“The Securities and Exchange Commission has come under intense pressure from business and some members of the Bush administration to water down proposed rule changes in the way corporate boards are elected, mutual funds are governed and hedge funds are regulated,” writes Stephen Labaton in today’s New York Times.

“The proposals, which flow from scandals in the mutual fund industry and at some of the nation’s largest corporations, have split the agency largely along partisan lines. The two Democratic commissioners support them, the two Republicans have expressed skepticism about them, and the swing vote is in the hands of the agency’s chairman, William H. Donaldson, a Bush appointee.”

“Mr. Donaldson has expressed support for the proposals in general terms, breaking ranks with his fellow Republicans on the commission to support the Democrats, notably Harvey J. Goldschmid, who has promoted the rule changes.”

“Inside the agency, officials and lobbyists say, Mr. Donaldson has indicated a willingness to temper some of the original proposals in response to industry criticism. How far the S.E.C. will go in watering them down is now playing out in its hallways.”

” ‘This is a pivot moment at the commission and it is coming in the middle of an election year, no less,’ said Lynn E. Turner, a former chief accountant at the S.E.C. during the Clinton administration who has been an advocate for greater federal oversight of corporate America and Wall Street. ‘What happens will mark the legacy of Donaldson.’ “

“Whatever happens is likely to do so in the next few weeks, and it involves three separate measures. In one, the agency plans to vote on a final rule to allow big shareholders in limited cases to propose their own candidates for board seats at troubled companies.”

“The commission plans to take up a second rule that would force the boards of mutual funds to be led by chairmen who are not involved in the management of the funds.”

“It also intends to propose a rule to give regulators greater access to the books and investment strategies of the largely secretive world of hedge funds – investment funds that have been bound by few rules or regulations on the longstanding assumption that only wealthy, experienced investors participate in them. The measure would require for the first time that hedge funds register with the S.E.C.”

“The proposals have provoked intense lobbying on several fronts.”

” ‘On each of the issues, the chairman is under immense political and industry pressure,’ a senior commission official said. ‘The heaviest pressure has been coming on the proxy battle, where the views of an administration eager to court the chief executives during an election year have been made clear to the chairman.’ “

“Officials say the mutual fund proposal has received an outpouring of criticism from lawmakers who support the largest fund companies in their resistance to a requirement for an outside chairman. (Representative Michael G. Oxley, Republican of Ohio and chairman of the House Financial Services Committee, is one of the few who has urged the commission to adopt the rule.)”

“Analysts estimate that the boards of about 80 percent of the nation’s mutual funds have chairmen who are senior executives of the funds’ management companies and would have to be replaced under the new rule.”