
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 15USC77jjj]

 
                      TITLE 15--COMMERCE AND TRADE
 
               CHAPTER 2A--SECURITIES AND TRUST INDENTURES
 
                    SUBCHAPTER III--TRUST INDENTURES
 
Sec. 77jjj. Eligibility and disqualification of trustee


(a) Persons eligible for appointment as trustee

    (1) There shall at all times be one or more trustees under every 
indenture qualified or to be qualified pursuant to this subchapter, at 
least one of whom shall at all times be a corporation organized and 
doing business under the laws of the United States or of any State or 
Territory or of the District of Columbia or a corporation or other 
person permitted to act as trustee by the Commission (referred to in 
this subchapter as the institutional trustee), 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 of Columbia authority. The Commission may, pursuant to such 
rules and regulations as it may prescribe, or by order on application, 
permit a corporation or other person organized and doing business under 
the laws of a foreign government to act as sole trustee under an 
indenture qualified or to be qualified pursuant to this subchapter, if 
such corporation or other person (i) is authorized under such laws to 
exercise corporate trust powers, and (ii) is subject to supervision or 
examination by authority of such foreign government or a political 
subdivision thereof substantially equivalent to supervision or 
examination applicable to United States institutional trustees. In 
prescribing such rules and regulations or making such order, the 
Commission shall consider whether under such laws, a United States 
institutional trustee is eligible to act as sole trustee under an 
indenture relating to securities sold within the jurisdiction of such 
foreign government.
    (2) Such institution \1\ trustee shall have at all times a combined 
capital and surplus of a specified minimum amount, which shall not be 
less than $150,000. If such institutional trustee publishes reports of 
condition at least annually, pursuant to law or to the requirements of 
said 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 report of condition so published.
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    \1\ So in original. Probably should be ``institutional''.
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    (3) If the indenture to be qualified requires or permits the 
appointment of one or more co-trustees in addition to such institutional 
trustee, 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, in which event 
such rights, powers, duties, and obligations shall be exercised and 
performed by such co-trustees.
    (4) In the case of certificates of interest or participation, the 
indenture trustee or trustees shall 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.
    (5) No obligor upon the indenture securities or person directly or 
indirectly controlling, controlled by, or under common control with such 
obligor shall serve as trustee upon such indenture securities.

(b) Disqualification of trustee

    If any indenture trustee has or shall acquire any conflicting 
interest as hereinafter defined--
        (i) then, within 90 days after ascertaining that it has such 
    conflicting interest, and if the default (as defined in the next 
    sentence) to which such conflicting interest relates has not been 
    cured or duly waived or otherwise eliminated before the end of such 
    90-day period, such trustee shall either eliminate such conflicting 
    interest or, except as otherwise provided below in this subsection, 
    resign, and the obligor upon the indenture securities shall take 
    prompt steps to have a successor appointed in the manner provided in 
    the indenture;
        (ii) in the event that such trustee shall fail to comply with 
    the provisions of clause (i) of this subsection, such trustee shall, 
    within 10 days after the expiration of such 90-day period, transmit 
    notice of such failure to the indenture security holders in the 
    manner and to the extent provided in subsection (c) of section 77mmm 
    of this title; and
        (iii) subject to the provisions of subsection (e) of section 
    77ooo of this title, unless such trustee's duty to resign is stayed 
    as provided below in this subsection, any security holder who has 
    been a bona fide holder of indenture securities for at least six 
    months 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, if such trustee fails, 
    after written request thereof by such holder to comply with the 
    provisions of clause (i) of this subsection.

