Glossary of Municipal Securities Terms

INDENTURE

A contract between the issuer of municipal securities and a trustee for the benefit of the bondholders. The trustee administers the funds or property specified in the indenture in a fiduciary capacity on behalf of the bondholders. The indenture, which is generally part of the bond contract, establishes the rights, duties, responsibilities and remedies of the issuer and trustee and determines the exact nature of the security for the bonds. The trustee is generally empowered to enforce the terms of the indenture on behalf of the bondholders. In many governmental issues (particularly for general obligation bonds and some types of limited tax bonds and revenue bonds), the issuer may forego using an indenture and set forth the duties of the issuer and the rights of bondholders in the bond resolution. In certain transactions, the indenture may be called a “trust agreement.” See: BOND CONTRACT; TRUSTEE. Compare: BOND RESOLUTION.

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