Enforcement is "hot," Gabinet said last week. He's got more troops - and a bigger mandate to use them.

After years of begging for resources from an unsympathetic Congress, where the agency was outgunned by regulation-hating Wall Street and corporate lobbyists, the SEC got more money this year through the Sarbanes-Oxley Act than it could spend, as agency executives acknowledged in a congressional hearing last week.

In Philadelphia, that means the SEC office is expanding from 85 people to 115, including lawyers hired away from big local firms under new, streamlined hiring rules. Recent hires include Christina Rainville, formerly a high-profile partner with Schnader Harrison Segal & Lewis, as district trial counsel. (In announcing Rainville's departure, Schnader Harrison noted the firm had supplied the SEC with a string of lawyers over the years, many of whom later return to work at the firm, where they can use their experience to defend accused securities violators against the SEC.)

Expansion has enabled the local SEC staff, which like those in other regional offices was once mostly relegated to pursuing local rogue brokers, to embark on big investigations with potentially national impact.

For example, the Philadelphia SEC office, located in one of the nation's biggest mutual-fund centers, this year began investigations of mutual-fund marketing techniques at a string of money-management firms. Without admitting guilt, Prudential Securities on July 10 agreed to pay $382,000 in fines and penalties incurred by what the SEC called "abusive" practices at Pru's Wilkes-Barre office, by brokers who failed to tell investors they qualified for a less-expensive class of shares.

How much credit does SEC Chairman William H. Donaldson deserve for the agency's new prominence? "Most chairmen are able to set their own agenda. But with Enron and WorldCom and Sarbanes-Oxley and everything else, the chairman's agenda is not his own anymore," said Albert Dandridge, a partner at Schnader Harrison and a former SEC executive.

"I don't think it's anything new that [the securities business] ought to come under some kind of scrutiny," Dandridge said. What's different is that Congress has agreed to offer "the manpower and resources and direction to go do something about it. They want to strike while the iron is hot."

Not everyone believes Donaldson is the best man for the job. Some question how a veteran Wall Street insider can be expected to make tough calls on powerful firms - a criticism also levied at Arthur Levitt, a former investment banker.

"Donaldson's reputation is as a pretty good mediator of interests," said Louis Thompson, president of the National Investor Relations Institute.

For example, "he surprised people when he [came out in favor of] opening the shareholder proxy voting process" in an effort to promote competitive corporate board elections.

Donaldson's SEC also surprised some observers when it came out with a warning against the widespread liberal reporting of profits excluding tax and financial expenses by cable-TV and real estate companies.

Donaldson has also proved surprisingly adept at Washington politics, Thompson said. "In Washington, you have to go hat in hand sometimes," he said.

For example, after sitting on the fence, Donaldson has recently shown support for congressional efforts to curb New York state prosecutor Eliot Spitzer's campaign to file civil charges against Wall Street firms.

"It may have made Spitzer mad," but it helped Donaldson win support for his SEC initiatives, Thompson said.

Philadelphia's Gabinet originally joined the SEC because he admired President Bush's first SEC chairman, Harvey Pitt, who as a high-powered Washington lawyer spent much of the 1990s helping accounting firms fight predecessor Arthur Levitt's attempts to tighten corporate accounting and auditing standards.

But with Pitt forced out by growing criticism, Gabinet now describes himself as a believer in Donaldson.

"He came from the outside, unlike Harvey Pitt, who was the consummate [Washington] insider," Gabinet said. As the former head of Wall Street's Donaldson Lufkin & Jenrette and of the New York Stock Exchange, Donaldson "is an executive, and he's very, very sure of himself." He also energized both new and veteran staffers of his often-demoralized agency by "building consensus and [promoting] a harmonious workforce," Gabinet said.

"Harvey [Pitt] intimidated his staff," Thompson added. "He put them through grueling sessions. They went out with their tails between their legs."

By contrast, Donaldson hired a chief of staff and set up a much more supportive administration, Thompson said.

Donaldson has won special support from small securities traders, including hard-pressed floor brokers and small-firm owners at the stock exchanges in New York, Philadelphia and other cities, by criticizing Levitt's initiative to cut the minimum spread between stock bids and offers from a "teeny" (one-sixteenth of a dollar, or 6.25 cents) to just a penny.

Levitt said the move would reduce trading costs for investors.

But market pros say it also made trades in many Nasdaq and low-volume stocks unprofitable, leading to wide price swings and generally low trading levels that now dog many public companies.

In May, Donaldson called for reexamining the issue of penny trades. Experts, like former Nasdaq executive William Harts, doubt he will go so far as to cancel Levitt's penny initiative.

Still, "this is a breath of fresh air," said John Giesea, president of the Security Traders Association. "It's good to see that the [SEC] is alert and interested. I think they get it - that market structures need attention."

-- Joseph N. DiStefano