    For the purposes of this subsection, an indenture trustee shall be 
deemed to have a conflicting interest if the indenture securities are in 
default (as such term is defined in such indenture, but exclusive of any 
period of grace or requirement of notice) and--
        (1) such trustee is trustee under another indenture under which 
    any other securities, or certificates of interest or participation 
    in any other securities, of an obligor upon the indenture securities 
    are outstanding or is trustee for more than one outstanding series 
    of securities, as hereafter defined, under a single indenture of an 
    obligor, unless--
            (A) the indenture securities are collateral trust notes 
        under which the only collateral consists of securities issued 
        under such other indenture,
            (B) such other indenture is a collateral trust indenture 
        under which the only collateral consists of 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 the indenture to 
        be qualified and such other indenture are secured by wholly 
        separate and distinct parcels of real estate:

    Provided, That the indenture to be qualified shall automatically be 
    deemed (unless it is expressly provided therein that such provision 
    is excluded) to contain a provision excluding from the operation of 
    this paragraph other series under such indenture, and any other 
    indenture or indentures under which other securities, or 
    certificates of interest or participation in other securities, of 
    such an obligor are outstanding, if--
            (i) the indenture to be qualified and any such other 
        indenture or indentures (and all series of securities issuable 
        thereunder) are wholly unsecured and rank equally, and such 
        other indenture or indentures (and such series) are specifically 
        described in the indenture to be qualified or are thereafter 
        qualified under this subchapter, unless the Commission shall 
        have found and declared by order pursuant to subsection (b) of 
        section 77eee of this title or subsection (c) of section 77ggg 
        of this title that differences exist between the provisions of 
        the indenture (or such series) to be qualified and the 
        provisions of such other indenture or indentures (or such 
        series) which are 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, or
            (ii) the issuer shall have sustained 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 or under more than one 
        outstanding series under a single 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 or with respect to such series;

        (2) such trustee or any of its directors or executive officers 
    is an underwriter for an obligor upon the indenture securities;
        (3) such trustee directly or indirectly controls or is directly 
    or indirectly controlled by or is under direct or indirect common 
    control with an underwriter for an obligor upon the indenture 
    securities;
        (4) such trustee or any of its directors or executive officers 
    is a director, officer, partner, employee, appointee, or 
    representative of an obligor upon the indenture securities, or of an 
    underwriter (other than the trustee itself) for such an obligor who 
    is currently engaged in the business of underwriting, except that--
            (A) one individual may be a director and/or an executive 
        officer of the trustee and a director and/or an executive 
        officer of such obligor, but may not be at the same time an 
        executive officer of both the trustee and of such obligor,
            (B) if and so long as the number of directors of the trustee 
        in office is more than nine, one additional individual may be a 
        director and/or an executive officer of the trustee and a 
        director of such obligor, and
            (C) such trustee may be designated by any such obligor or by 
        any underwriter for any such obligor, to act in the capacity of 
        transfer agent, registrar, custodian, paying agent, fiscal 
        agent, escrow agent, or depositary, or in any other similar 
        capacity, or, subject to the provisions of paragraph (1) of this 
        subsection, to act as trustee, whether under an indenture or 
        otherwise;

        (5) 10 per centum or more of the voting securities of such 
    trustee is beneficially owned either by an obligor upon the 
    indenture securities or by any director, partner or executive 
    officer thereof, or 20 per centum or more of such voting securities 
    is beneficially owned, collectively by any two or more of such 
    persons; or 10 per centum or more of the voting securities of such 
    trustee is beneficially owned either by an underwriter for any such 
    obligor or by any director, partner, or executive officer thereof, 
    or is beneficially owned, collectively, by any two or more such 
    persons;
        (6) such trustee is the beneficial owner of, or holds as 
    collateral security for an obligation which is in default as 
    hereinafter defined--
            (A) 5 per centum or more of the voting securities, or 10 per 
        centum or more of any other class of security, of an obligor 
        upon the indenture securities, not including indentures \2\ 
        securities and securities issued under any other indenture under 
        which such trustee is also trustee, or
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    \2\ So in original. Probably should be ``indenture''.
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            (B) 10 per centum or more of any class of security of an 
        underwriter for any such obligor;

