Trust Indenture Act of 1939

DEFINITION of 'Trust Indenture Act of 1939'

A law passed in 1939 that prohibits bond issues valued at over $5 million from being offered for sale without a formal written agreement (an indenture), signed by both the bond issuer and the bondholder, that fully discloses the particulars of the bond issue. The act also requires that a trustee be appointed for all bond issues, so that the rights of bondholders are not compromised.

BREAKING DOWN 'Trust Indenture Act of 1939'

The Trust Indenture Act of 1939 was passed for the protection of bond investors. In the event that a bond issuer becomes insolvent, the appointed trustee may be given the right to seize the bond issuer's assets and sell them in order to recoup the bondholders' investments.