So much for riding off into the sunset.

The Securities and Exchange Commission last week scheduled a June 29 vote on a controversial mutual fund governance rule that is likely to end Chairman William Donaldson's tenure on a sour note.

Donaldson is expected to step down on June 30, the day after an open meeting at which he will join his fellow commissioners in voting again on a rule requiring mutual funds to have an independent chairman and a 75% independent board of directors.

The first time around 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 reform the investment management industry and protect investors amid a wave of trading scandals at some of the nation's largest fund shops.

The heated debate over the independent chair rule, coupled with the hedge fund registration rule forged a rocky relationship among the Commission's elite.

Donaldson, who is also expected to push through IPO reforms easing quiet period restrictions, hoped to step down with everything neat and tidy, but a court decision on the independence rule has put the kibosh on that scenario.

Case Bounced Back For Further SEC Review

The vote was set fast on the heels of a ruling by the U.S. Court of Appeals in Washington 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 explore any possible alternatives to the rule.

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