        (7) such trustee is the beneficial owner of, or holds as 
    collateral security for an obligation which is in default as 
    hereinafter defined, 5 per centum or more of the voting securities 
    of any person who, to the knowledge of the trustee, owns 10 per 
    centum or more of the voting securities of, or controls directly or 
    indirectly or is under direct or indirect common control with, an 
    obligor upon the indenture securities;
        (8) such trustee is the beneficial owner of, or holds as 
    collateral security for an obligation which is in default as 
    hereinafter defined, 10 per centum or more of any class of security 
    of any person who, to the knowledge of the trustee, owns 50 per 
    centum or more of the voting securities of an obligor upon the 
    indenture securities;
        (9) such trustee owns, on the date of default upon the indenture 
    securities (as such term is defined in such indenture but exclusive 
    of any period of grace or requirement of notice) or any anniversary 
    of such default while such default upon the indenture securities 
    remains outstanding, 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, or of any class of 
    security, of any person, the beneficial ownership of a specified 
    percentage of which would have constituted a conflicting interest 
    under paragraph (6), (7), or (8) of this subsection. As to any such 
    securities of which the indenture trustee acquired ownership through 
    becoming executor, administrator or testamentary trustee of an 
    estate which include them, the provisions of the preceding sentence 
    shall not apply for a period of not more than 2 years from the date 
    of such acquisition, to the extent that such securities included in 
    such estate do not exceed 25 per centum of such voting securities or 
    25 per centum of any such class of security. Promptly after the 
    dates of any such default upon the indenture securities and annually 
    in each succeeding year that the indenture securities remain in 
    default the trustee shall make a check of its holding of such 
    securities in any of the above-mentioned capacities as of such 
    dates. If the obligor upon the indenture securities fails to make 
    payment in full of principal or interest under such indenture when 
    and as the same becomes due and payable, and such failure continues 
    for 30 days thereafter, the trustee shall make a prompt check of its 
    holdings of such securities in any of the above-mentioned capacities 
    as of the date of the expiration of such 30-day period, and after 
    such date, notwithstanding the foregoing provisions of this 
    paragraph, all such securities so held by the trustee, with sole or 
    joint control over such securities vested in it, shall be considered 
    as though beneficially owned by such trustee, for the purposes of 
    paragraphs (6), (7), and (8) of this subsection; or
        (10) except under the circumstances described in paragraphs \3\ 
    (1), (3), (4), (5) or (6) of section 77kkk(b) of this title, the 
    trustee shall be or shall become a creditor of the obligor.
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    \3\ So in original. Probably should be ``paragraph''.

    For purposes of paragraph (1) of this subsection, and of section 
77ppp(a) of this title, the term ``series of securities'' or ``series'' 
means a series, class or group of securities issuable under an indenture 
pursuant to whose terms holders of one such series may vote to direct 
the indenture trustee, or otherwise take action pursuant to a vote of 
such holders, separately from holders of another such series: Provided, 
That ``series of securities'' or ``series'' shall not include any series 
of securities issuable under an indenture if all such series rank 
equally and are wholly unsecured.
    The specification of percentages in paragraphs (5) to (9), 
inclusive, of this subsection shall not be construed as indicating that 
the ownership of such percentages of the securities of a person is or is 
not necessary or sufficient to constitute direct or indirect control for 
the purposes of paragraph (3) or (7) of this subsection.
    For the purposes of paragraphs (6), (7), (8), and (9) of this 
subsection--
        (A) the terms ``security'' and ``securities'' shall include only 
    such securities as are generally known as corporate securities, but 
    shall not include any note or other evidence of indebtedness issued 
    to evidence an obligation to repay moneys lent to a person by one or 
    more banks, trust companies, or banking firms, or any certificate of 
    interest or participation in any such note or evidence of 
    indebtedness;
        (B) an obligation shall be deemed to be in default when a 
    default in payment of principal shall have continued for thirty days 
    or more, and shall not have been cured; and
        (C) the indenture trustee shall not be deemed the owner or 
    holder of (i) any security which it holds as collateral security (as 
    trustee or otherwise) for any obligation which is not in default as 
    above defined, or (ii) any security which it holds as collateral 
    security under the indenture to be qualified, irrespective of any 
    default thereunder, or (iii) any security which it holds as agent 
    for collection, or as custodian, escrow agent or depositary, or in 
    any similar representative capacity.

