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(4) Any security exempted from the provisions of the Securities Act of 1933, by paragraph 2, 3, 4, 5, 6, 7, 8, or 11 of subsection 3 (a) of such Act, as heretofore amended.
(5) Any security issued under a mortgage indenture as to which a contract of insurance under the National Housing Act is in effect.
(6) Any guarantee of any security exempted from the provisions of [section 4] this Act by this subsection. (b) The provisions of section 4 shall not apply to any of the transactions exempted, by section 4 of the Securities Act of 1933, as heretofore amended, from the provisions of section 5 of such Act. For the purposes of this subsection the term “underwriter”, as used in section 4 of such Act, shall have the meaning provided in paragraph (3) of section 2 of this Act.
(c) The Commission may from time to time by rules and regulations, and subject to such terms and conditions as may be prescribed therein, add any class of securities to the securities exempted in subsection (a) of this section, if it deems that the application of this Act with respect to such securities is not necessary in the public interest and for the protection of investors by reason of the small amount involved and the small amount of securities outstanding and thereafter issuable under the same indenture, or the limited character of the public offering; but no issue of securities shall be exempted under this subsection where the aggregate amount of which such issue is offered to the public exceeds $250,000.
(d) The Commission may, on application by the issuer and after opportunity for hearing thereon, by order exempt from any one or more provisions of this Act any security issued or proposed to be issued under an indenture under which, at the time of such issuance, securities referred to in paragraph (3) of subsection (a) of this section are outstanding, if and to the extent that it 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 the indenture, or of any other indenture or agreement made prior to the effective date of this Act, or by reason of the provisions of any applicable law, the consent of the holders of securities outstanding thereunder, or
(2) would impose an undue burden on the issuer, having due regard to the public interest and the interests of investors.
PROHIBITIONS RELATING TO INTERSTATE COMMERCE AND THE MAILS SEC. 4. (a) Subject to the provisions of section 3, unless a security 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 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) Notwithstanding the provisions of the Securities Act of 1933, on and after January 3, 1938, no registration statement relating to a security which is subject to the provisions of subsection (a) of this section shall become effective unless such security has been or is to be issued under an indenture as to which an application for qualification is effective.
APPLICATIONS FOR QUALIFICATION AND THE TAKING EFFECT THEREOF SEC. 5. (a) An application for qualification of the indenture under which a security has been or is to be issued shall be filed with the Commission by the issuer of such security. 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. Such application shall include such of the information and documents as would be required to be filed in order to register such security under the Securities Act of 1933, and such additional information, in such form and detail, and such documents, regarding the applicant, the obligors, the trustees, the paying agents and the underwriters (as such term is defined in subsection (b) of section 7), including prospective obligors, trustees and underwriters, and the direct or indirect relationships between any of the foregoing, as the Commission may by rules and regulations prescribe as necessary or appropriate in the public interest or for the protection of investors. 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 unless a registration statement, under the Securities Act of 1933, covering securities issued or to be issued under the indenture to be qualified has been filed prior to or simultaneously with the application, the filing of such application shall not be deemed to have taken place unless 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. If a registration statement covering securities issued or to be issued under such indenture is subsequently filed, the amount of the fee so paid shall be credited against the fee required to be paid at the time of filing such registration statement, and any excess shall be refunded to the applicant. If an amendment to an application is filed prior to the effective date of such application, the application shall be deemed to have been filed when such amendment was filed; except that an amendment filed with the consent of the Commission, prior to the effective date of the application, or filed pursuant to an order of the Commission, shall be treated as a part of the application. Amendments after the effective date of an application may be made upon such terms and conditions as the Commission may prescribe.
(c) The effective date of an application shall be the twentieth day after the filing thereof, unless the Commission prior to such time shall have issued an order to the issuer to show cause why such application should become effective. If an order to show cause under this subsection has been issued, such application shall become effective within such reasonable period of time after an opportunity for hearing upon such order as the Commission shall fix by rules and regulations unless the Commission prior to the expiration of such period shall have issued an order pursuant to section 6 refusing to permit such application to become effective. Whenever the Commission shall issue an order to show cause, it shall cause the same to be served upon the issuer in such manner as the Commission may by rules and regulations prescribe, and accord an opportunity for hearing thereon (at a time fixed by the Commission) within 10 days after such service.
(d) Except as otherwise expressly provided in this Act the making, amendment or rescission of a rule, regulation or order [relating to the contents of any indenture or indentures or the form or interpretation of any provision or provisions thereof] under the provisions of this Act shall not affect the 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, or of any provision of any such indenture.
(e) The Commission is hereby empowered to make an investigation in any case in order to determine whether a refusal order should issue under section 6. If the issuer, or any obligor, underwriter or trustee, including prospective obligors, underwriters and trustees, shall fail to cooperate, or shall obstruct or refuse to permit the making of such investigation, such conduct shall be proper ground for the issuance of a refusal order.
