CITE

    15 USC Sec. 77bbb                                           01/08/2008

EXPCITE

    TITLE 15 - COMMERCE AND TRADE
    CHAPTER 2A - SECURITIES AND TRUST INDENTURES
    SUBCHAPTER III - TRUST INDENTURES

HEAD

    Sec. 77bbb. Necessity for regulation

STATUTE

    (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.

SOURCE

    (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.