What do two Republicans, two Democrats, and one Republican chairman add up to? In the case of the recently approved corporate governance rule, and likely with the upcoming hedge fund registration proposal, the balance equals two irritated Republican commissioners.

That's because it appears that Chairman William Donaldson will side with Democratic commissioners once more on July 14, when the SEC considers requiring registration of hedge funds in an open meeting.

The highly controversial SEC rule requiring a supermajority of independent directors on a fund board and an independent board chairman passed in a similar manner. Commissioners Cynthia Glassman and Paul Atkins, both Republicans, voted against the proposal, while Chairman William Donaldson, also a Republican, sided with the Democratic commissioners, Harvey Goldschmid and Roel Campos.

The Republican commissioners are not letting the corporate governance rule go. In an interview with a Financial Times reporter published Thursday, Glassman criticizes the agency's recent fund governance rule, regulation of hedge funds, and internal workings of the agency itself.

According to Glassman, in considering the corporate governance proposal, the SEC had "not developed a sound economic justification and used our economic resources as well as we could," reported the FT.

On the hedge fund issue, according to the FT interview, Glassman said the SEC spent 15 months studying hedge funds and "basically found nothing…[the study] did not, in my view, substantiate the need for new rules." The study was released last September.

Atkins has also voiced his opposition to both proposals. After the fund governance rule had already passed, Atkins reiterated his opposing arguments at a securities industry conference in late June.

He has also joined Glassman in posting his comments during the governance rule meeting on the SEC's website. Neither Donaldson nor the two Democratic commissioners have published their comments.

The decision to publish a record of statements, whether they were made during hearings or at conferences, is up to the individual commissioners, said John Nester, spokesman for the SEC.

Although the Goldschmid and Campos support the hedge fund proposal, Donaldson is the one taking to the streets. Last week, he aired his views on the hedge fund issue to an AP reporter. He stressed that the SEC is not trying to regulate hedge funds' internal operations or trading strategies, but keeping hedge funds, "the big kids on the block,...from hurting the little guy."

In a June 20 speech at Stanford Law School, Donaldson stressed that the goal of the proposal is "simple...to enable the Commission to collect more accurate information about this important industry, and better target our inquiries to those hedge fund managers where there is some reasonable concern that they may be violating the federal securities laws."

Prepare to watch sparks fly during the July 14 meeting. The meeting is scheduled for 10:00am EST and will be webcast. 

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