Sec. 6. The Commission shall issue an order refusing to permit an application filed pursuant to section 5 to become effective if it finds that
(1) such application does not conform to the requirements of this Act and the rules and regulations thereunder;
(2) the application includes 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;
(3) any person designated as trustee (or trustees] under the indenture is not (qualified] eligible to act as such under [subsections (a) and (b)] subsection (a) of section 7 or has any conflicting interest as defined in subsection (b) of section 7;
(4) the indenture does not conform to the requirements of section 7 and the rules and regulations thereunder; or
(5) the indenture or any security to be issued thereunder contains any provision which limits, qualifies or conflicts with a provision required to be contained in the indenture by this Act or the rules and regulations thereunder; or any provision the inclusion of which is prohibited by this Act or the rules and regulations thereunder; or any provision which is misleading or deceptive; or the elimination of which is necessary or appropriate in the public interest or for the protection of investors or to prevent the circumvention or
evasion of this Act. 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 crder, and the application shall become effective at the date fixed pursuant to subsection (c) of section 5 or upon the date of such rescission, whichever shall be the later.
CONTENTS OF INDENTURE
Persons Eligible for Appointment as Trustee Sec. 7. (a) (1) The 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 an institution incorporated and doing business under the laws of the United States or of any State or Territory or of the District of Columbia, which (A) is authorized under such laws to exercise corporate trust powers, and (B) is subject to supervision or examination by Federal, State, Territorial, or District authority.
(2) If the Commission deems it necessary or appropriate in the public interest or for the protection of investors, in view of the type of indenture, the amount of securities outstanding and thereafter issuable thereunder, and the duties and responsibilities imposed thereby on the trustee or trustees, the indenture to be qualified shall require that such institutional trustee have at all times a combined capital and surplus of such specified minimum amount as the Commission deems adequate, having due regard to the public interest and the interests of investors. If such institutional trustee publishes reports of condition at least annually, pursuant to law or to the requirements of such supervising or examining authority, the indenture may provide that for the purposes of this paragraph, the combined capital and surplus of such trustee shall be deemed to be its combined capital and surplus as set forth in its most recent published report of condition.
(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.
(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 [no person shall accept or hold the position of trustee thereunder if such person has] if the indenture trustee has or shall acquire any conflicting interest as hereinafter defined, (and that, if at any time any indenture trustee has or shall acquire any such conflicting interest, ] (i) such trustee shall, within 90 days after [the acquisition] ascertainment of such conflicting interest, either eliminate such conflicting [interest, or resign and take prompt steps to have a successor appointed in the manner provided in the indenture] 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 shall take prompt steps to have a successor appointed in the manner provided in the indenture, and (ii) subject to the provisions of subsection [(1)] () of this section, any security holder who has been a bona-fide holder of indenture securities for at least six months (on failure of such trustee on the written request of such holder either to resign or to eliminate such conflicting interest, as required by clause (i) of this subsection) 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 trustee. For the purposes of this subsection, an indenture trustee shall be deemed to have a conflicting interest if
(1) such trustee is trustee under an indenture under which any other securities, or certificates of interest or participation in any other securities, of an obligor are outstanding, other than [(A)] the indenture to be qualified, [and (B) an indenture under which collateral trust notes of such obligor are outstanding which are secured exclusively by indenture securities, and (C) any other indenture entered into by such obligor, if] or any other indenture entered into by such obligor, unless (A) the indenture securities are collateral trust, notes secured, exclusively by securities issued under such other indenture, or (B) such other indenture is a collateral trust indenture secured exclusively by 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 [if] the indenture to be qualified and such other indenture are secured by wholly separate and distinct parcels of real estate, or (D) such trustee shall sustain 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 or was, subsequent to June 16, 1934, an underwriter;
(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 or underwriter, whether by agency, stock ownership, or otherwise;
(4) such trustee or any of its directors or executive officers is a director, officer, partner, employee, appointee, or representative of an obligor or underwriter, except that [(A) one director of the trustee may be a director or executive officer of an obligor, and (B) one additional director (who may also be an executive officer) of the trustee may, if expressly authorized by the trustee, be a director of such obligor, if he has no pecuniary interest in such obligor other than his qualifying shares as such director] (A) one person may be a director and/or executive officer of the trustee and of an obligor, but may not be at the same time an executive officer of both the trustee and of such obligor, and (B) one additional person may be a director and/or executive officer of the trustee and a director of such obligor, if his pecuniary interest in such obligor does not exceed such percentage of the voting securities or such percentage of all other securities, other than indenture securities, of such obligor as the Commission may deem not detrimental to the public interest and the interests of investors, such percentages and the method of calculating the same to be fixed in the indenture, but such percentages in no event to exceed 1 per centum: Provided, however, That such additional person may be a director of the trustee and such obligor only so long as the number of directors of the trustee in office is more than nine, and (C) such trustee may be designated to act as trustee under the indenture to be qualified, [or] and in the [capacity] capacities of transfer agent, registrar, custodian, paying agent, fiscal agent, escrow agent or depositary, or in other similar capacity, by any obligor or underwriter;
