SR - Consultation Paper- Guidelines on Audit Committee - 1…

SR-CONSUL-04/08-0007 FINANCIAL SERVICES COMMISSION DISCUSSION PAPER GUIDELINES ON AUDIT COMMITTEES AUGUST 27, 2004 1.0 BACKGROUND Most supervisory agencies including the Financial Services Commission (“FSC”) are moving towards a supervisory approach that relies on strong corporate governance. One of the areas of corporate governance that the FSC is seeking to strengthen is the supervision role that is performed by Audit Committee s. The Securities Act requires, through section 59 (A)(1) of the Securities Act, that “ every company which is licensed under section 7 or 8 of the Act shall establish an audit committee”. In addition, section 59 (A)(2) of the Securities Act states that the FSC shall make rules in respect to the functions of Audit Committees. Section 4 of this document, outline s the proposed rules governing the establishment of Audit Committees by companies licensed as securities dealers or investment advisors. These rules will be drafted into regulations. Once these regulations have been promulgated, a breach of them shall be an offence. It is intended that the guidelines on Audit Committee should be adopted not only by licensees under the Securities Act but by the issuers of outstanding issues of securities as well . In developing the proposed guidelines we examined the documents listed under the caption “Information Source s” at the end of the paper. 2.0 THE PURPOSE OF THE AUDIT COMMITTEE The Audit Committee is ...