Word: sec
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Dates: during 1930-1939
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...corporate trustee is usually the trust department of a bank. It is the trustee who holds the mortgage securing the bonds, who forecloses if the borrower de faults. As pointed out in the SEC report, "The trustee is the only agency avowedly designed for the protection of security holders during the entire life of the security." Commenting on his findings last week, young Commissioner Douglas declared: "By & large, the corporate trustee has been sitting idly by while bondholders have been exploited. . . . And when I speak of the corporate trustees, I am speaking about some of the leading banks...
...What SEC wants is to jack up the standards of corporate trusteeship to the high level of personal trusteeship, the responsibilities of which have been clearly defined through centuries of court decisions. In law a personal trustee is supposed to act like a mythical character called the "prudent man." That implies active defense of the beneficiaries' interests and a definite liability for losses through negligence. But the combined skill of lawyers representing the borrower, the banker and the trustee (but never the investor) have reduced the duties of corporate trusteeship to a few clerical motions, the liabilities to virtually...
That was not a definite recommendation, however. SEC's proposals centred on the indenture, urging such elementary requirements as liability for failure to record mortgages, notify bondholders of defaults or prevent illegal substitutions of collateral. By setting higher legal standards for trustees and forbidding exculpatory (hedge) clauses in indentures, SEC hopes to evolve vigorous, alert agencies, per-haps paid more than trustees now receive, but whose sole purpose would be protection of security owners...
...Congress last week SEC also sent its long-awaited, highly-involved study of thebroker-dealer, plumping for segregation of the two functions. Requesting no new legislation, SEC announced that its first step would be to offer floor members of stock exchanges the choice of being either straight brokers or traders for their own accounts. Exceptions will be made for specialists and odd-lotdealers...
...Congress last week SEC also sent its long-awaited, highly-involved study of the broker-dealer, plumping for segregation of the two functions. Requesting no new legislation, SEC announced that its first step would be to offer floor members of stock exchanges the choice of being either straight brokers or traders for their own accounts. Exceptions will be made for specialists and odd-lot dealers...