Trust Indenture Act of 1939
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| Enacted by | the 76th United States Congress |
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| Citations | |
| Public law | Pub.L. 76–253 |
| Statutes at Large | 53 Stat. 1149 |
| Codification | |
| Acts amended | Securities Act of 1933 (inserted as Title III) |
| U.S.C. sections created | 15 U.S.C. §§ 77aaa–77bbbb |
| Legislative history | |
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| Major amendments | |
| Act as amended (amendments noted by section) | |
The Trust Indenture Act of 1939 (TIA), codified at 15 U.S.C. §§ 77aaa–77bbbb, supplements the Securities Act of 1933 in the case of the distribution of debt securities in the United States. Generally speaking, the TIA requires the appointment of a suitably independent and qualified trustee to act for the benefit of the holders of the securities, and specifies various substantive provisions for the trust indenture that must be entered into by the issuer and the trustee. The TIA is administered by the US Securities and Exchange Commission (SEC), which has made various regulations under the act.
Section 211 of The Securities Exchange Act of 1934 mandated that the SEC conduct various studies. Although not expressly required to study the trustee system then in use for the issuance of debt securities, SEC Commissioner William O. Douglas (as he then was) was convinced by November 1934 that the system required legislative reform. In June 1936, the Protective Committee Study, headed by Douglas, published its report Trustees Under Indentures. It recommended that:
The Act was subsequently passed and was signed into law in August 1939. During the course of its passage, its legislative history shows that that Congress intended to address various deficiencies that were prevalent in trust indentures at the time:
Subject to certain exceptions, it is unlawful for any person to sell notes, bonds, or debentures in interstate commerce unless the security has been issued under an indenture and qualified under the Act. Trustees appointed under such indentures have specified duties:
Complications as to financial reporting requirements can arise where the indentures are secured by a pledge of stock, in which case Rule 3-16 of Regulation S-X may come into play. Many issuers attempt to mitigate the impact by inserting "collateral cut-back" provisions into their indentures, but the SEC has not endorsed the concept that such a cut-back does not constitute a release of collateral.
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