When Arthur Levitt announced that he was stepping down as chairman of the Securities and Exchange Commission last month, Washington lawyers predictably began speculating on his replacement almost immediately. It might be some time, however, before President-elect George Bush makes the appointment.

The SEC is composed of five commissioners who are appointed for five year terms by the president and must receive Senate confirmation, according to the Securities Exchange Act of 1934. Bush will have to appoint two commissioners, following the retirement of Norman Johnson earlier last year and Levitt's resignation.

No more than three commissioners can be of the same political party, according to the 1934 act. Usually, there are three commissioners from the party in the White House and two from the other, according to Carol Patterson, a spokesperson for the SEC. Currently on the commission, there are two democrats - Paul Carey and Isaac Hunt. Laura Unger, a republican, is the most likely person to serve as acting chairperson until a permanent one is appointed.

The timetable for the appointments is unclear. Levitt has indicated that he will leave the SEC some time before mid-February.

"In the past, the president has nominated someone and designated them as chairman at the same time," said John Heine, a spokesperson for the SEC. "There's no way of predicting if that's what will happen or even when the nomination will happen."

"My guess is that the [newly-elected Bush] administration is not focused on that position right now," said Richard Roberts, a partner at Thelen Reid & Priest, a law firm in Washington, D.C. and a former SEC commissioner. "The Clinton administration appointed Levitt in March, he was confirmed and in place in the summer. That strikes me as a reasonable timetable, but there's no certainty."

"At this point in time, given where the Bush administration is, it's a little early to conjecture about who it will be," said Barry Barbash, a former director of the SEC's division of investment management. "We haven't heard if the people mentioned are even interested. I think we're probably still four to six weeks away from having candidates thought about."

The SEC declined to speculate about whom Bush might select.

"We're not saying anything about it," said Heine. "It's a White House matter."

Several industry observers have cited James Doty as the leading candidate. Doty is currently a partner at the Washington D.C. office of Baker Botts, a law firm based in Houston. Doty heads its corporate and securities practice. Doty was general counsel of the SEC from 1990 to 1992, during the George Bush Sr. administration. During that time, Doty became acquainted with George Bush, Jr. and has advised the President-elect on business affairs since then, according to Judith Burns of Dow Jones & Company of New York. As general counsel, Doty was active in the formation of the emerging markets advisory committee of the SEC and the International Institute for Securities Market Development, according to Baker Botts.

"I've heard Jim [Doty's] name and I can't imagine a better candidate for the position," said Marianne Smythe, who worked with Doty while she was director of the division of investment management at the SEC in the early 1990s. Currently, Smythe is head of the investment management practice at the law firm of Wilmer, Cutler & Pickering of Washington, D.C.

"[Doty] is the only person whose name I've heard," said John Collins, a spokesperson for the ICI. "I don't think he's well known by anyone, just that he has been with a big securities firm. No one around here seems to have any sense about his qualifications."

Doty declined to comment.

Other candidates mentioned by industry observers include Denise Crawford, securities commissioner of Texas and adviser to Bush on securities matters while he was governor; Harvey Pitt, another former SEC general counsel; Mary Shapiro, head of the National Association of Securities Dealers Regulation and a former SEC commissioner; and Wendy Gramm, former chair of the Commodity Futures Trading Commission.

The ICI says it has paid little attention to the possibilities.

"I asked around last week and no one seems to have an opinion on who it might be or should be," said Collins.

Although he believes it is too early to conjecture about who the replacement will be, Barbash has an opinion as to the direction in which the next chairperson might take the SEC.

"I think, generally speaking, the next chair will follow a more deregulatory path," he said. "The SEC tends to look at the world from two perspectives - investor protection and capital formation. Arthur Levitt focused much more on investor protection, and so my guess would be, knowing the push/pull that exists in Washington, that the next chairman will lean the other way."

Levitt is the 25th and longest-serving chairman of the SEC after seven and a half years in that position. He was appointed by President Clinton in 1993 and re-appointed to a second five-year term in 1998. He has not yet indicated his future plans, according to an SEC statement.

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