thereunder, as the Commission may from time to time prescribe by rule or regulation as necessary, or appropriate in the public interest or for the protection of investors.

The indenture to be qualified shall also provide that such reports, information, and notices shall be in such form and detail, and shall be transmitted or otherwise made available to the indenture security holders in such manner as may from time to time be prescribed in such rules and regulations. Such rules and regulations may be adopted either before or after qualification becomes effective as to such indenture.

Bondholders' Lists (f) The indenture to be qualified shall contain provisions which the Commission deems adequate, having due regard to the public interest and the interests oi investors, requiring each obligor to furnish or cause to be furnished to the instivutional trustee thereunder, at stated intervals, all information in the possession or control of such obligor or of any of its paying agents as to the uames and addresses of the indenture security holders, and requiring such trustru to preserve all such information so furnished to it or received hy it in the coupacity of paying agent, and to make such information or the use thercol avállable to indenture security holders, subject only to such terms "' ú condizious as the Commission deems not detrimental to the public interesu or the inierests of investors. The disclosure of any such information in accordance with such provisions, regardless of the source from which such information was derived, shall not be deemed a violation of any existing law or of any law hereafter enacted which does not specifically refer to this subsection,

Duties of the Trustee Prior to Default

(g) The indenture to be qualified shall contain provisions imposing upon the indenture trustee such specific duties and obligations prior to default (as such term is defined in such indenture) as the Commission deems consistent with the duties and obligations which a prudent man would assume and perform prior to such a default if he were trustee under such an indenture, including, without limitation, action in respect of the following matters:

(1) the recording, re-recording, filing, and refiling of the indenture;

(2) the application of the indenture securities and the proceeds thereof to the purposes specified in the indenture;

(3) the existence of or compliance with all conditions precedent to the authentication and delivery of the indenture securities, to the release or substitution of any property subject to the lien of the indenture, to the satisfaction and discharge of the indenture, and to any other action by the trustee under the indenture; and

(4) the performance by the obligor of such of its other obligations under the indenture as the Commission deems necessary or appropriate in the

public interest or for the protection of investors. The indenture to be qualified shall also contain provisions requiring the obligor to provide the indenture trustee with such information, such opinions and certificates of attorneys, accountants, and other experts, and such other documents, as the Commission may deem necessary or appropriate to enable the trustee to perform, or to facilitate its performance of, the duties and obligations imposed upon it pursuant to this subsection.

Notice of Defaults

(h) The indenture to be qualified shall contain provisions requiring the trustee to give to the indenture security holders, at such time and in such manner as the Commission may deem adequate, having due regard to the public interest and the protection of investors, notice of all default known to the trustee: Provided, however, That the indenture may provide, except in the case of defaults (to be specified in the indenture) of which the Commission deems it necessary or appropriate in the public interest or for the protection of investors that prompt notice be given, that 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

(i) The indenture to be qualified shall contain provisions requiring the indenture trustee to exercise in case of default (as such term is defined in the indenture) such of the rights and powers vested in it by the indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise under the circumstances if he were a fiduciary and had the degree of skill which the indenture trustee has, or which, at the time of the offering of the indenture securities, the indenture trustee represents itself as having, as indenture trustee, whichever is the higher.

Responsibility of the Trustee (j) The indenture to be qualified shall not contain any provisions relieving the trustee from liability for its own negligent action or failure to act, or for its own willful misconduct, except that

(1) The Commission shall permit the inclusion in the indenture to be qualified of one or more provisions authorizing the indenture trustee conclusively to rely, as to the truth of the statements and the correctness of the opinions contained therein, in the absence of bad faith on the part of such trustee, upon opinions or certificates of attorneys, accountants, or other experts (subject to such requiruments as to independence and qualifications and the exercise by the trustee of reasonable care in their selection or approval, and subject to such other terms and conditions, as the Commission may deem necessary or appropriate in the public interest or for the protection of investors), and, when authorized by the indenture, upon opinions or certificates of spccified officers of the obligor, if, in any of the above cases, the Commission deerns that such provisions do not materially conflict with the required standard of conduct and are not detrimental to the public interest and the interest of investors;

(2) The indenture to be qualified may contain provisions protecting the trustee from liability for any error of judgment made in good faith by a responsible officer or officers of the trustee, unless it shall be proved that the trustee was negligent in ascertaining the pertinent facts;

(3) The indenture to be qualified may contain provisions (A) authorizing the holders of not less than a majority in principal amount of the indenture securities at the time outstanding to direct the method and place of conducting all proceedings at law or in equity for any remedy under such indenture, and (B) protecting the indenture trustee in respect of any action taken in good faith in accordance with any such direction. In determining whether the required proportion in principal amount of the indenture securities outstanding has concurred in any such direction, indenture securities owned by any obligor or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with any obligor shall be disregarded, except that, for the purposes of clause (B) of this paragraph, only indenture securities which the trustee knows are so owned shall be so disregarded.

