Frank and Oxley sent a letter to the appropriations committee, calling the Fidelity-sponsored mutual fund provision included in the conference report, without debate, "imprudent."
Consumer advocates say they are particularly concerned about attempts during the summer to thwart a plan to require companies to count stock options as an expense. Those attempts were made even after Congress affirmed the independence of the Financial Accounting Standards Board, the group that is issuing the standard, in the 2002 law. An anti-options expensing bill passed the House of Representatives 312 to 111 but stalled in the Senate. Jeff Peck, the lead lobbyist for technology companies which oppose options expensing, said his group will turn up the heat both on the Hill and at the SEC early this year.
 
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Officials at other trade groups also said they were mobilizing to take their arguments to the five-member SEC, which passed rules implementing many of the provisions of the Sarbanes-Oxley Act. The commission consists of three Republican appointees and two Democrats. The membership of the panel is expected to change this year.
Former Columbia University law professor Harvey J. Goldschmid, who has led efforts on behalf of shareholder activists, has said he will return to the faculty sometime between May and August. Consumer advocates and business groups alike are watching for hints about who may replace him and whether that person will carry the same intellectual and political weight of Goldschmid, a widely respected former SEC general counsel. No list of possible replacements exists yet, according to Senate aides.
The SEC's Campos, whose term expires in June, said he hopes to be renominated. He added that leaving even one spot vacant on the commission this year could produce gridlock, since several important issues last year were decided by a 3 to 2 vote.
For most of the past two years, the Republican chairman William H. Donaldson, has cast his vote with the two Democratic members, on controversial topics including mutual fund governance. Donaldson, 73, a longtime friend of the Bush family, has said he intends to remain at the SEC for at least another year.
In the past few weeks, however, Donaldson has thrown his support behind certain arguments advanced by his Republican colleagues, recently casting the deciding vote to scuttle a staff recommendation to file civil charges against Gary Winnick, the founder of telecommunications company Global Crossing Ltd. Winnick had reached a tentative deal with the staff to pay a $1 million fine without admitting or denying responsibility.
The chairman also is likely to be the key vote in an appeal lodged last week by several union-backed pension funds trying to expand the power of investors to nominate board candidates at Walt Disney Co. SEC staffers, in an unusual move, reversed themselves last week and ruled that Disney could exclude the shareholder resolution from its 2005 proxy ballot just three weeks after declaring otherwise. Disney's lawyer had sent multiple letters to the five commissioners pleading for a turnaround. The staff changed its ruling before the commission formally acted. Now the Disney appeal and the fate of a broader, year-old proposal to give large investors more input in board choices rest with the commission. Whether shareholders should have more input into the board election process is the single most contentious issue the agency will face this year.
An official at one trade group who declined to be identified because of the sensitivity of the issue, said that business interests had some anxiety about Donaldson's regulatory approach last year but that it would be self-defeating to push to replace him now. Instead, the official said, lobbyists have been talking with the White House about the general type of candidate they would like to see fill slots on the commission when they naturally come up this year. Last month, a White House spokesman said President Bush "appreciates" the job Donaldson is doing to help clean up the markets.
"If he goes, the chances we'd see a chairman with his kind of agenda is very slim," said Barbara L. Roper, director of investor protection at the Consumer Federation of America. "At best you get an SEC that doesn't get anything done, and at worst you get an SEC that may be dismantling some of the work of the last few years."
Over the past several months, the agency increasingly has been beset by philosophical differences over the scope of its work and the penalties it imposes on errant companies. Last month, Republican appointees Paul S. Atkins and Cynthia A. Glassman blasted their colleagues for passing "unjustified" rules without fully considering their cost. They also have begun to speak out against multimillion dollar civil penalties the enforcement division has extracted from companies, arguing that the fines penalize shareholders rather than the individual executives responsible for fraud.
"The commission . . . should not regulate for the sake of regulation," Glassman said in a speech to pension fund groups in California last month. "Where markets are functioning we should let them work without unnecessary interference."
The Chamber of Commerce's Hirschmann said the combination of the 2002 law, increasingly aggressive enforcement by the SEC and New York Attorney General Eliot L. Spitzer, and numerous lawsuits by class action lawyers all are fueling the concern among businesses.
Harvey L. Pitt, a former SEC chairman, said that industries under fire had themselves, at least in part, to blame.
"What business should be concerned with is the attitude on the part of the SEC that regulation is the solution to all financial market problems. It isn't, and it shouldn't be," he said. "If these industries had taken the lead in detecting their own conflicting practices, and then resolving them, there wouldn't be anything for Elliot Spitzer or the SEC to do."
