Eight Republican Senators have asked outgoing Securities and Exchange Commission Chairman William Donaldson to defer final action on a controversial governance rule, leaving the issue for his successor to resolve, Dow Jones Newswires reports.
Senate Banking Committee members Jim Bunning (R-Ky.), Robert Bennett (R-Utah), Mike Crapo (R-Idaho), Mike Enzi (R-Wyo.), Chuck Hagel (R-Neb.), Mel Martinez (R-Fl.), Rick Santorum (R-Pa.) and John Sununu (R- N.H.), wrote a letter to Donaldson urging him to hold off on the rule requiring mutual funds to have an independent chairman and a 75% independent board until the new chairman is in place.
The SEC will revisit the rule at an open meeting on Wednesday, just one day before Donaldson will step down. President Bush has nominated Christopher Cox to be his replacement but Cox has yet to be confirmed by members of Congress.
"As you know, it is tradition that an outgoing chairman not finalize pending controversial matters immediately before his or her successor takes office," the letter reportedly states.
The lawmakers cautioned Donaldson that it would be "inappropriate" and contrary to federal administrative procedures to move to finalize the fund governance rule without a lengthy debate over its merits and potential unintended consequences.
Last year, the rule passed by a narrow 3-2 decision with Republican Commissioners Cynthia Glassman and Paul Atkins representing the dissenting votes. Democratic Commissioners Roel Campos and Harvey Goldschmid sided with Donaldson, who was facing increasing pressure from Congress to bring about reforms that would protect investors.
Wednesday's scheduled vote was set fast on the heels of a ruling by the U.S. Court of Appeals last Tuesday that bounced it back to the SEC for further review. The court determined that while the SEC was well within its jurisdiction to implement the rule, it failed to consider the costs of compliance that it would impose on mutual funds and any possible alternatives to the rule.
The court's decision came as the result of a lawsuit brought by the U.S. Chamber of Commerce attempting to block the requirement, which is scheduled to take effect in January 2006.