February 27, 1991
TO: SEC RULES MEMBERS NO. 14-91
STATE SECURITIES MEMBERS NO. 9-91
CLOSED-END FUND MEMBERS NO. 12-91
UNIT INVESTMENT TRUST MEMBERS NO. 10-91
RE: CALIFORNIA COURT OF APPEAL DECLARES PROPOSITION 105
UNCONSTITUTIONAL
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As we previously informed you, in 1988 voters in California
approved Proposition 105 that contained disclosure requirements
for diverse topics such as toxic household products, health
insurance, and nursing homes. Of particular concern to
investment companies was the disclosure requirement that all
corporations issuing securities in California had to file a
statement with the Secretary of State and include disclosure in
their prospectuses as to whether or not they did business in
South Africa.
A lawsuit challenging the constitutionality of Proposition
105 was initiated by certain parties. Recently, the California
Court of Appeal declared the measure unconstitutional since it
violated the single subject rule contained in article II, section
8, subdivision (d) of the California Constitution. That
subdivision provides that an initiative measure addressing more
than one topic may not be submitted to voters or have any effect.
* * *
Attached is a copy of the Court of Appeal ruling. We will
keep you advised of further developments.
Patricia Louie
Assistant General Counsel
Attachment