7.9.2009 The SEC has expressed its belief that California’s recently issued IOUs are “securities” under federal securities law. California began issuing the IOUs (called “registered warrants” by California) on July 2 to certain individuals and entities, including citizens who were entitled to a tax refund and vendors who were entitled to payments. The IOUs are obligations of the State of California, are negotiable and bear interest.

The SEC’s view that the IOUs are securities affords holders of these IOUs and those who may purchase them protection by federal securities laws that prohibit fraud in the purchase or sale of securities. The SEC’s view that the IOUs are securities does not affect California’s right to issue or repay the IOUs. There is also no registration requirement, since the IOUs are municipal securities.

Click http://www.sec.gov/news/press/2009/2009-154.htm to access the SEC press release.