The Securities and Exchange Commission staff yesterday warned of deficiencies and weaknesses in the valuation and liquidity of high-yield municipal bond fund portfolios, as well as looming disclosure problems found during recent examinations of SEC-registered firms.

In a letter to investment firms and broker-dealers, commission staff expressed concerns about the composition of some funds, warning that the proportion of their holdings that are illiquid securities ranges from less than 1% to as high as 70%.

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