    For the purposes of this subsection, the term ``underwriter'' when 
used with reference to an obligor upon the indenture securities means 
every person who, within one year prior to the time as of which the 
determination is made, was an underwriter of any security of such 
obligor outstanding at the time of the determination.
    Except in the case of a default in the payment of the principal of 
or interest on any indenture security, or in the payment of any sinking 
or purchase fund installment, the indenture trustee shall not be 
required to resign as provided by this subsection if such trustee shall 
have sustained the burden of proving, on application to the Commission 
and after opportunity for hearing thereon, that--
        (i) the default under the indenture may be cured or waived 
    during a reasonable period and under the procedures described in 
    such application, and
        (ii) a stay of the trustee's duty to resign will not be 
    inconsistent with the interests of holders of the indenture 
    securities. The filing of such an application shall automatically 
    stay the performance of the duty to resign until the Commission 
    orders otherwise.

    Any resignation of an indenture trustee shall become effective only 
upon the appointment of a successor trustee and such successor's 
acceptance of such an appointment.

(c) Applicability of section

    The Public Utility Holding Company Act of 1935 [15 U.S.C. 79 et 
seq.] shall not be held to establish or authorize the establishment of 
any standards regarding the eligibility and qualifications of any 
trustee or prospective trustee under an indenture to be qualified under 
this subchapter, or regarding the provisions to be included in any such 
indenture with respect to the eligibility and qualifications of the 
trustee thereunder, other than those established by the provisions of 
this section.

(May 27, 1933, ch. 38, title III, Sec. 310, as added Aug. 3, 1939, ch. 
411, 53 Stat. 1157; amended Pub. L. 101-550, title IV, Secs. 406-408, 
Nov. 15, 1990, 104 Stat. 2723, 2724.)

                       References in Text

    The Public Utility Holding Company Act of 1935, referred to in 
subsec. (c), is act Aug. 26, 1935, ch. 687, title I, 49 Stat. 838, as 
amended, which is classified generally to chapter 2C (Sec. 79 et seq.) 
of this title. For complete classification of this Act to the Code, see 
section 79 of this title and Tables.


                               Amendments

    1990--Subsec. (a)(1). Pub. L. 101-550, Sec. 406(1)-(4), substituted 
``There shall'' for ``The indenture to be qualified shall require that 
there shall'', and ``under every indenture qualified or to be qualified 
pursuant to this subchapter'' for ``thereunder'', inserted ``or a 
corporation or other person permitted to act as trustee by the 
Commission'' before ``(referred to'', and inserted at end ``The 
Commission may, pursuant to such rules and regulations as it may 
prescribe, or by order on application, permit a corporation or other 
person organized and doing business under the laws of a foreign 
government to act as sole trustee under an indenture qualified or to be 
qualified pursuant to this subchapter, if such corporation or other 
person (i) is authorized under such laws to exercise corporate trust 
powers, and (ii) is subject to supervision or examination by authority 
of such foreign government or a political subdivision thereof 
substantially equivalent to supervision or examination applicable to 
United States institutional trustees. In prescribing such rules and 
regulations or making such order, the Commission shall consider whether 
under such laws, a United States institutional trustee is eligible to 
act as sole trustee under an indenture relating to securities sold 
within the jurisdiction of such foreign government.''
    Subsec. (a)(2). Pub. L. 101-550, Sec. 406(5), which directed the 
substitution of ``Such institution'' for ``The indenture to be qualified 
shall require that such institution'', was executed by making the 
substitution for ``The indenture to be qualified shall require that such 
institutional'', as the probable intent of Congress.
    Subsec. (a)(3). Pub. L. 101-550, Sec. 406(6), struck out ``such 
indenture shall provide that'' before ``the rights''.
    Subsec. (a)(4). Pub. L. 101-550, Sec. 406(7), (8), struck out ``the 
indenture to be qualified shall require that'' before ``the indenture'' 
and inserted ``shall'' after ``trustee or trustees''.
    Subsec. (a)(5). Pub. L. 101-550, Sec. 407, added par. (5).
    Subsec. (b). Pub. L. 101-550, Sec. 408, amended subsec. (b) 
generally.

                          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.

                  Section Referred to in Other Sections

    This section is referred to in sections 77eee, 77mmm, 77rrr, 77sss, 
77uuu of this title.
