Amid growing rumors that SEC Chairman William Donaldson may not reach end of term in 2007, prominent business groups are pressuring the Bush administration to weaken the Security and Exchange Commission’s ability to censure wayward financial service companies, The Associated Press reports.

The demands, ranging from a pro-business appointment in the SEC’s upper-management to a substitute for Donaldson, are coming at a critical time when the Commission is struggling to get its arms around a brood of high-profile scandals.

With a new scandal breaking in the powerful insurance industry, consumer advocates say the SEC needs more enforcement muscle, not less. SEC officials in the past year have worked hard to keep pace with New York Attorney General Eliot Spitzer, who upstaged the Commission by leading initial charges against mutual fund providers accused of late trading and improper market timing.

Donaldson reportedly made powerful enemies in elite business circles by supporting strict guidelines, particularly for mutual fund companies, aimed at dissolving potential conflicts of interest and increasing transparency.

But Donaldson has made few friends among shareholder activists who continue to hold out for stronger guidelines supporting shareholders’ rights to nominate prospective trustees.

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