Luis A. Aguilar, one of five members of the , is generally known as one of its strongest advocates for tougher oversight of the securities industry. In public statements this year, he has pushed his S.E.C. colleagues to be more aggressive, contending that the commission was not protecting investors assiduously enough.
But last week, Mr. Aguilar derailed one of the most significant current efforts to tighten regulations on the financial industry. His opposition to a proposal put forward by the S.E.C. chairwoman, Mary L. Schapiro, which was intended to improve the safety and soundness of a popular investment, money market , put Mr. Aguilar in lock step with the powerful and aggressive mutual fund industry in which he worked as a lawyer from 1994 to 2002. Mr. Aguilar's decision to oppose Ms. Schapiro's plan last week became the third and deciding S.E.C. vote against the proposal.
His public criticisms of the approach taken by Ms. Schapiro closely echo those made by the industry in its fierce lobbying effort to scuttle a regulatory plan that had won support from nearly every top financial regulator, including the Federal Reserve chairman, Ben S. Bernanke, and Treasury Secretary Timothy F. Geithner.
It is not uncommon, of course, for regulators to side with the industries they oversee. But Mr. Aguilar has been adamant that he is not against prudent reform. He has said instead that he wants to be sure regulators have enough information before they move forward with new rules.
Behind the scenes, though, Mr. Aguilar had not requested that additional information, according to people briefed on his actions in recent months.
In his statement outlining his opposition to Ms. Schapiro's plan, for instance, he said “there are larger macro questions and concerns about the cash management industry as a whole†that needed to be studied before the S.E.C. could move forward with efforts to improve money market funds. Mr. Aguilar did not mention the need for further study to Ms. Schapiro until two days before he went public with his opposition last week, commission officials said.
Possible changes to money market funds have been discussed within the agency for over a year, and Ms. Schapiro distributed the 414-page proposal in June to the four other members of the commission, including Mr. Aguilar. During that time, S.E.C. staff members made numerous overtures to Mr. Aguilar to address any concerns he might have had about the proposal, but most were rebuffed, the people said. On the other hand, Mr. Aguilar met with mutual fund companies 11 times this year as the proposal was being developed, according to S.E.C. records.
Mr. Aguilar also defended his opposition to Ms. Schapiro's plan by noting his discomfort with a recent S.E.C. staff list that showed how many money funds had asked the commission for approval to receive financial support from their parent companies. Mr. Aguilar contended that the commission “was never given the chance to assess the staff's underlying methodology to understand how the list was compiled.†But S.E.C. officials said that he and the other commissioners received the complete list in early July and that Mr. Aguilar had raised no questions about it.
Mr. Aguilar did not respond to requests for comment, but last week he said in an interview that he wanted to be sure to fully understand the implications of any changes to avoid the possibility that they would unnecessarily drive investors out of money market funds.
Mr. Aguilar's positions have taken on such significance because they have become the deciding factor in one of the most contentious issues facing financial regulators.
Though not guaranteed by the government, money market funds, which invest in the short-term debt of governments, banks and other companies, have long been seen as low-risk investments, in part because of their apparently stable $1 value per share.
During the financial crisis, however, a large fund lost money on the short-term debt of Lehman Brothers and fell below that $1 a share value, leading investors to withdraw $300 billion within a few weeks from what was a $3.6 trillion industry.
The run ended when the Federal Reserve and the Treasury Department stepped in to stabilize the funds. Both agencies have said that because of rule changes made in the Dodd-Frank financial legislation, the government no longer has tools to help the funds if they face another crisis.
