This Charter governs the operations of the Audit Committee (the "Exchange Committee") of the Board of Directors (the "Exchange Board") of The NASDAQ Stock Market LLC (the "Exchange"). The Charter will be reviewed and reassessed, at least annually, by the Exchange Board and the Exchange Committee. The Exchange Committee shall be appointed by Exchange Board in compliance with Article III, Section 5(d) of the By-Laws of the Exchange and shall consist of four or five Directors, each of whom is independent of management. Members of the Committee shall be considered independent if, in the opinion of the Board of Directors, they have no relationship that may interfere with the exercise of their independence in carrying out the responsibilities of a director. All Committee members will be able to read and understand fundamental financial statements, including a balance sheet, income statement, and cash flow statement. At least one member must have past employment experience in finance or accounting, requisite professional certification in accounting or any other comparable experience or background that results in the individual's financial sophistication, including service as a Chief Executive Officer, Chief Financial Officer, or other senior officer with financial oversight responsibilities or otherwise satisfy standards for financial expertise required for audit committees of companies listed on The NASDAQ National Market.
Statement of Policy
The primary responsibility of the Exchange Committee will be to assist the Exchange Board in fulfilling its oversight responsibilities in assessing controls that mitigate risks associated with operating an exchange. These would be principally related to regulatory and operational risks.
In so doing, it is the responsibility of the Exchange Committee to maintain free and open communication with independent auditors, internal auditors, and management of the Exchange and its affiliates. Where feasible the Exchange Committee shall leverage the same independent auditors, internal auditors and overall risk management framework as The NASDAQ OMX Group (the "NASDAQ OMX"). The Exchange Committee shall have the ability to engage outside resources as needed to fulfill their responsibilities. In discharging their oversight role, the Exchange Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities, and personnel of the Exchange and its affiliates and the power to retain independent counsel, or other experts, and funding sufficient for this purpose.
Responsibilities and Processes
The primary responsibility of the Exchange Committee is to oversee the effectiveness of the control processes for the operation of the Exchange. These are primarily but not exclusively related to mitigating regulatory and operational risk resulting from the operation of a national securities exchange. The Exchange Committee shall report the results of their efforts to the Exchange Board. Exchange LLC management is responsible for the quality of controls at the Exchange and for mitigating risk. The Exchange Committee in carrying out its responsibilities believes its policies and procedures should remain flexible, in order to best react to changing conditions and circumstances. The Exchange Committee should take the appropriate actions to oversee overall corporate policy for quality activities and reporting of a self-regulatory organization, sound business risk management practices, and ethical behavior.
The following shall be the principal recurring processes of the Exchange Committee in carrying out its responsibilities. The processes are set forth as a guide with the understanding that the Committee may supplement them as appropriate. The responsibilities and processes of the Committee shall be consistent with the Exchange Act and the rules and regulations adopted by the SEC.
The Exchange Committee shall discuss with the internal auditors and the independent auditors the overall scope and plans for their respective audits at the Exchange including the adequacy of staffing, compensation, and resources. Also, the Committee shall discuss with management, the internal auditors, and the independent auditors the adequacy and effectiveness the Exchange's internal controls, including the system to monitor and manage regulatory and operational risk, and legal and ethical compliance programs. Included in this assessment are regulatory services that are outsourced. Further, the Committee shall meet separately with the internal auditors and the independent auditors, with and without management present, to discuss the results of their examinations. The internal auditors shall report directly to the Committee and have free and open access to information deemed necessary by them to perform their assessments. The Committee shall provide oversight over the system of internal controls, relying upon management's and the internal and independent auditors representations and assessments of the controls.
As it relates to the activities of the Exchange the Committee shall assist the Regulatory Oversight Committee of the Exchange Board in overseeing the adequacy and effectiveness of NASDAQ's self-regulatory organization responsibilities; assessing NASDAQ's regulatory performance with regard to membership and trading activity and the regulatory compliance of its broker/dealer subsidiaries; and assisting the Exchange Board and other committees of the Exchange Board in reviewing the regulatory plan and the overall effectiveness of NASDAQ's regulatory functions
An annual performance appraisal of the Exchange Committee.
Independent Public Auditor Services
For the Exchange the independent auditor is prohibited from performing any of the following services for NASDAQ or its affiliates:
bookkeeping or other services related to the accounting records or financial statements of the audit client;
financial information systems design and implementation;
appraisal or valuation services, fairness opinions, or contribution-in-kind reports;
actuarial services;
internal audit outsourcing services;
management or human resources functions;
broker or dealer, investment adviser, or investment banking services;
legal services and expert services unrelated to the audit; and
any other service that the Public Company Accounting Oversight Board determines, by regulation, is impermissible.
All audit and allowable non-audit services must be approved in advance by the Audit Committee of NASDAQ OMX. However, the Chairman of the Audit Committee of NASDAQ OMX has authority to approve in advance non-audit services by the independent auditor to support business development, consulting on accounting issues (subject to the prohibitions above) or tax consulting to the extent permitted by SEC rules, if such non-audit services do not exceed $300,000 in the aggregate between meetings of the Audit Committee of NASDAQ OMX and the Audit Committee of NASDAQ OMX is informed of such pre-approval by the Chairman at the Committee's next meeting.
0.33)