Page images
PDF
EPUB

nothing herein contained shall affect the right of the trustee to realize, for its own account, upon any security for any such claim held by it prior to the beginning of such four months' period, or to receive payment on such claim against the release of any such security, to the fair value thereof; and property substituted after the beginning of such four months' period for property held as security prior to such date shall, to the extent of the fair value of the property released, have the same status as the property released: And provided, further, That if the indenture is secured by the mortgage or pledge of property, and the indenture securities outstanding had a maturity at the time of issuance of five years or more, the trustee shall not be required to account for any such reduction or for any property co received or the proceeds thereof, if the trustee shall sustain the burden of proving that at the time such property was received or such reduction effected, the trustee had no reasonable cause to believe that a default in the payment of principal or interest under the indenture would occur within four months.

The indenture to be qualified shall provide that if any securities outstanding under the indenture had a maturity at the time of issuance of less than five years, or if the indenture is not secured by the mortgage or pledge of property, the trustee's rights in the funds and property held in such special account and the proceeds thereof shall be subject to the prior payment in full of all sums due and owing under the indenture, but that, subject to such prior payment in full, the trustee shall be subrogated to the rights of the indenture security holders, to the extent that such funds and property are applied to such payment. The indenture to be qualified shall provide further that if such indenture is secured by the mortgage or pledge of property, and the securities outstanding thereunder had a maturity at the time of issuance of five years or more, the trustee's rights in 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 realizes no greater percentage of [his] its deficiency claim (atter deducting therefrom all credits for which [he] it is not required to account hereunder) than the security holders realize in respect of their deficiency claim against the obligor (after deducting therefrom all allowable credits).

An indenture trustee who has resigned or been removed shall be subject to the provisions of this subsection as though such resignation or removal had not occurred, unless such resignation or removal occurred more than four months prior to such default, and 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 more than four months after such resignation or removal.

As used in this subsection the term “default” shall include any failure to make payment in full of principal or interest under the indenture when and as the same becomes due and payable.

(d) The indenture to be qualified may contain provisions excluding from the operation of paragraph (6) of subsection (b) of this section and from the operation of subsection (c) of this section a creditor relationship arising from

(1) the ownership or acquisition of indenture securities or any security or securities having a maturity of one year or more at the time of acquisition by the trustee, or

(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, provided that [prompt] notice of such advance and of the circumstances surrounding the making thereof is given to the 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 transfer agent, registrar, custodian, paying agent, fiscal agent or depositary, or other similar capacity; or

(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 such term is defined in the indenture; or

(5) the acquisition, ownership, acceptance or negotiation of drafts, bills of exchange, acceptances or obligations falling within the classification of self

liquidating paper, as such term is defined in the identure. The Commission shall by rules and regulations prescribe the definitions of the terms "cash transaction" and "self-liquidating paperwhich shall be included in the indenture.

Reports of Obligors (e) The indenture to be qualified shall contain provisions which the Commission deems adequate, having due regard to the public interest and the interests of investors, requiring each obligor to file with the trustee and the Commission, and to transmit or otherwise make available to the indenture security holders, such annual and other reports, and such information with respect to the performance by such obligor of its obligations under the indenture, in such form and detail as the Commission may from time to time prescribe as necessary or appropriate in the public interest or for the protection of investors by rule or regulation 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 of investors, requiring each obligor to furnish or cause to be furnished to the institutional 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 names and addresses of the indenture security holders, and requiring such trustee to make the same or the use thereof available to indenture security holders, subject only to such terms and conditions as the Commission deems not detrimental to the public interest or the interests of investors. The disclosure of any such information in accordance with such provision, regafdless 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 determination that the indenture has been recorded and filed, and from time to time re-recorded and refiled,] the recording, re-recording, filing, and refiling of the indenture to the extent necessary to establish and preserve the validity and priority thereof or of any lien created or purported to be created thereby as against any person or persons;

(2) the [determination that] application of all indenture securities and the proceeds thereof [are applied] to the purposes specified in the indenture;

(3) the [determination that] existence of or compliance with all conditions precedent to the authentication and delivery of indenture securities, the release or substitution of any property subject to the lien of the indenture, [the authentication and delivery of indenture securities,] the satisfaction and discharge of the indenture, and any other action by the trustee under the indenture [, exist or have been complied with before taking such action or permitting the same to be taken]; and

[(4) the determination whether the obligors have performed their obligations under the indenture.]

(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 imposed upon it pursuant to this subsection.

