State of California's Insurance of Registered Warrants Raises Securities Law Questions and Concerns

On July 2, 2009, the State of California began issuing IOUs to vendors and other creditors. These IOUs are called "registered warrants" even though they have not been registered with the U.S. Securities & Exchange Commission (SEC) or the California Department of Corporations. They differ from “regular” warrants because they are marked “REGISTERED” and have a special endorsement stamp on the back. A regular warrant is redeemable by the California Treasurer after it is issued, but a registered warrant cannot be redeemed until it matures. In the case of the registered warrants now being issued, the maturity date is on or after October 2, 2009 (assuming California will then have the money to redeem them). If the state has enough money before that date, the registered warrants may be redeemed earlier. The registered warrants bear interest at the rate of 3.7% per annum. A registered warrant can be identified by the word "REGISTERED" on the front. The warrant will be green in color.

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