What Is SEC Form 305B2?

SEC Form 305B2 is an electronic filing with the Securities and Exchange Commission (SEC) that allows for a designation of a trustee by a bond issuer on a delayed basis under the Trust Indenture Act of 1939. This would include when registering a shelf offering of bonds or other debt instruments.

Key Takeaways

  • SEC Form 305B2 is used by a company that wants to register a shelf offering of fixed-income securities with the SEC.
  • A shelf registration allows for the delayed issuance of securities by the issuer, where they can be offered for sale up to two years following the initial registration.
  • This filing falls under the auspices of the Trust Indenture Act of 1939, which prohibits bond issues valued over $5 million from being offered without registration.

Understanding Form 305B2

A trustee must be named when a company issuing bonds (the registrant) files an automatic shelf registration for the offer and sale of debt securities. A shelf registration is a method for companies to register securities without having to issue them immediately.

Instead, the securities can be issued at any time within a two-year period, allowing a company to adjust the timing of the sales to take advantage of more favorable market conditions should they arise.

If the registrant does not immediately name a trustee, it will submit SEC Form 305B2 along with SEC Form T-1 to register the debt securities. Investment banks serve as trustees.

Registering Securities Under The Trust Indenture Act

A trust indenture is an agreement in a bond contract made between a bond issuer and a trustee that represents the bondholder's interests by highlighting the rules and responsibilities that each party must adhere to. It may also indicate where the income stream for the bond is derived from.

The Trust Indenture Act of 1939 (the "Act") is a federal law that prohibits bond issues valued 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.

When an issuer plans an offering of debt securities, it files SEC Form T-1 as an exhibit to the registration statement. Form T-1 contains basic personal information about the proposed trustee, as well as its relationships with the issuer of debt and the underwriters, such as whether the issuer or any underwriter holds any of the trustee's securities and whether the trustee holds any securities of the issuer or any underwriter.

If the offering is part of a shelf registration, Section 305(b)(2) of the Act allows the issuer to designate the trustee on a delayed basis. If the issuer chooses this option, SEC Form T-1 becomes effective 10 calendar days after filing.

At the top of this form is a box to check if it also is an application to the SEC to determine the eligibility of a trustee under Section 305(b)(2). If the registrant checks that box, SEC Form 305B2 must also be separately filed electronically.