The SEC said California's IOUs are indeed securities and holders and buyers of the registered warrants are protected by the provisions of the federal securities laws that prohibit fraud in the purchase or sale of securities.
In addition to the antifraud provisions of the federal securities laws, other parts of the federal securities laws also apply to the purchase and sale of the IOUs, the SEC said yesterday. Persons acting as intermediaries between buyers and sellers of the warrants may need to register as brokers, dealers or municipal securities dealers, or as alternative trading systems or national securities exchanges.
Broker-dealers, as well as any potential secondary markets, should be aware that the requirements of the securities laws and the rules of the Municipal Securities Rulemaking Board apply to the IOUs, according to the SEC.
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The agency said although the IOUs are labeled registered warrants, they are not registered with the SEC. There is no registration requirement that applies because the IOUs are municipal securities.
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