World Surveillance Group Inc (fka WSGI)

[rocky301]

Here is the best explanation I could find on the
AMEX audit committe RULES..


(5) AMEX Rules and Regulations on Director Independence as of July 1, 2002 Back to Top
Director Independence.

1. Current AMEX Rules on Director Independence.

Section 121(A) of the American Stock Exchange Company Guide (the "AMEX Guide") contains a number of provisions regarding standards for corporate governance in general and director independence in particular. American Stock Exchange Guide (Listing Standards, Policies and Requirements), located at http://www.amex.com. Like similar regulations under other SROs, as of July 31, 2002, there were no AMEX requirements generally requiring director independence. As of July 31, 2002, AMEX rules and regulations mandated director independence only in the context of audit committees.

Under Section 121(A) of the AMEX Guide, publicly traded companies listed on AMEX must have a sufficient number of independent directors on the company's board of directors to satisfy the audit committee requirements set forth in Section 121(B) (discussed below). The AMEX Guide Section 121(A) states that to be considered "independent", directors (i) cannot be officers of the company and (ii) must be "free from any relationship that would interfere with the exercise of independent judgment."

In addition, the AMEX Guide lists five (5) classes or types of persons or entities that are not considered independent under Section 121(A), regardless of their individual circumstances. These five types of persons or entities are as follows:

(a) a director who is employed by the corporation or any of its affiliates for the current year or any of the past three years;

(b) a director who accepts any compensation from the corporation or any of its affiliates in excess of $60,000 during the previous fiscal year, other than compensation for board service, benefits under a tax-qualified retirement plan, or non-discretionary compensation;

(c) a director who is a member of the immediate family of an individual who is, or has been in any of the past three years, employed by the corporation or any of its affiliates as an executive officer. Immediate family includes a person's spouse, parents, children, siblings, mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law, and anyone who resides in such person's home;

(d) a director who is a partner in, or a controlling shareholder or an executive officer of, any for-profit business organization to which the corporation made, or from which the corporation received, payments (other than those arising solely from investments in the corporation's securities) that exceed 5% of the corporation's or business organization's consolidated gross revenues for that year, or $200,000, whichever is more, in any of the past three years; and

(e) a director who is employed as an executive of another entity where any of the company's executives serve on that entity's compensation committee."

2. Proposed AMEX Rules on Director Independence. As of July 31, 2002 there were no currently pending developments with regards to AMEX Director Independence Rules that have been made available to the public by AMEX.

Audit Committee Independence.

AMEX Rules on Audit Committee Independence as of July 1, 2002.

Section 121(B) of the AMEX Company Guide contains a number of provisions regarding standards for audit committees and addresses audit committee charters, independence and composition.

Under the requirements of Section 121(B), each issuer must certify to AMEX that it has adopted a formal written audit committee charter and that the issuer's audit committee has reviewed and assessed the adequacy of the formal written charter on an annual basis. Section 121(B) specifies the substantive requirements for such charters as well as the composition of the audit committee:

(a) Charter

Each Issuer must certify that it has adopted a formal written audit committee charter and that the Audit Committee has reviewed and reassessed the adequacy of the formal written charter on an annual basis. The charter must specify the following:

(i) the scope of the audit committee's responsibilities, and how it carries out those responsibilities, including structure, processes, and membership requirements;

(ii) the audit committee's responsibility for ensuring its receipt from the outside auditors of a formal written statement delineating all relationships between the auditor and the company, consistent with Independence Standards Board Standard 1, and the audit committee's responsibility for actively engaging in a dialogue with the auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the auditor and for taking, or recommending that the full board take, appropriate action to oversee the independence of the outside auditor; and

(iii) the outside auditor's ultimate accountability to the board of directors and the audit committee, as representatives of shareholders, and these shareholder representatives' ultimate authority and responsibility to select, evaluate, and, where appropriate, replace the outside auditor (or to nominate the outside auditor to be proposed for shareholder approval in any proxy statement).

(b) Composition

(i) Each issuer must have, and certify that it has and will continue to have, an audit committee of at least three members, comprised solely of independent directors, each of whom is able to read and understand fundamental financial statements, including a company's balance sheet, income statement, and cash flow statement or will become able to do so within a reasonable period of time after his or her appointment to the audit committee. Additionally, each issuer must certify that it has, and will continue to have, at least one member of the audit committee that has past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual's financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities.

(ii) Notwithstanding paragraph (i), one director who is not independent as defined in Section 121A, and is not a current employee or an immediate family member of such employee, may be appointed to the audit committee, if the board, under exceptional and limited circumstances, determines that membership on the committee by the individual is required by the best interests of the corporation and its shareholders, and the board discloses, in the next annual proxy statement subsequent to such determination, the nature of the relationship and the reasons for that determination.

(iii) Exception for Small Business Filers - Paragraphs (b)(i) and (b)(ii) do not apply to issuers that file reports under SEC Regulation S-B. Such issuers must establish and maintain an Audit Committee of at least two members, a majority of the members of which shall be independent directors.

Thus, Section 121(B) requires that each audit committee of at least three (3) members and must be comprised solely of independent directors, each of whom is well versed in fundamental financial analysis. At least one such member must have past experience in financial accounting, requisite professional certification or comparable experience which results in financial sophistication. Although there are a few stated exceptions to the strict independence rules for audit committee members, such exceptions are highly limited.

Proposed AMEX Rules on Audit Committee Independence. As of July 1, 2002 there were no currently pending developments with regards to AMEX Audit Committee Rules that have been made available to the public by AMEX.

(6) SEC Independence Rules Back to Top
The Sarbanes-Oxley Act of 2002 added Federal requirements for Director Independence for audit committees as follows:
Each member of the audit committee shall be a member of the board of directors of the company, and shall otherwise be independent, as defined in applicable laws, rules and regulations governing the composition of the company’s audit committee (Section 301).

To be considered to be independent a member of an audit committee may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee:

(i) accept any consulting, advisory or other compensatory fee from the company; or

(ii) be an affiliated person of the company or any subsidiary of the company (Section 301).
http://www.boardstrategies.com/boarddoctor/audit_director.html#5