WASHINGTON -- The Securities and Exchange Commission has sent an important and chilling message to the municipal bond market.

It did so nearly two weeks ago when the SEC's top enforcement official said during an exclusive interview with Lynn Stevens Hume, a reporter in The Bond Buyer's Washington bureau, that the agency is conducting at least two dozen investigations of possible abuses in the municipal bond market.

William R. McLucas, the director of the SEC enforcement division, then went on to say the agency could bring charges in some of those cases in three to six months.

While he wouldn't name specific targets, he said the investigations cover potential pay-to-play situations, conflicts of interest, inadequate disclosure, excessive markups in bond prices, and questionable sales practices.

McLucas' comments are significant because enforcement officials rarely talk to the press and, even when they do, it is unusual for them to cite the number of cases pending and when they might bring charges.

The municipal market should pay attention for two reasons.

McLucas' comments are just one more clear sign of SEC chairman Arthur Levitt's determination to step up the agency's regulation and enforcement efforts on municipal bonds, as well as make the individual investor the primary concern of the agency.

His remarks also show that the SEC is gathering ammunition for when it goes to a federal appeals court here on Dec. 9 to defend the Municipal Securities Rulemaking Board's curb on political contributions against a challenge by Alabama bond dealer William Blount.

Some market participants, arguing against Rule G-37 and other proposed reforms, say there's no evidence of widespread abuse in the market.

But McLucas is clearly saying that the SEC is about to try to provide that evidence.

The SEC has gone after numerous bond abuses in the past, but usually it targeted only the worst abuser, such as the former underwriting firm of Matthews & Wright Inc. That sent the message that firms could abuse the system as long as they didn't take the lead.

McLucas' comments about the breadth of the current probe may mean that the SEC plans to go after all the major transgressors, not just the most visible.

If the investigations show serious problems, the SEC should go after everyone involved and push for reforms to prevent future abuses. If the probes show few or no problems, the SEC should say so, rather than let the matter fade into history.

If that is the message the SEC is delivering, it is one that will be good for the long-term health of the municipal market.

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