Handicapping the Next Nominees at the S.E.C.

Here's a situation where three may not be enough: Three commissioners are left standing at the Securities and Exchange Commission, all of them Republicans.

Democrat Roel Campos left the agency in September to join a Washington law firm and Annette L. Nazareth, whose term expired in June, announced Oct. 3 that she intends to resign, but did not give a departure date.

That would leave the S.E.C. in Republican hands—and headed by Chairman Christopher Cox, who consumer advocates say has less-than-inspiring record of protecting investors. There's been no word from the White House on nominees, while wrangling on Capitol Hill over potential candidates to fill the vacancies plays out behind closed doors.

The vacancies have opened up as the commission is about to tackle controversial proposals to limit the ability of shareholders to vote on corporate boards.

There's a prevailing belief that one seat will go to a Latino and the other to a woman. Democratic Senator Robert Menendez of New Jersey has said publicly that he wants Campos's successor to be a Hispanic.

Two early contenders, Luis Aguilar and Yoon-Young Lee, have lost favor with Democrats because they come from corporate law firms. Lee, whose name surfaced the day that Nazareth announced her resignation, was the apparent choice of Senator Charles Schumer, the Democrat from New York.

But Lee, a 1998 graduate of Harvard Law School, is a partner at Wilmer Hale, a law firm that is considered among the best in advising corporations and investment firms on securities regulation.

Harold Meyerson of the American Spectator, and the Washington Post's designated "lefty" columnist, penned an OpEd essay last month called "Wall Street Democrats vs. Main Street Democrats" that left the Aquilar and Lee nominations dead in the water.

In the Washington rumor mill, many believed that an effort to bolster the candidacy of Damon Silvers, the associate general counsel of the A.F.L./C.I.O. Alas, Silvers is not a woman.

For a moment, maybe less than a moment, Kayla Gillan, the former general counsel at CalPERS, the nation's largest public pension fund, seemed to be in the running.

At a meeting to discuss the vacancies, Schumer asked for names of female candidates from labor, but they had none. Now Elise Walter, who spent many years at the S.E.C. and is now at the Financial Industry Regulatory Authority—a non-governmental regulator of securities firms operating in the U.S.—has emerged as the leading candidate for the female slot.

But Walter is believed to favor "principles-based" regulation, which investor advocates view as a code for allowing corporations to avoid hard-and-fast rules. And they're digging through the S.E.C. records to determine whether she wrote letters that favored corporations in the proxy proposal process.

"Do we want to engage in a race to the bottom?" said one lawyer for investors who spoke on the condition that no names be used.

"It's all speculation," said Timothy Smith of Walden Asset Management, said of the roster of candidates. Smith is a member of Ceres—a network of investors, environmentalists, and others helping companies to address global climate change and other sustainability issues—sent a letter to Senate majority leader Harry M. Reid of Nevada earlier this month urging the nomination of candidates with a "proven commitment to promoting and preserving the rights of shareholders."

That doesn't sound like such a tall task, but apparently it is proving to be. "It's a pretty obvious request," says Smith. "Unfortunately, that is not always the case, as you know."

Cox has a quorum and, by law, could go forward with the proposal to change the current S.E.C. rules, which allow shareholders to propose procedures to elect directors, and adopt one of two pending proposals to limit that right.

All of Wall Street is urging Cox to go forward. On Nov. 1, Senate Banking Committee Chairman Christopher Dodd of Connecticut sent a letter to Cox warning him, "we feel the Commission should proceed only after it has a full complement of Commissioners."

Don't hold your breath.

by Karen Donovan

_{Photograph of the S.E.C. flag outside the commission's headquarters by Dennis Brack/Bloomberg News/Landov}