"This validates Breeden's strategy of focusing H&R Block on tax-related businesses," said David Roberts, a principal at Harvest Investment Advisors in Tallahassee, Florida, which owns the company's shares. "This calls into question whether H&R Block should remain in banking. It's a distinct possibility that H&R Block will be broken up."
Ernst's resignation is effective immediately, but he will remain with H&R Block as a consultant. H&R Block said it had formed a search committee to find a permanent chief executive, and that Bennett does not want to be considered for that job.
H&R Block was not available for immediate comment.
Ernst, 49, became chief executive in January 2001 and chairman in September 2002. His departure came 15 days after William Trubeck, H&R Block's chief financial officer, also resigned.
Breeden led the SEC from 1989 to 1993. He and colleagues L. Edward Shaw and Robert Gerard were elected to H&R Block's board on Sept. 6.
"Our actions today reflect a determination to focus on those activities where H&R Block can generate significant shareholder value," Breeden said in a statement.
In the 15 months that ended July 31, H&R Block lost $736.2 million, largely from losses in its Option One Mortgage Corp subprime lending unit.
H&R Block had agreed in April to sell Option One for an amount estimated at $1 billion to private equity firm Cerberus Capital Management. That agreement collapsed as the U.S. housing slump deepened. H&R Block has been trying to salvage a sale of at least part of the unit.