UPDATE 4-Democrats don't want SEC to act with vacancies

(Adds background, SEC comment, edits throughout)

By John Poirier

WASHINGTON, Oct 3 (Reuters) - The U.S. Securities and Exchange Commission should not make any major policy decisions while its two Democratic seats are vacant, the Democratic chairmen of the Senate Banking Committee and the House Financial Services Committee said on Wednesday.

Sen. Christopher Dodd of Connecticut told reporters that nominees to replace Democrats Roel Campos, who has already left the SEC, and Annette Nazareth, who plans to leave soon, have not yet been determined.

A source familiar with the matter said Nazareth is expected to leave the federal agency after Jan. 1.

"Yes," Dodd said when asked if he is concerned. "I don't think they should be making any decisions at the moment."

House Financial Services Committee Chairman Barney Frank told Reuters he shared Dodd's concerns.

If the Democrats are not replaced before Nazareth leaves, SEC Chairman Christopher Cox would chair a commission with only his two fellow Republicans -- Paul Atkins and Kathleen Casey -- remaining.

SEC spokesman John Nester declined to discuss what he called a "hypothetical situation," noting that currently there is only one vacancy. He said he was unaware of expectation there would be two vacancies before one or both of the seats were filled.

It is not clear whether the Democratic commissioners will be replaced before the SEC is expected to face its next big policy issue, a November vote on whether shareholders can nominate directors to a company's board. Earlier this year, the commission split along party lines to propose two approaches.

Earlier this week, a spokesman for Senate Majority Leader Harry Reid of Nevada said Democrats are working with the White House to find replacement commissioners.

Frank, of Massachusetts, said the investor protection agency can continue carrying out "day-to-day" enforcement issues, but should not make any major policy decisions while the Democratic seats are vacant.

"We don't want only three Republicans," Frank said in a telephone interview. "It's nobody's fault, but this is not a time for a 3-0 commission that's supposed to be balanced to be making any major policy decisions."

Campos, a former criminal prosecutor from Texas, left the SEC last month and joined the law firm of Cooley Godward Kronish LLP. Nazareth, who is married to former Federal Reserve Vice Chairman Roger Ferguson, said she plans to return to the private sector at a date yet to be set.

Dodd's committee has general oversight of the SEC as well as banking, money and credit issues. White House nominations to the SEC must be approved by the Senate Banking Committee.