Underwriters may be the primary targets of any new regulations imposed on the municipal bond industry in the aftermath of the campaign contribution uproar, a Public Securities Association official said Wednesday.

"There is some concern about that, because we're the ones that are regulated," said Heather L. Ruth, president of the PSA, during a PSA media seminar yesterday in New York.

Currently, municipal bond underwriters are subject to more layers regulation and enforcement than other participants in the tax-exempt market such as issuers, independent financial advisers, bond lawyers, credit enhancers, and rating agencies, Ruth said. Dealers face scrutiny by the Municipal Securities Rulemaking Board, state securities and banking regulators and the federal Securities and Exchange Commission.

Every player in the Municipal market should be subject, to the same type of disclosure requirements, Ruth said.

"What is morally reprehensible and illegal is for a state official to give business based on a political contribution," Ruth said.

In a statement issued last month, Ruth called on state and local official to "continue to seek ways to reduce the pressure faced by officials to solicit and for the municipal bond industry to contribute campaign funds." In addition, Ruth said the PSA supports efforts by the MSRB to examine how to improve the mandatory disclosure of political contributions.

Meanwhile, state and local government officials have the ability to ban political contributions if they believe they can influence the awarding of underwriting or other contracts, the PSA official said.

"We as an association are quite far out there saying we want to clean up this perception." Ruth said. "We don't think there are many problems."

Industry participants and regulators have been examining the appropriateness of political contributions in the wake of a federal investigation into potential kickbacks in New Jersey underwritings.

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