California IOUs can be considered securities, SEC says

Market Watch ^ | 07/09/09 | Ronald D. Orol

[heleny]

"The staff of the SEC has expressed its belief that California's recently issued IOUs are 'securities' under federal securities law. As such, holders of these IOUs and those who may purchase them are protected by the provisions of the federal securities laws that prohibit fraud in the purchase or sale of securities," the agency said.

Doesn't a securities issuer need to file some SEC paperwork or comply with some rules before issuing the securities? These IOU's became "securities" after they were issued, and the recipients had no choice whether they wanted to "invest" in these "securities."

[Daisyjane69]

thanks for that correction. I should have performed some due diligence before posting something from an email without independently confirming it.

We sure as heck have enough bad news (for real!) around here without me “winging it.”

*sheesh*

[SampleMan]

Bonds are paid before these IOU's, and given CA's declining credit rating, the bond yields may even be higher.

Hold on there. The new rules of bankruptcy under Obama now place bond holders at the back of the line behind unions, newly force-issued government owned stocks, and ACORN.

I don't put it past the state or federal government to arbitrarily decide that those honoring the new socialist IOUs deserve more than the old capitalist bond holders.

But thanks for the info on the IOU's interest status.