WASHINGTON — The Securities and Exchange Commission late Thursday announced that the IOUs being issued by California are “securities” that are subject to the federal securities laws, a position that effectively overrules state officials' claims that the "registered warrants" are not securities but rather "negotiable instruments similar to checks."

The SEC guidance means the IOUs or registered warrants are subject to federal antifraud regulations and that they are municipal securities because they are issued by a state government. As a result, the SEC’s guidance is expected to be followed Friday morning by a related notice from the Municipal Securities Rulemaking Board on the muni rules that broker-dealers need to be aware of when trading them.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.