such rule, regulation, or order may, after such act or omission, be amended or rescinded or be determined by judicial or other authority to be invalid for any reason.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. 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 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 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 810, 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 of 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. 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)) 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 created 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 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 SEC. 324. It shall be unlawful for any person in offering, selling, or issuing 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. 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 The words "offering, selling, or issuing" were substituted for "Issuing or selling." therein not misleading, shall upon conviction be fined not more than $5,000 or imprisoned not more than five years, or both. 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 pro vision of this title or any rule, regulation, or order thereunder. 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. 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. SECURITIES AND EXCHANGE COMMISSION-EXPLANATION OF AMENDMENTS TO THE TRUST INDENTURE ACT OF 1939 GENERAL OBJECTIVES OF STATUTE In general the Trust Indenture Act of 1939 requires that bonds, notes, debentures, and similar securities publicly offered for sale, except as specifically exempted by the act, be issued under an indenture which meets the requirements of the act and has been duly qualified with the Commission. The act requires the indenture to be qualified, to designate standards of eligibility and qualification of the corporate trustee, to outlaw exculpatory provisions with respect to the liability of the indenture trustee, and to provide provisions by which the securities issued thereunder may be protected and enforced. WHAT THE BILL WOULD DO The amendments embodied in the bill are recommended by the Securities and Exchange Commission, which is of the opinion that such changes will materially assist in the enforcement of the statute without altering its basic provisions and purposes. In brief, the proposed amendments would (1) conform the provisions relating to the size of offerings which are exempted from registration to amendments proposed in the Securities Act of 1933, (2) would extend the time within which certain applications for exemption from the act might be filed, and (3) would provide an administrative remedy during the entire period following the filing of the application for qualification and before its effective date. The specific amendments by which such changes would be effected are explained more fully below. EXPLANATION BY SECTIONS Section 1. Increase of exemption from $250,000 to $500,000 Present law.-Section 304(a)(8) presently exempts any security to be issued otherwise than under an indenture in an aggregate principal amount not to exceed $250,000 within a period of 12 consecutive months. Problem. Since it is proposed to increase the exemption in section 3(b) of the Securities Act of 1933 from $300,000 to $500,000, the Commission believes that a similar increase should be made in the subject exemption. Remedy in the bill.-To accomplish the foregoing result it is proposed to amend section 304 (a) (8) to strike out the $250,000 figure and insert in lieu thereof $500,000. Section 2. Extension of time within which to file applications for exemption Present law.-Section 304 (c) of the Trust Indenture Act of 1939 presently permits the filing of an application for exemption from provisions of the act where the change in an indenture would require the consent of holders of securities outstanding under the indenture or would impose an undue burden on the issuer having due regard to the public interest and the protection of investors. However, this application may be filed only if there are outstanding at the time of filing securities which were outstanding prior to or within 6 months after August 3, 1939. Problem. In anticipation of the fact that the opportunity to file application for exemption would some day expire, most companies have inserted such provisions of the act in their indenture to become effective when such old indenture securities are no longer outstanding. However, in some cases there was a delay in inserting such provisions, so that there may be a period of time when such a company would be unable to do mortgage financing because of its inability to comply with certain provisions of the act under the standards of this provision. Remedy in the bill.-In order to afford such companies an opportunity to bring their indentures fully into compliance with the act without undue hardship, the Commission proposes to amend such provision so as to extend the time of filing applications for exemption thereunder if securities were outstanding when the application is filed which were outstanding on January 1, 1959, Section 3. Administrative remedies Present law. Section 305 (b) of the Trust Indenture Act of 1939 presently authorizes the Commission to enter an order in accordance with section 8(b) of the Securities Act of 1933 if it finds after notice and opportunity for hearing 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. 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 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 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 Notwithstanding any provision of this title, no report, record, or other information made avail able to the Commission under this subsection, no report of an examination made under this subsec tion for the use of the Commission, no report of an examination made of any trustee or prospective trustee by any Federal, State, Territorial, or Dis trict 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 mem ber, 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 regis tration statement or application of informa tion 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 subsec tion (a) of such section 810, to determining whether such prospective trustee is eligible to act as such under such paragraph (2). |