
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 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.
