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  • HC-3 Audit Committee and Financial Statements Certification

    • HC-3.1 Principle

      • HC-3.1.1

        The Board must have rigorous controls for financial audit and reporting, internal control, and compliance with law.

        January 2011

    • HC-3.2 Audit Committee

      • HC-3.2.1

        The Board should establish an audit committee of at least three directors of which the majority should be independent including the Chairman. The committee should:

        (a) Review the company's accounting and financial practices;
        (b) Review the integrity of the investment firm licensee's financial and internal controls and financial statements;
        (c) Review the investment firm licensee's compliance with legal requirements;
        (d) Recommend the appointment, compensation and oversight of the investment firm licensee's external auditor; and
        (e) Recommend the appointment of the internal auditor (whether in-house or outsourced).
        Amended: January 2013
        January 2011

      • HC-3.2.2

        The Board or Audit Committee should ensure that the external audit firm and its partners are truly independent of the licensee and have no financial or other relationship with the licensee. Audit findings should be used as an independent check on the information received from management about the licensee's operations and performance and the effectiveness of internal controls.

        January 2011

    • HC-3.3 Audit Committee Charter

      • HC-3.3.1

        The audit committee should adopt a written charter which shall, at a minimum, state the duties outlined in Paragraph HC-3.2.1 and the other matters included in Appendix A to this Module.

        January 2011

      • HC-3.3.2

        A majority of the audit committee should have the financial literacy qualifications stated in Appendix A.

        January 2011

      • HC-3.3.3

        The Board should adopt a "whistleblower" program under which employees can confidentially raise concerns about possible improprieties in financial or legal matters. Under the program, concerns may be communicated directly to any audit committee member or, alternatively, to an identified officer or employee who will report directly to the Audit Committee on this point.

        January 2011

    • HC-3.4 CEO and CFO Certification of Financial Statements

      • HC-3.4.1

        To encourage management accountability for the financial statements required by the directors, the investment firm licensee's CEO and chief financial officer should state in writing to the audit committee and the Board as a whole that the investment firm licensee's interim and annual financial statements present a true and fair view, in all material respects, of the investment firm licensee's financial condition and results of operations in accordance with applicable accounting standards.

        January 2011

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