§ 77bbb. — Necessity for regulation.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC77bbb]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2A--SECURITIES AND TRUST INDENTURES
SUBCHAPTER III--TRUST INDENTURES
Sec. 77bbb. Necessity for regulation
(a) Practices adversely affecting public
Upon the basis of facts disclosed by the reports of the Securities
and Exchange Commission made to the Congress pursuant to section 78jj of
this title 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 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) Declaration of policy
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
subchapter, in accordance with which policy all the provisions of this
subchapter shall be interpreted, to meet the problems and eliminate the
practices, enumerated in this section, connected with such public
offerings.
(May 27, 1933, ch. 38, title III, Sec. 302, as added Aug. 3, 1939, ch.
411, 53 Stat. 1150.)
References in Text
Section 78jj of this title, referred to in subsec. (a), was omitted
from the Code.
Transfer of Functions
For transfer of functions of Securities and Exchange Commission,
with certain exceptions, to Chairman of such Commission, see Reorg. Plan
No. 10 of 1950, Secs. 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat.
1265, set out under section 78d of this title.
