WASHINGTON -- The Securities and Exchange Commission voted yesterday to propose a rule that would require diversification of holdings by tax-exempt money market funds that invest in bonds from more than one state.

But the commission opted not to require funds that invest only in the bonds of a single state to diversify. Instead, the agency proposed that such funds be permitted to invest in only the highest-quality bonds in a state and that they disclose to investors the increased risk of investing in a fund that concentrates in one geographic area.

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