(5) 5 per centum or more of [any class of] the voting securities of such trustee is beneficially ow [beneficially or otherwise,] individually or collectively, by an obligor (or underwriter,] or by any director, partner, or executive [officer, appointee or nominee of an obligor or underwriter, other than a director or executive officer of an obligor who is a director of such trustee] officer thereof, exclusive of any such securities owned by a person described in clause (A) of paragraph (4) of this subsection in an amount not exceeding 242 per centum of such securities or owned by a person described in clause (B) of such paragraph (4); or 5 per centum or more of the voting securities of such trustee is beneficially owned, individually or collectively, by an underwriter, or by any director, partner, or executive officer thereof;
(6) such trustee shall be or become a creditor, directly or indirectly, secured or unsecured, of an obligor, except as authorized pursuant to subsection (d) of this section, if the indenture to be qualified is not secured by the pledge or mortgage of property or if any indenture securities outstanding, had a maturity at the time of issuance of less than five years;
(7) such trustee is the [owner, beneficially or otherwise, ] beneficial owner of 5 per centum or more of [any class of] the voting [security] securities: or 10 per centum or more of any other class of security of an obligor (other than indenture securities) or of 10 per centum or more of any class of security of an underwriter;
(8) such trustee is the [owner, beneficially or otherwise,] beneficial owner of 5 per centum or more of [any class of] the voting [security] securities of any person (who,] who to the knowledge of the [trustee,] trustee owns 10 per centum or more of (any class of] the voting [security] securities of, or controls directly or indirectly or is under direct or indirect common control with, an obligor;
(9) such trustee is the [owner, beneficially or otherwise,] beneficial owner of 10 per centum or more of any class of security of any person who,] who to the knowledge of the (trustee,] trustee owns 50 per centum or more of [any class of] the voting [security] securities of an obligor;
(10) 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 of any person the beneficial ownership of 5 per centum of which would have constituted a conflicting interest under paragraph (7) or (8) of this subsection, or an aggregate of 25 per centum or more of any class of security the beneficial ownership of 10 per centum of which would have constituted a conflicting interest under paragraph (7) or (9) of this subsection. Promptly after each such May 15, the trustee sħall make a check of its holdings of securities of the obligor as of such May 15. If the obligor fails to make payment in full of principal or interest under the indenture to be qualified when and as the same becomes due and payable, the trustee shall make a prompt check of its holdings of securities of the obligor as of the date of such default, and all such securities held by the trustee in any of the above mentioned capacities, with sole or joint control over such securities vested in it, shall thereafter be considered as though beneficially owned by such trustee, for the purposes of paragraphs (7),
(8), and (9) of this subsection: Provided, however, That for the purposes of paragraphs (7), [(8) and (9)] (8), (9), and (10) of this subsection, the term “security” shall include only such securities as are generally known as corporate securities, and the indenture trustee shall not be deemed the owner of any security which it holds as collateral [for a loan] security was trustee or otherwise), so long as there is no default in the principal obligation for which such security is collateral, or which it holds [in a custody account or escrow account or as depositary or in other similar capacity] as custodian, escrow agent, or depositary, or in any representative capacity: And provided further, That the indenture to be qualified may contain provisions excluding from the operation of [paragraphs (7), (8) and (9)] paragraph (10) of this subsection the ownership by the indenture trustee of not more than 25 per centum of any class of security referred to in [any of] such [paragraphs] paragraph for a period of not more than eighteen months from the date of acquisition thereof, or until a default (as defined in the indenture) shall occur, whichever shall be the sooner, if the trustee became the owner of such security through becoming executor, administrator or testamentary trustee of an estate which included such security.
For the purposes of this subsection, the term “underwriter” means every person who [is or], within six years prior to the time as of which the determination is made, was an underwriter of any security of an obligor outstanding at [the time as of which the determination is made] such time, except as otherwise provided in paragraph (2) of this subsection.
(c) 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, within four months prior to a default in the payment of principal or interest under the indenture 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 security holders,
(1) an amount equal to any and all reductions in the amount due and owing upon any such claim in respect of principal or interest, effected after the beginning of such four months' period and valid as against the 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 at the date of such default; and
(2) all property received in respect of any of its claims as such creditor, 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 the obligor and its other creditors in such property or such proceeds: Provided, however, That nothing herein contained shall affect the right of the trustee to retain for its own account (A) payments made on account of any such claim by persons, other than the obligor, who are liable thereon, and (B) the proceeds of the bonafide sale of any such claim by the trustee to a third person: And provided further. That