REGULATION

SEC TO RECONSIDER MUTUAL FUND BOARD RULE

The chairman of the Securities and Exchange Commission, Christopher Cox, said yesterday he expects the agency will revisit a controversial rule requiring mutual funds to have an independent chairman.

The SEC adopted the rule in 2004 and reaffirmed it last June, but the U.S. Court of Appeals for the D.C. Circuit recently ruled that it failed to seek public comment on its costs, sending the matter back to the agency once again.

“I think you can expect us to take some action,” Mr. Cox told reporters after testifying before the Senate Banking Committee. Asked if the SEC might reopen the rule for public comment, Mr. Cox said: “I believe that’s the direction we’ll go.”

– Dow Jones Newswires

MICROSOFT, E.U. REGULATORS CLASH OVER BUNDLING ISSUE

Microsoft and European regulators clashed yesterday about whether media software should be bundled into a personal computer operating system, as the week-long court hearing entered its second day.

The U.S. software maker is appealing a landmark European antitrust ruling against it. A panel of 13 judges from the Court of First Instance pummeled lawyers from both sides about testimony given Monday.

In its 2004 decision, regulators said Microsoft had unfairly leveraged its position as the dominant supplier of PC operating systems to squeeze out competitors making software that plays video and music and server software, such as RealNetworks.

Regulators required Microsoft to offer a version of its Windows operating system without Media Player and share detailed information with competitors to help them make software that works smoothly with Windows.

– Dow Jones Newswires

INVESTMENT BANKING

MORGAN’S GORMAN SHUFFLES EUROPEAN, ASIAN CHIEFS

James Gorman, who joined Morgan Stanley in February to turn around the firm’s retail brokerage, reassigned his European and Asian chiefs a month after dismissing the unit’s top two sales executives in America.

Alexander Classen, head of sales for Europe and the Middle East, will run private wealth management in those regions, according to an internal memo Mr. Gorman sent his staff yesterday. Michael Durbin, head of non-U.S. operations since June, “will be pursuing new opportunities at Morgan Stanley,” the memo said. The firm’s chief executive, John Mack, pulled Mr. Gorman, 47, from Merrill Lynch & Co. to reverse a slide in earnings at the brokerage. Morgan Stanley brokers generate just two-thirds the revenue their counterparts make for Merrill Lynch, and the company’s shares are the worst-performers of the five biggest American securities firms in the past year.

“This is an ailing franchise because it’s positioned wrong,” an analyst with Punk Ziegel & Co. in Pinellas Park, Fla., Richard Bove, said. “Gorman has to change the culture, and it’s an enormous task.”

Mr. Gorman is trying to reverse a profit slide at Morgan Stanley’s Global Wealth Management Group, where earnings tumbled to $23 million in the first quarter from $353 million a year earlier.

– Bloomberg News

DEFENSE SPENDING

BOEING, AIRBUS LIKELY COMPETITORS FOR AIR FORCE TANKER CONTRACT

Opening a multibillion-dollar competition, the Air Force issued a request yesterday for information from companies that hope to build a new generation of aerial refueling tankers.

The request begins a competition that is likely to pit the Boeing Company against a team of Northrop Grumman Corporation and European Aeronautic Defence and Space Company, the majority owner of European jet maker Airbus SAS. A contract for the project, expected to be worth at least $20 billion, could be awarded as soon as next year.

– Associated Press

IN BRIEF

AT&T, formerly SBC Communications, said yesterday that its earnings rose 63.3% in the first quarter mostly because of its acquisition of AT&T Corporation …Amazon.com said yesterday that earnings fell nearly 35% in the first quarter, compared to a period last year in which the online retailer had a big one-time gain.

– Associated Press