Quote from AAAintheBeltway:
After receiving permission from his battalion commanders, Waddell ordered Marine snipers to open fire on the man, and he was hit...
... the battalion commander, Lt. Col. Seth Folsom, determined he had violated rules of engagement that governed when Marines could fire, and at whom. Folsom said Wadell "is not recommended for promotion" and "in violation of [combat rules] during an engagement." The report stated that "noncombatant local nationals" were in the area of direct fire and that "the engagement resulted in a damaged local national vehicle."
A Marine brigadier general who reviewed the case was sympathetic to Waddell, whom he described as a "superb and heroic combat leader. But the general said the decision on whether Waddell should be promoted was "the commander's prerogative," noting that the battalion commander on the scene had lost "confidence in [Waddell's] abilities."