Trust Indenture Act of 1939

A federal statute setting out the requirements for Trust Indentures in connection with publicly traded corporate Securities.

The Trust Indenture Act prohibits the sale of corporate debt Securities to the public unless they are issued under an Indenture that conforms to federal statutory standards.  The basic requirement of the Trust Indenture Act is that a Trustee be appointed to oversee the Indenture and that the Trustee exercise certain ministerial duties prior to a Default under the Indenture and exercise a fiduciary duty to act as a prudent person on behalf of investors after a Default occurs under the Indenture.

The Trust Indenture Act expressly exempts any Security exempted from the provisions of the 1933 Act by virtue of Section 3(a)(2) of the 1933 Act thereby exempting most municipal Securities from its purview.

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A commercial bank or trust company with trust powers which acts in a fiduciary capacity for and on behalf of the bondholders by entering into an indenture with the issuer of the bonds.

Indenture or Trust Indenture/Agreement

A contract between an issuer and a trustee under which the issuer issues bonds and specifies their maturities, interest rates, redemption provisions, form, exchange provisions, security and other terms.

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The repayment of bonds prior to their maturity date.