WASHINGTON - A rule proposed by the SEC in December aimed at tightening standards for tax-exempt money market funds would significantly weaken the ability of funds to purchase bonds without increasing investor protection, the Public Securities Association said.

The PSA statement came in a 16-page comment letter that the association sent last week to the Securities and Exchange Commission in response to a rule proposed by the agency Dec. 15 that is designed to heighten the diversity and quality of bonds held by tax-exempt funds. Comments on the SEC's proposed amendments to its money market Rule 2a-7 were due Friday.

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