Duties of the Trustee in Case of Default (h) 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 the indenture trustee [expressly or impliedly] represents itself as having, as indenture trustee, at the time of the offering of the indenture securities, whichever is the higher: Provided, however, That the indenture to be qualified may contain provisions

(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 method and place of conducting all proceedings at law or in equity for any remedy under the indenture to be qualified, and (B) to direct the indenture trustee to waive any default and its consequences, except that a default in the payment of the principal of any indenture security at the date of maturity specified therein shall not be waived, and except that a default in interest shall not be waived for a total period exceeding one year, nor unless payment of all arrears of interest shall have been made or provided for; [and]

(2) protecting the indenture trustee in respect of any action taken in good faith in accordance with any direction authorized as provided in paragraph (1) of this [subsection.] subsection; and

(3) protecting the trustee from liability for any error of judgment or for any loss arising out of any act or omission in the execution of the trust so long as it

acts in good faith and without negligence. In determining whether the required proportion in principal amount of the indenture securities outstanding have 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 paragraph (2) of this subsection, only indenture securities which the trustee knows (or has reasonable cause to believe] are so owned shall be so disregarded.

Reliance Upon Certificates and Opinions (i) 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 contained therein, in the absence of bad faith or gross negligence on the part of such trustee, upon opinions or certificates of attorneys, accountants, or other experts (subject to such requirements as to independence and qualifications and the exercise by the trustee of reasonable care in their selection, 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) [as to a specified fact or matter involved in a particular determination or determinations], if the Commission deems that such provisions do not materially conflict with the required standard of care and are not detrimental to the public interest or the interest of investors.

Exculpatory Clauses (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.

Notice of Defaults (k) 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, [prompt] notice of all defaults known to the [trustee, or of which the trustee should have acquired knowledge in the performance of the obligations imposed upon it by the indenture; except that) trustee: Provided, however, That the indenture may provide, except in the case of defaults (other than major defaults, that, if the trustee does not have any conflicting interest, as defined in subsection (b) of this section, ] (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 or executive committee or a trust committee of directors or responsible officers of the trustee in good faith determine the withholding of such notice to be in the interests of the indenture security holders. [For the purposes of this subsection the term “major default” shall mean a default in the payment of the principal of or interest on any indenture security outstanding, and any other default (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.]

Undertaking for Costs (1) 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 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 security holders for the enforcement of the payment of the principal of or interest on any indenture security, at or after the respective due dates expressed therein, or to suits instituted by any indenture security holder or group of security holders holding in the aggregate more than 10 per centum in principal amount of the indenture securities outstanding.

Other Indenture Provisions (m) The indenture to be qualified shall contain such provisions as the Commission shall deem necessary or appropriate in the public interest or for the protection of investors in respect of the following matters

(1) Restrictions or conditions on the release and substitution of any propepty subject to the lien of the indenture, on the issuance of additional indenture securities, and on the satisfaction and discharge of the indenture.

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

(3) The definition of what shall constitute a default thereunder.

(4). The rights, powers, and duties of the indenture trustee, including (A) the giving to the indenture security holders of notice of the release or substitution of property subject to the lien of the indenture and the issuance of additional indenture securities; (B) the making of reports by the indenture trustee to the indenture security holders with respect to its qualifications, the properties and funds held by it under the indenture and its administration of the trust; (C) the rights, powers, or duties of the indenture trustee with respect to the institution of foreclosure proceedings, proceedings for the judicial or other sale of the property subject to the lien of the indenture, or for obtaining, in its name as such trustee, a judgment for the entire amount due and owing under the indenture; with respect to entry into possession of the trust estate; with respect to the calling of meetings of the indenture security holders; with respect to keeping itself informed with regard to all bankruptcy, receivership or reorganization proceedings affecting the obligors, and all proceedings affecting the indenture securities or the property subject to the lien of the indenture; with respect to appearance and intervention in any such proceedings, and the filing of proofs of claim therein on behalf of the indenture security holders; and (D) restrictions upon the employment by the indenture trustee of attorneys or other experts who have (or have had, or who represent or have represented,] any interests which are likely materially to conflict with the interests of the indenture security holders.

(5) 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 right and power of the indenture security holders with respect to accountings by the indenture trustee, bringing action to collect the principal of and interest upon the indenture securities at their respective due dates, and calling and holding meetings of the indenture security holders and taking action at such meetings.

(6) 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 defaults in the performance of the obligations of the obligors.

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 and 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 forms of indentures or of any provisions required or permitted to be included therein. For the purpose of its rules or regulations the Commission may classify [persons and] persons, securilies, and other matters within its jurisdiction and prescribe different requirements for different classes of [persons) persons, securilies, or matters.

(b) Subject to the provisions of the Federal Register Act and regulations heretofore or hereafter prescribed under the authority thereof, the rules and regulations of the Commission 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 protection of investors (or consumers], 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 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, and/or under the Public Utility Holding Company Act.

SPECIAL POWERS OF THE COMMISSION

corre

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 inquiry. Such attendance of witnesses and the production of any such books, papers spondence, 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

151514—37

« PreviousContinue »