§697b Pooling of Debentures

Summary

The Administration may sell trust certificates that show ownership of all or part of debentures issued by state or local development companies, but only if the certificates come from a trust or pool made up entirely of those guaranteed debentures. The Administration can promise that payments of principal and interest on those certificates will be made on time, under rules it sets. That promise only covers the amount of the underlying debentures. If a debenture is paid off early or defaults, the promise is cut back in the same ratio. Interest is guaranteed only up to the date it is paid. If all pool debentures are prepaid or default, the certificate can be called for redemption. The United States backs these guarantees. The Administration will not charge a fee for the guarantee itself, but an agent may collect an approved fee for registration work. If the Administration pays a claim, it takes the rights of the paid holder and may enforce ownership rights in the debentures despite any state or federal law. The Administration must keep a central registration of all such certificates, hire an agent (who must have bond or insurance), require sellers to disclose terms and yield to buyers before sale, may regulate brokers and dealers, and may use electronic book-entry registration.