Undertaking for Costs (k) 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 against the trustee, as trustee, the filing by any party litigant of an undertaking to pay the costs of such suit, and may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant, having due regard to the merits and good faith of the suit or defense: Provided, however, That the provisions of this subsection shall not apply to suits instituted by the trustee or to suits instituted by indenture security holders for the enforcement of the payment of the principal of or interest on any indenture security, upon or after the respective due dates expressed therein, or to suits 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. Release and Substitution; Issuance of Additional Securities; Satisfaction and

Discharge (1) Any provisions in the indenture to be qualified with respect to (1) the release and substitution of any property subject to the lien of the indenture, or (2) the issuance of additional indenture securities, or (3) the satisfaction and discharge of the indenture shall be subject to restrictions and conditions which, in the light of the bargain of the parties, the Commission deems adequate, having due regard to the public interest and the interest of investors. Rights, Powers, and Remedies of Indenture Trustees and Indenture Security

Holders (m) The indenture to be qualified shall contain provisions which the Commission deems adequate, having due regard to the public interest and the interest of investors, with respect to the following matters

(1) The definition of what shall constitute a default thereunder;

(2) The rights and powers of the indenture trustee with respect to (A) entry into possession of the trust estate; (B) obtaining, in its name as such trustee, a judgment for the entire amount due and owing under the indenture; (C) the institution of foreclosure proceedings and proceedings for the judicial or other sale of the property subject to the lien of the indenture; and (D) appearance and intervention in any judicial proceedings, and filing proofs of claim therein on behalf of the indenture security holders; and the duties of the indenture trustee with respect to calling meetings of the indenture security holders;

(3) The rights, powers, and remedies of the indenture security holders and the manner in which and conditions upon which such rights, powers, and remedies may be exercised, including the rights, powers, and remedies of the indenture security holders with respect to (A) accountings by the indenture trustee, (B) bringing action to collect the principal of and interest upon the indenture securities upon their respective due dates, and (C) calling and holding meetings of the indenture security holders and taking action at such meetings. The indenture to be qualified may contain provisions authorizing the holders of not less than a majority in principal amount of the indenture securities at the time outstanding to consent to the postponement of any interest payment for a period not exceeding one year from its due date, or to the waiver of any default and its consequences, except a default in the payment of the principal of any indenture security upon the date of maturity specified therein, and except that a default in the payment of interest shall not be waived unless payment of all arrears of interest not so postponed shall have been made or provided for. The provisions of paragraph (3) of subsection (j) of this section shall govern the determination of whether the required proportion in principal amount of the indenture securities has concurred in such consent, and the extent to which the trustee shall be protected in relying thereon.

Other Indenture Provisions (n) The indenture to be qualified shall contain provisions which the Commission deems adequate, having due regard to the public interest and the interest of investors, with respect to the following matters

(1) The qualifications, rights, powers, and duties of paying agents, including the duty of each paying agent to hold for the benefit of the indenture security holders or the trustee all sums held by such paying agent for the payment of the interest on and principal of the indenture securities, and to give to the indenture trustee notice of any default by the obligors in the making of such payments;

(2) Restrictions upon the employment by the indenture trustee of attorneys or other experts who have any interests which are likely to involve a material conflict with the interests of the indenture security holders; and

(3) The obligations of the obligors with respect to the recording or filing of the indenture.

RULES, REGULATIONS, AND ORDERS Sec. 8. (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 provisions of this Act, including rules and regulations defining accounting, technical, and trade terms used in this Act. Among other things, the Commission shall have authority, for the purposes of this Act, 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, and to prescribe or recommend the form or forms of any provisions which, pursuant to section 7, are required or permitted to be included in an indenture. For the purpose of its rules or regulations the Commission may classify persons, securities, and other matters within its jurisdiction and prescribe different requirements for different classes of persons, securities, 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 Act 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) The Commission, by such rules and regulations or order as it deems necessary or appropriate in the public interest or for the protecton of investors, may authorize the filing of any information or documents required to be filed with the Commission under this Act, or under the Securities Act of 1933, or under the Securities Exchange Act of 1934, or under the Public Utility Holding Company Act of 1935, by incorporating by reference any information or documents on file with the Commission under this Act or any such Act. No provision of this Act 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 Sec. 9. 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. The Commission may, by such rules and regulations or orders as it deems necessary or appropriate in the

63402-38-2

public interest or for the protection of investors, provide for the consolidation of proceedings under this Act with proceedings under the Securities Act of 1933, Securities Exchange Act of 1934, and/or under the Public Utility Holding Company Act of 1935.

SPECIAL POWERS OF THE COMMISSION

SEC. 10. (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 Act, 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 injury. 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 Act 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 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 for which applications for qualification have been filed with the Commission, 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 Act, 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 con ce, 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 Act.

(c) Nothing in this Act shall be construed as empowering the Commission to conduct an investigation or other proceeding for the purpose of determining whether the provisions of an indenture as to which an application for qualification is effective are being complied with, or to enforce such provisions.

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 Act, shall be limited

(1) to determining whether such prospective trustee is qualified to act as trustee under the provisions of subsection (b) of section 7;

(2) tn requiring t'.e inclusion in the application of information with respect to the eligibility of such prospective trustee under paragraph (1) of subsection (2) of such section 7; and

(3) to) requiring the inclusion in the 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 7, to determining whether such prospective trustee is eligible to act as such under such paragraph (2).

« PreviousContinue »