SEC Form T-3
What Is SEC Form T-3?
SEC Form T-3 is an application for the qualification of a indenture that must be recorded with the Securities and Exchange Commission (SEC). SEC Form T-3 is required for compliance with the Trust Indenture Act of 1939, which applies to debt securities, for example, bonds, debentures, and notes that are offered for public sale.
Even though such securities might be registered under the Securities Act, they may not be offered available to be purchased to the public except if a formal agreement between the issuer of bonds and the bondholder, known as the trust indenture, conforms to the standards of this act.
Understanding SEC Form T-3
Corporations and governments issue bonds as IOUs to investors who pay a principal amount or initial investment upfront to the bond issuer. The investor or bondholder typically gets interest payments on the amount invested as well as the principal amount paid back on the bond's maturity date. Bond issuers utilize the funds raised from bond offerings for expansion or different projects.
Bond issuers are required to uncover to investors the terms of a debt security that's being issued by means of a trust indenture. An indenture is a contract between the bond issuer and its appointed trustee. The bond trustee, which is normally a financial institution, does the agreement to issue the bond while protecting the interests of the investors or bondholders. The trust indenture must be approved by the SEC.
The Trust Indenture Act (TIA) requires any new bond issues that are valued for more than $5 million to be registered via a trust indenture. Nonetheless, there are exceptions in which certain bonds are not subject to the Trust Indenture Act, including municipal bonds, which are bonds offered available to be purchased by a state, county, municipality, or neighborhood government.
SEC Form T-3 is the Trust Indenture Act (TIA) form used to apply for qualification of an indenture under which a class of debt securities is to be issued in an unregistered offering. Although SEC form T-3 is required by the Trust Indenture Act of 1939, it is just vital when the proposed securities to be issued are exempt from registration under the Securities Act of 1933. Form T-3 is a standalone form, not at all like Form T-1, and Form T-2, which fill a similar need but are recorded as exhibits to Securities Act registration statements in registered offerings.
Requirements for SEC Form T-3
Form T-3 is a relatively straightforward form, but it prohibits any proposals until an application for qualification has been recorded with the SEC. Below are a portion of the T-3 sections alongside the information that the applicant (or bond issuer) is required to outfit to the SEC.
General Information
The SEC Form T-3 requires the form or type of business, as well as its state of residence. The form likewise requires the type of securities being issued, including the approximate date for the public offering of the bonds.
Securities Act Exemption
The next section requires the applicant to state why they shouldn't need to register the indenture. The form requests that the issuer state momentarily the facts depended upon by the applicant as a basis for the claim that registration of the indenture securities under the Securities Act of 1933 isn't required.
Affiliates
On the off chance that there are affiliates of the company, the applicant must reveal, via writing or by means of a diagram, showing the relationship of each affiliate to the applicant and to the other named affiliates. Assuming those affiliates have voting interests, the percentages of those voting rights ought to be incorporated.
The T-3 form requires disclosure of how the bond funds are to be utilized on the off chance that the applicant plans on purchasing another company or a division of a company by means of a acquisition. Likewise, on the off chance that there's a reorganization arranged, the information is required about those plans.
Directors and Officers
Form T-3 requires a list of names and the complete postage information of all directors and executive officers as well as any people that are probably going to be picked as directors or executive officers. The specific offices that every one of these people holds within the company or organization must likewise be unveiled. Any people or principal owners of voting securities, which own 10% or a greater amount of the voting securities for the company must be outfitted.
Underwriters
The SEC requires the name and complete postage information of the underwriters that are to be utilized for the securities being proposed. Now and again, the SEC requires any past underwriters utilized for securities issued within the last three years.
Classification of the Bond
In this section, the SEC requires whether any voting rights accompany the ownership of the bond by investors. Additionally required are some other provisions of the security that investors ought to know about before purchasing the bond.
Other Instructions
It's important that applicants pay particular attention to the requirements of the form T-3 and any of the SEC's definitions and terms to guarantee appropriate compliance. In the form, attention is additionally directed to Rule 5a-3 in regards to the filing of statements of eligibility and qualification and to Rule 7a-16 with respect to the inclusion of items, the differentiation between items and replies, and the oversight of instructions. Kindly survey the T-3 Form by means of the SEC website, although an electronic submission (instead of a PDF) might be required while filing the application.
Highlights
- Corporations and governments issue bonds to investors who pay a principal amount or initial investment upfront to the bond issuer.
- SEC Form T-3 is an application for the qualification of an indenture that must be documented with the Securities and Exchange Commission.
- SEC form T-3 is required by the Trust Indenture Act, but it's likewise utilized when the new bonds are to be exempt from SEC registration.
