- D&O Insurance.
a. Average liability for D&O insured litigation settlements increased to $23 million in 2002, from $17 million in the prior year. (Tillinghast Towers Perrin Survey)
b. Insurers continue to take a harder line on Severability clause issues. Severability of personal misconduct exclusions remains widely available. However, full contractual Severability grows more evasive. Insurers continue to introduce new policy forms that restrictively confront perceived inadequate policyholder candor in the application process. (John Niederhofer, of Barney & Barney)
- SEC Final Rules for Audit Committees.
The SEC issued final rules which:
a. require each audit committee member to be “independent” according to specified criteria;
b. require that the audit committee be directly responsible for the selection and oversight of the issuer’s auditors and the auditors must report directly to the issuer’s audit committee;
c. require the audit committee to establish procedures for handling complaints regarding the issuer’s accounting practices; and
d. require audit committees to have the authority to engage advisors and require issuers to provide audit committees with funding to retain such advisors and to compensate the auditors.
A public company’s audit committee must be in compliance with these rules no later than the earlier of (i) October 31, 2004, and (ii) the company’s annual shareholders meeting held after January 15, 2004. (Scott Stanton and Laura Sand of Gray Cary)
- Nasdaq Rules.
Nasdaq is to publish its proposed revised, new rules under the Sarbanes Oxley Act by July 15, 2003, and to have finalized rules approved by the SEC by December 1, 2003. A Nasdaq listed company must be in compliance with these new rules not later than the earlier of (i) the company’s annual shareholders meeting held after January 15, 2004, and (ii) October 31, 2004. (Scott Stanton and Laura Sands of Gray Cary.)
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