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The Securities and Exchange Commission is proposing a new rule that would formally permit mutual fund companies to invest in repurchase agreements (repo's) and pre-refunded bonds (pre-re's). Since the early 1980's, the SEC has not taken an official position but has informally viewed repo's and pre-re's as collateralized investments. It has done this by responding with so-called no-action letters to requests from fund companies to invest in repos and pre-re's.

The Investment Company Act of 1940 prohibits fund companies from issuing or accepting loans.

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