Trust Indenture Act of 1939

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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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Indenture

    A legal and binding contract between a bond issuer and the bondholders.
  2. SEC Form T-1

    A statement of eligibility for an individual trustee that must ...
  3. SEC Form T-2

    A statement of eligibility for an individual trustee that must ...
  4. Trust

    A fiduciary relationship in which one party, known as a trustor, ...
  5. Bond

    A debt investment in which an investor loans money to an entity ...
  6. Trustee

    A person or firm that holds or administers property or assets ...
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