Thomsen defends her boss. “This chairman has an extremely busy schedule,” she says. “I can get to him if I need to.” But she acknowledges that “sometimes it can take days.” Cox says, “She has complete and total access to me.” An S.E.C. spokesman says the two met as often as eight times a day during recent settlement negotiations with banks over auction-rate securities. The banks agreed to repay nearly $27 billion to investors.

Some former S.E.C. staffers say Thomsen complied too easily with the push to restrict enforcement. Cox boasts that the commission approves “99.999 percent” of the enforcement division’s recommendations. But some former S.E.C. enforcement officials say he maintains that high percentage by prevailing on Thomsen to water them down. Thomsen confirms that she has revised recommendations “from time to time” but denies that the commission has curbed enforcement efforts. “Everybody’s pro-law-enforcement” among the commissioners, she says. “Nobody likes crooks.”

Demoralized, key enforcement staffers started heading out the door. Veteran S.E.C. lawyer James Coffman left in 2007 after he was passed over for a promotion. He says that Thomsen told him he didn’t get the job because he was viewed as “too tough.” Thomsen, noting that toughness is one of the qualities necessary for an enforcement job, dismissed the notion that anyone would be denied a promotion for being “too tough.”

A budget shortfall led the S.E.C. to impose a hiring freeze in 2005. The enforcement division’s staff is divided into groups, and ordinarily 15 lawyers report to an assistant director in each one. But as the freeze dragged on, some groups dwindled to seven or eight lawyers. An S.E.C. spokesman says that if one group is overburdened, cases are reassigned to a different group.

Enforcement staffers cite two cases as examples of the agency’s retreat from tough prosecution. One is the Biovail case. When eight women died after their bus smashed into a truck loaded with Biovail antidepressant pills, the pharmaceutical maker attributed a revenue decline to inventory lost in the crash. S.E.C. enforcement lawyers charged that not only was the company’s explanation false, but Biovail had also set up a company in Barbados to inflate reported profits and was in cahoots with a pharmaceutical distributor to stage a sham sale of pills, according to the S.E.C. complaint. Although an outside expert retained by the S.E.C. recommended a much larger fine, the commissioners decided on $10 million. Biovail accepted the penalty without admitting or denying wrongdoing. Cox says the commission relied on the advice of the agency’s chief economist.

The other case involved Tenet Healthcare, a hospital company that had allegedly boosted earnings through Medicare fraud. In March 2007, the S.E.C.’s settlement talks with Tenet nearly collapsed over whether the company would be granted a “safe harbor” provision, which protects a company from liability for financial projections that are made in good faith. The S.E.C. had routinely denied this protection in fraud settlements. Accordingly, enforcement lawyers refused to make an exception for Tenet. But on the night before they were set to appear before the commission, Tenet’s lawyer fired off an appeal to the S.E.C. commissioners.

The next day, a majority of the commissioners, including Cox, made it clear that they would grant Tenet safe harbor, according to several people who attended the meeting. The enforcement staff drafted a settlement. (The company paid a $10 million penalty.) The commission’s break with precedent on this and other cases caused consternation among the enforcement staff and helped spur the departure of Randall Lee, the veteran head of the S.E.C.’s Los Angeles office, which had handled the case. Cox says the commissioners took into consideration that Tenet had new management.