Securities and Exchange Commission Chairman Harvey L. Pitt no longer uses the words "kinder" and "gentler" to describe the agency he heads.

He did so just once -- in October, in a speech to the accounting industry -- and was promptly pilloried by critics, who complained that he reached out to major accounting firms but not to watchdog groups.

"People took out of context what I said, and the result of that was those words have been used to suggest things that are wholly at odds with what I stand for," Pitt said in a recent interview.

Since Pitt took over the SEC in August, investor groups have been watching his actions to see how closely he sides with the accounting and brokerage industries -- groups he represented for years as a private lawyer and now must regulate. The collapse of Enron Corp. and revelations of massive accounting problems there have intensified scrutiny over how tough a watchdog he will be.

Pitt is moving to put his stamp on the SEC at a critical time for financial markets. Many lawmakers and investor groups argue that the relationship between the government and corporations, accountants and security firms must change -- perhaps dramatically -- to win back investor confidence in the financial records of publicly traded companies.

Although he has headed the SEC for just six months, Pitt, a burly, bespectacled man and a widely respected securities lawyer who has long wanted to head the agency, has already made comments or taken actions that indicate his style and strategy.

"The system has flaws," Pitt said in the interview. "In some places it is broken, and I believe and I still believe it needs to be repaired, and I believe it is the SEC's responsibility to repair it."

When he took over the SEC, Pitt's ambitious goals included an overhaul of decades-old securities laws in an effort to reflect the advent of the digital age.

He also promised to change the culture that had evolved under his predecessor, Arthur Levitt Jr., who publicly clashed with the accounting profession over rules governing auditor behavior. Pitt argued that investors would be better served if they felt they could avoid restatements of financial results by bringing problems early to the SEC's attention, without fear of penalties.

Both supporters and adversaries say a reflection of Pitt's desire to work more closely with the accounting industry is his appointment of Robert Herdman, a vice chairman of Ernst & Young, to be the SEC's chief accountant. Herdman is well known in the accounting industry as an active member of the American Institute of Certified Public Accountants, the trade group Levitt often sparred with in his attempt to regulate auditors.

Herdman is a sharp contrast to Levitt's chief accountant, Lynn Turner. Aides to the former chairman said Turner was chosen because of his strong reformist streak. Turner clashed often with the accounting industry, especially the AICPA, something lobbyists for major accounting firms said they did not expect to happen with Herdman.

Enron caused Pitt to adjust his strategy, according to many securities lawyers and industry lobbyists.

Pitt "came in with an idea of how to run things and what kind of style to use," said Barry Barbash, a lawyer at Shearman & Sterling who ran the SEC's investment management division under Levitt. "That style was consensus."

"Harvey Pitt has stepped into a very bad time, particularly given that he wanted to smooth the waters," said Andrew Bailey, a professor of accounting at the University of Illinois.

What has happened in some cases, according to securities lawyers, is that Pitt's message has evolved as the events involving Enron unfolded.

For instance, in Pitt's first major speech in October, he said that a basic impetus behind "pro forma" disclosures -- which Levitt strongly criticized -- is often "a legitimate desire by companies to demystify" financial statements. Pro forma disclosures do not follow general accounting rules.

In December, the SEC took a tougher tone, issuing a news release warning investors to view pro forma information with "appropriate and healthy skepticism," and in January the SEC brought its first case against pro forma financial reporting, targeting Trump Hotel & Casino Resorts Inc., although it did not impose any financial penalties.

The SEC also issued a statement in December advising companies to disclose critical accounting policies used in calculating financial results in the portion of the financial statement called Management's Discussion and Analysis -- and not put those key details in footnotes, where such disclosures are often found.

Pitt has a tried to straddle the line between the post-Enron need to get tough and his desire to encourage corporations and auditors to be more open with the agency. Thus he has called for greater corporate disclosure but also has said that companies should be able to do so without facing greater liability.

By far, Pitt's action that has attracted the most attention is his proposal for a new oversight and disciplinary group, dominated by experts from outside the accounting industry. The SEC would oversee the board and investigate cases of suspected lawbreaking.

"I have moved off a notion of self-regulation, and I've moved into a notion of what I call private regulation," Pitt said in the interview. "I am not willing to try to solve this by having the accounting profession regulate itself. Even if I thought it could be done, and I don't, it wouldn't sell."

Pitt supporters say that his proposal would put auditors under much tougher rules, but it was immediately met with skepticism by others.

Some of the criticism came as a result of his failure to consult with the Public Oversight Board, an industry-funded group that oversees ethics and quality-control issues for the industry. The board has said it plans to disband in March in protest because there appears to be no part for it to play under Pitt's new system.

In contrast, Pitt consulted extensively with representatives of the Big Five accounting firms and with the AICPA while drawing up his plan.

"That's just bad management," said Sarah Teslik, executive director of the Council of Institutional Investors. She added that Pitt hasn't met with her group, either, an organization of large pension funds.

"Even if you want to sell us down the river, you still meet with us because it looks good," she said.

Pitt said he is trying to reach out and build consensus for what comes next.

"It's probably taken me longer to become cognizant that that's what comes with the position," he said. "I tend to try to get to the heart of a problem as quickly as I can, try to work out a solution, and if there are problems with the solution, try to accommodate legitimate objections and get it done and move on to the next thing."

But Pitt said he has learned "that's not the way anybody in this job functions. So there's a learning curve about the fact that people look more closely at what you say, try to analyze what you might say, what are the hidden meanings and motivations."

Pitt said he was taken aback by the reaction to the "kinder and gentler" speech. "The reason I gave that speech, which came well before Enron had reared its ugly head, is that I thought there was an enormous need for overhaul of the regulatory system of the accounting profession. I knew that it was going to be difficult because I suspected the accounting profession would be not be happy with that," said Pitt.

Perhaps, say critics, but the real test is not what he says, but what he does.

In that regard, said Sen. Ron Wyden (D-Ore.), "the verdict is out."

"It's too early to pass judgment on Mr. Pitt," Wyden said.

Researcher Richard Drezen contributed to this report.

SEC Chairman Harvey Pitt: "I have moved off a notion of self-regulation, and I've moved into a notion of what I call private regulation."Pitt said critics misunderstood his call for a "kinder and gentler" SEC.