For months, Christopher Cox, the chairman of the Securities and Exchange Commission, has been under fire for a belated response to market upheavals stemming from the subprime fiasco and for being soft on big corporations. He’s eager to dispel his critics. In his 10th-floor office, with a postcard view of the Capitol, Cox appears fit and buoyant despite a recent bout with a rare cancer of the thymus gland. He denies any suggestion that he has oriented the S.E.C. away from tough enforcement and investor protection. “I spend more time on enforcement than on any aspect of my job,” he says.

But a look at his record since he became chairman in 2005 suggests that, behind the scenes, Cox has engineered a series of procedural and tactical changes, effectively reducing the S.E.C. enforcement division’s power. The division, one of four in the S.E.C., investigates and litigates violations of securities laws. Under the new rules, enforcement staffers no longer have the freedom to negotiate fines against public companies in a select group of cases. Instead, the commissioners—three Republicans and two Democrats—dictate the maximum penalty the enforcement division can seek. Since the rule was imposed, penalties have dropped. For example, in March, the commission approved a fine of $10 million against pharmaceuticals manufacturer Biovail, significantly less than the enforcement staff had sought.

At the S.E.C., which has come under fire from Congress for its apparent lack of vigilance in the subprime mess, such tensions between frontline investigators and the politically appointed commissioners to whom they report have become commonplace. Former senior enforcement officials say Cox has used his control over the commission’s calendar to delay major cases and water down others. Cox and other commissioners have shifted the agency’s focus away from strong enforcement action against big public companies and Wall Street firms, instead emphasizing what S.E.C. lawyers consider petty-fraud cases, such as small Ponzi schemes. Penalties against companies, individuals, and brokerage firms have sunk from a high of $1.5 billion in 2005 to $507 million last year.

In the coming months, the S.E.C. will be expected to sort out whether malfeasance contributed to the current economic crisis—and if so, whose. But the fundamental changes at the enforcement division will make this all the more difficult. The division has been significantly weakened by the exodus of top supervisors and is hamstrung by the new limits on its powers. Even if a new administration in the White House replaces Cox, whose term expires in 2009, it is not as though a switch could be flipped to begin more aggressive prosecution. Gearing up would require restoring the depleted ranks and finishing pending cases, both of which could entail substantial delays at a time when the market needs to quickly regain the confidence of battered investors.

Cox did not accomplish these changes on his own. Internal agency politics, critics say, played a major role, with Cox’s Republican colleagues, particularly Paul Atkins, pressing him to roll back enforcement and rein in the division’s independence. Beginning in late 2007, the White House, which nominates S.E.C. commissioners, helped clear the way for retrenchment in enforcement by delaying the replacement of two Democratic commissioners whose terms had ended. From January through July 2008, the commission had just three members, all Republican. This gave Atkins and Kathleen Casey de facto veto power over the more moderate chairman.

The perceived absence of support for major investigations has alienated many staff members and prompted some of the enforcement division’s senior officials to quit. Since Cox took office in 2005, the staff count in the division has dropped 9 percent, to 1,124 people this year. His predecessor, William Donaldson—like Cox, a Republican—long declined to speak publicly about changes at the S.E.C. He told me recently, though, that he was aware of a “high degree of frustration” among the staff. “With the kind of problems we have now,” he said, “any attempt to reduce the effective role of the S.E.C. as a policeman has been a mistake.”