The Securities and Exchange Commission yesterday scheduled a vote for this coming Wednesday, June 29, on the highly controversial mutual fund governance rule that is likely to end Chairman William Donaldson's tenure on a sour note, Reuters reports.

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.

Rocky Road

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

Donaldson, who is expected to push through IPO reforms easing quiet period restrictions, hoped to ride off in to the sunset, but a court decision on the independence rule has altered that scenario.

The vote was set fast on the heels of a ruling by the U.S. Court of Appeals in Washington on 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 - and that it failed to consider the costs of compliance that it would impose on mutual funds and any possible alternatives to the rule.

The court ruling came as the result of a lawsuit brought by the U.S. Chamber of Commerce, which raised similar objections to the rule originally voiced by Glassman and Atkins.

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