CITE

    15 USC Sec. 77jjj                                           01/08/2008

EXPCITE

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

HEAD

    Sec. 77jjj. Eligibility and disqualification of trustee

STATUTE

    (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.
      (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
          (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.
      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 (!4) 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.

SOURCE

    (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 title I of act Aug. 26, 1935, ch. 687, 49 Stat.
    803, as amended, which was classified generally to chapter 2C (Sec.
    79 et seq.) of this title, prior to repeal by Pub. L. 109-58, title
    XII, Sec. 1263, Aug. 8, 2005, 119 Stat. 974. For complete
    classification of this Act to the Code, see 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.

FOOTNOTE

    (!1) So in original. Probably should be "institutional".
    (!2) So in original. Probably should be "indenture".
    (!3) So in original. Probably should be "paragraph".
    (!4) See References in Text note below.