corporate debt securities outline

Trust Indenture Act of 1939

1. requires all corporate issues of $10 million or more to be issued under an indenture, deed of trust
2. indenture, a promise by the issuer
3. indenture, trustee watches over an agreement between the issuer and the bondholders
4. bondholders may take legal action if the issuer fails to live up to the promises (covenants) made to the bondholders
5. indenture, outlines the rights and duties for both the bondholder and the issuer
6. the trust indenture describes who is trustee, duties of the trustee
7. Securities Act of 1933: corporate bonds and corporate stocks are subject to registration requirements
8. indenture is part of registration
9. prospectus outlines the provisions of the indenture
10. closed end provision: provisions of indenture may restrict other borrowing at similar terms
11. deed of trust, bond contract 
12. book entry bond, many bonds are issued without certificates, issuer hires transfer agent to keep track of the names of the bondholders
13. issuer hires trustee to make sure the corporation follows all of the terms outlined in trust indenture
14. trustee: has the responsibility to protect the bondholders

Prospectus and indenture

1. prospectus, offering circular: document that is used to describe the terms of the bond, disclosures of risk, the use of the proceeds from selling the bonds

indenture, like an agreement, outlines detailed provisions of the bond

1. if the bond is callable or convertible into shares of common stock
2. authorized amount issued
3. form of the bond-registered bond or book entry bond
4. description of collateral backing the bond 
5. protective covenants, promises
6. sinking fund provisions: an account managed by bond trustee for the purpose of repaying bonds and conversion provisions
7. duties and privileges of the trustees, issuers and bondholders

• Which of the following is a security issued under the Trust Indenture Act of 1939? Corporate bonds. The Trust Indenture Act of 1939 only outlines the requirements for corporate bonds. Municipal and U.S. government bonds are exempt from the act since they are not corporations. Municipalities do issue bonds that have a trust indenture which is under a different requirement by the Federal Government. U.S. government bonds are never issued with a trust indenture.