William Donaldson, who as chairman of the Securities and Exchange Commission attempted to rescue financial markets from corporate scandals that sent some of America’s biggest companies into bankruptcy, said yesterday he will step down at the end of the month.

[President Bush intends to nominate Rep. Christopher Cox, a Republican of California, to replace Mr. Donaldson, Republican officials told the Associated Press yesterday. The officials, who spoke on condition of anonymity, said an announcement was possible as early as today.]

During his two and a half years at the agency, Mr. Donaldson presided over a crackdown on abuses in the mutual fund industry, extended oversight of hedge funds, and pushed through a rule guaranteeing investors get the best available price on stock trades. Mr. Donaldson, who turns 74 today, said at a news conference that he is returning to private industry.

Mr. Bush appointed Mr. Donaldson after Harvey Pitt resigned as SEC chief in 2002. He clashed with business groups and fellow Republican members of the commission who complained he was taking regulation too far. His resignation provides an opening for groups lobbying to loosen rules imposed since the collapse of Enron and WorldCom.

A Republican and former New York Stock Exchange chairman, Mr. Donaldson leaves the agency bracing for a congressional investigation into budgeting errors. The SEC last week said it would have to curtail travel and hiring to make up a $48 million funding shortfall.

Mr. Donaldson also leaves a fractured five-member commission, which split over rules for mutual fund managers, stock markets, and hedge funds.

Mr. Donaldson sparred with New York Attorney General Eliot Spitzer, who seized the lead in the mutual fund trading investigation. Mr. Spitzer chastised the SEC for failing to detect the misconduct, while Mr. Donaldson, who co-founded securities firm Donaldson, Lufkin & Jenrette in 1959, rebuffed Mr. Spitzer’s calls to punish mutual fund managers by forcing them to cut fees.

“He has a number of accomplishments that he can be proud of,” said Barbara Roper, director of investor protection at the Consumer Federation of America. “We only hope they survive his departure.”

Mr. Donaldson leaves Mr. Bush with the political challenge of picking a new leader for the agency, which has been criticized by the U.S. Chamber of Commerce for imposing excessive fines in enforcement cases. The chamber and other business groups also have complained about the cost of complying with SEC rules aimed at preventing corporate fraud.

Mr. Donaldson’s fellow commissioners – Democrats Harvey Goldschmid and Roel Campos and Republicans Cynthia Glassman and Paul Atkins – have publicly split on votes over new rules governing mutual funds and trading rules for stock markets. Mr. Donaldson has sided with the Democrats on those rules, and relied on the two Democrats to support a rule that subjects hedge funds to SEC oversight.

“The politicization that has occurred since the fall of Enron makes this a very difficult job to maintain for an extended period of time,” said Mr. Pitt, Mr. Donaldson’s predecessor. “I doubt that he was forced out.”

The commissioners have also split privately, in closed-door votes over enforcement cases. Messrs. Atkins and Glassman have objected to large fines imposed on companies including Time Warner, which agreed in March to pay $300 million to settle an SEC probe. Mr. Donaldson also sided with Messrs. Goldschmid and Campos in those cases.

“He was about doing the right thing whether that was politically popular or unpopular and whether it was deemed conservative or liberal,” said Stephen Cutler, who resigned as Mr. Donaldson’s enforcement chief last month. “He couldn’t be shaken by politics or expedience.”

Mr. Donaldson said his decision to resign “had nothing to do” with disagreements among the commissioners. “I hope that there will be no legalistic rollback of any of these key items that we’ve put forward,” he said.

Mr. Goldschmid plans to retire from the SEC by August and return to teach at Columbia University’s law school. Senate Democrats, including Minority Leader Harry Reid, have chosen Annette Nazareth, now the head of the SEC’s market regulation unit, to fill his slot.