The Securities and Exchange Commission is stepping up its involvement in the municipal bond business, and the municipal bond business doesn't seem to grasp that its world is changing. Questions keep popping up.

Deeper SEC involvement shouldn't be surprising because the interstate market for state and city and other local government bonds has become huge -- $1.2 trillion at latest count -- and its cast of players has shifted from banks and casualty insurance companies to individual investors or their surrogates, the mutual funds and unit investment trusts. It's pretty hard for the SEC not to pay more attention to municipal bonds, given these strong underlying trends.

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