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UPDATE 3-Puerto Rico House approves Pierluisi, positioning him for governor

(Recasts with House vote approving nomination)

SAN JUAN, Aug 2 (Reuters) - Puerto Rico's House of Representatives on Friday approved the nomination of attorney Pedro Pierluisi as the island's next secretary of state, potentially positioning him to take over as governor from disgraced leader Ricardo Rosselló.

Rosselló is due to resign on Friday at 5 p.m. ET (2100 GMT), after mass street protests in July following the publication of vulgar text messages between the first-term governor and his close advisers.

Rosselló nominated Pierluisi as secretary of state, an appointment that would put Pierluisi next in line to succeed Rossello. The House voted on Friday 26 in favor of Pierluisi's nomination and 21 against, with one abstention. The Senate has yet to vote on the nomination.

Some legislative leaders and constitutional lawyers have said that Pierluisi's approval by the House would be sufficient for him to become Puerto Rico's governor once Rosselló steps down.

Federal officials and investors are keenly watching political transition of the territory. Puerto Rico has $42.5 billion in federal disaster funding allocated to it, and its bankruptcy is the biggest ever in the U.S. municipal bond market.

Pierluisi raised concerns over conflicts of interest because of his position at O'Neill & Borges, one of the two law firms representing the federally appointed oversight board directing Puerto Rico's bankruptcy. Pierluisi has told El Nuevo Dia newspaper that he resigned from the law firm.

(Reporting by Luis Valentin in San Juan additional reporting by Karen Pierog in Chicago writing by Andrew Hay; editing by Scott Malone and Leslie Adler)