“William Donaldson, chairman of the Securities and Exchange Commission, has an ambitious agenda for the rest of the year: registering hedge-fund advisers, improving shareholder access and combating abusive behavior at mutual funds,” writes Deborah Solomon in today’s Wall Street Journal.

“ ‘If history is any guide, however, Mr. Donaldson may want to ratchet down his expectations.’ ”

” ‘I think leading up to the election and the aftermath of the election, there’s no question that some rule-making actions may be slowed, some may be sidelined, and some may be tabled for the foreseeable future,’ ” said David Martin, head of the securities practice at law firm Covington & Burling and a former director of the SEC’s corporation-finance division.”

“While the SEC is an independent agency, politics has intruded during election years. In 2000, after President Bush won the White House, he requested a 60-day freeze on all rule-making. The SEC voluntarily complied with the request, effectively killing a ‘pay-to-play’ rule governing political contributions by money managers that then-Chairman Arthur Levitt had been pushing.”

“In 1992, then-Chairman Richard Breeden postponed action on a rule regarding time limits for settling stock trades until after the election. Some SEC historians say a presidential transition was a factor in 1945, at the beginning of the Truman administration, when the White House ordered the SEC to rescind a rule abolishing floor trading on the New York Stock Exchange.”

“Mr. Donaldson isn’t helped by frequent speculation that he may step down in January, regardless of whether President Bush wins re-election.”

“The founder of investment-banking firm Donaldson, Lufkin & Jenrette, Mr. Donaldson has worked to calm tensions at the agency after the brief but stormy tenure of Harvey Pitt, who resigned under pressure from critics. Although he took the helm in February 2003, Mr. Donaldson, 73 years old, hasn’t relocated his family to Washington and returns to New York on weekends to see his wife and son.”

The commission is somewhat fractured these days, with Mr. Donaldson’s two fellow Republicans often at odds with his agenda. One, Paul Atkins, a former SEC official with ties to the White House, is seen as a possible successor should President Bush be re-elected.
“Several public meetings of the commission have become tense as Mr. Atkins and the SEC’s other Republican commissioner, Cynthia Glassman, openly challenged rule proposals backed by the chairman. Many SEC observers see Mr. Atkins, a self-styled libertarian who once ran a consulting group at PricewaterhouseCoopers, as a growing thorn in Mr. Donaldson’s side. At a recent SEC public meeting, Mr. Atkins raised eyebrows when he quoted from a speech that Mr. Donaldson had given five years ago on corporate governance, using the chairman’s own words to try to beat back a rule that Mr. Donaldson was pushing.”

“The dissent of Mr. Donaldson’s fellow Republicans has led to two bruising battles in recent months over his proposals — one requiring mutual funds to have independent chairmen and another mandating that hedge-fund advisers register with the SEC. Votes on both issues were split 3-2, with the Democrats siding with Mr. Donaldson.”

“While Mr. Donaldson hasn’t yet lost on a rule that he proposed, he faces a tough road on several issues that are being challenged both inside the SEC and by some Bush administration heavyweights, such as Federal Reserve Chairman Alan Greenspan and U.S. Treasury Secretary John Snow.”