CHICAGO - Municipal issuers must file material event notices when the ratings on their bonds are downgraded, even if credit rating agencies don't formally notify them that their bonds' ratings have changed, a Securities and Exchange Commission enforcement attorney said yesterday.

The issue has been a thorn in the sides of some issuer officials who feel it is unreasonable to expect state and local governments to file material event notices when the ratings on their credit-enhanced bonds are downgraded because the ratings of the insurers that backed their bonds have been lowered. While rating agencies do not contact issuers who have been affected by their downgrades directly, they do list bonds affected by their actions on their Web sites.

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