Municipal Securities Rulemaking Board and Securities and Exchange Commission Issue...

Municipal Securities Rulemaking Board and Securities and Exchange Commission
Issue Guidance on California Registered Warrants
Sales and Trading of State's IOUs are Subject to MSRB Rules for Municipal
Securities

ALEXANDRIA, Va., July 10 /PRNewswire/ -- The staff of the Securities and
Exchange Commission has issued guidance that registered warrants, also known
as IOUs, being issued by the State of California are municipal securities,
which means that any person or entity acting as an intermediary for the
purchase and sale of warrants may need to be registered with the Securities
and Exchange Commission. Furthermore, sales and trading activities relating
to California's registered warrants by securities firms and banks are subject
to the rules of the Municipal Securities Rulemaking Board. The MSRB today is
publishing guidance for securities firms and banks buying, selling or trading
California warrants on the application of MSRB rules, including in particular
those on fair pricing and fair treatment of customers.

"The buying, selling and trading of California's warrants by intermediaries
are subject to all MSRB rules of conduct and fair practice," said MSRB General
Counsel Ernesto Lanza. "The MSRB is particularly concerned about compliance
with obligations with respect to the prices at which such intermediaries buy
California warrants from citizens who may be in need of immediate cash."
Lanza said, "Persons attempting to profit from the buying and selling of
municipal securities must price those transactions based on their fair market
value, and California's IOUs are no exception."

Due to a cash shortage, the State of California began issuing the warrants on
July 2, 2009 to certain individuals and private businesses, including citizens
of the state and vendors to whom payments were due from the state.

MSRB rules require that prices for the purchase and sale of municipal
securities, including the California warrants, charged by securities firms and
banks must be fair and reasonable based on their best judgment of the
securities' fair market value. These intermediaries would violate this rule
if they attempt to take advantage of their customers by offering to purchase
warrants at deep discounts that do not reflect fair market value.
Advertisements and published quotations for purchases and sales of California
warrants also must meet MSRB standards.

Securities firms and banks buying and selling California warrants have a
responsibility to understand their features and must tell their customers
about their material terms. Among other things, customers need to be apprised
of the terms of repayment and any documentation they will need in order to
receive payment on the warrants from the California State Treasurer's Office.

For more information on MSRB rules that apply to the sale and trading of
California warrants, please see MSRB Notice 2009-41.

The Municipal Securities Rulemaking Board (MSRB) was established in 1975 by
Congress to develop rules regulating securities firms and banks involved in
underwriting, trading, and selling municipal securities. The Board also
operates information systems, including the Electronic Municipal Market Access
(EMMA) system, designed to promote transparency and access to information. The
MSRB also conducts extensive outreach and education. The Board is composed of
members from the municipal securities dealer community and the public, and is
charged with protecting investors and promoting a fair and efficient market.
The Board is a self?regulatory organization that is subject to oversight by
the Securities and Exchange Commission.

SOURCE Municipal Securities Rulemaking Board (MSRB)

Jennifer A. Galloway, Chief Communications Officer of Municipal Securities
Rulemaking Board (MSRB), +1-703-797-6600, jgalloway@msrb.org