The Bush administration has nominated Wall Street veteran William Donaldson to replace Harvey Pitt as chairman of the Securities and Exchange Commission, but observers said it’s too early to say what the appointment will mean for the mutual fund business.

Donaldson founded Donaldson Lufkin & Jenrette in 1959 and served as the firm’s chairman and CEO, eventually becoming chairman of Aetna. In addition, he served as chairman and CEO of the New York Stock Exchange from 1990 to 1995.

The SEC and the Investment Company Institute declined comment on the appointment.

Still, observers agreed that if Donaldson is appointed, the fund industry will find a savvy SEC chairman who is familiar with the vernacular and structure of the fund business. But they also said that there is no way to tell how Donaldson might approach key issues facing the business, such as proposals to force companies to report their portfolio holdings more frequently or disclose how they voted in proxies.

"I just can’t say whether he’s friend or foe," to the fund business, said fund consultant Geoffrey Bobroff. "He’s clearly grown up on Wall Street. The fund business is something he’s familiar with. As to whether he’ll be expansive or resistant to change, it’s hard to tell."

In addition, Bobroff said that the White House likely ensured that Donaldson won’t "be a thorn in business’ side. He’s not as populist as Mr. Levitt was," he said.

Gary Gensler, a former under secretary of the U.S. Treasury and co-author of "The Great Mutual Fund Trap," said he wasn’t aware of Donaldson’s current views on the fund business. However, funds will be far from one Donaldson’s key priorities should he take control of the SEC, Gensler said.

"He’s got a lot in front of him as SEC chair," Gensler said. Those issues include getting the beleaguered independent accounting board – which led to Pitt’s resignation – up and running, implementing other aspects of the anti-fraud legislation signed by Bush last summer, and fighting for more funding for the understaffed commission.

"When it comes to mutual funds, whatever he might have in mind will be a second order of business," Gensler said.

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