It’s been a year of many firsts for enforcement and regulation in the municipal bond market, an area to which the Securities and Exchange Commission has previously paid little attention.

“We have not historically placed tremendous attention in this area, and so you have lots of firsts,” said Andrew Ceresney, director of the SEC’s enforcement division, during a Monday afternoon panel discussion at the Securities Industry and Financial Markets Association’s annual meeting.

Ceresney went on to list a number of those “firsts.”

  • The first financial penalty against a municipal issuer this past year in Wenatchee Valley, Washington.
  • The first emergency action to halt a fraudulent municipal bond offering in the city of Harvey, Illinois.
  • The first case charging a firm, TL Ventures Inc., with violating the pay-to-play rules for investment advisors.
  • The first case under the Municipalities Continuing Disclosure Cooperation initiative, which was the Kings Canyon Joint Unified School District case.
  • The first case charging violations of Municipal Securities Rulemaking Board Rule G-15(f), which establishes the “minimum denomination,” brought against a number of dealers related to Puerto Rico junk bond sales — just a couple of weeks ago.
  • The first time the SEC has charged a municipal official under a federal statute that provides for “control person” liability in a case against the mayor of city of Allen Park, Michigan, filed this week.

“Our focus on this area has begun to change behavior,” Ceresney said. “We understand some have felt that this new focus is somewhat disruptive of the way the business has traditionally been done but I think it’s fair to say that this is a place where we’re here to stay, and you’re likely to see more enforcement activity rather than less in the municipal securities and public pension fund arena.”

For those in the municipal bond market, like Chris Hamel, managing director and head of the Municipal Finance Group for RBC Capital Markets, Ceresney’s list of firsts would be enough to make anyone nervous.

“Those kinds of firsts worry me, from the perspective that I intend not to be his next one,” Hamel said with a laugh, during SIFMA’s panel Monday afternoon.

Staying out of the SEC’s enhanced focus on the municipal bond market is “our job as managers,” he added.

“It is really our job to listen to what these folks have to say and respond accordingly,” Hamel said. “It is incredibly important that we get this right. Our industry has been ripe with a bit of scandal, pretty systemic scandal that touched a number of firms on a variety of matters. I think we as a culture need to look at ourselves and look at our industry and see that that does not happen again.”

While the municipal bond market — known for its role in financing a majority of the country’s investment in public infrastructure and being vital to the economy — has admittedly oft been overlooked by the SEC’s enforcement division in the past, times are changing. This couldn’t be more evident than in the recent Municipalities Continuing Disclosure Cooperation (MCDC) initiative. Under this initiative, the SEC’s Enforcement Division agreed to recommend standardized settlement terms for issuers and underwriters who self-report or were already under investigation for violations involving continuing disclosure obligations. The 2014 initiative, launched on March 10, expired on Sept. 10.

Ceresney called this initiative a “great success.”

“We’ve had extraordinary participations by dealers,” he said. He added, “The bad news is the volume does tend to suggest that it was a widespread industry problem. The good news is the industry has demonstrated that it’s ready, willing and able to engage with us.”

Ceresney said the SEC is still evaluating the submissions. Adding, “we’re not really able to comment on the extent or nature of the violations.”

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