From: Michael Groll [MGROLL@LLGM.COM]
Sent: Tuesday, February 18, 2003 7:22 PM
To: rule-comments@sec.gov
Subject: File No. S7-02-03

Via E-Mail: rule-comments@sec.gov

February 18, 2003

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington D.C.  20549-0609

Attention:  Jonathan G. Katz, Secretary

Re:   File No. S7-02-03
Proposed Rule: Standards Relating to Listed Company Audit Committees
Release Nos.  33-8173; 34-47137; IC-25885	  

Dear Mr. Katz:

We are submitting this letter in response to the request for comments in connection 
with the above-referenced proposed rule relating to audit committee independence.  
Our comments pertain to the exemption from the "affiliated person requirement" of an 
audit committee member that sits on the board of directors of  both a parent and a 
direct or indirect consolidated majority-owned subsidiary, if the audit committee 
member otherwise meets the independence requirements for both the parent and the 
subsidiary.  We write to suggest that the Securities and Exchange Commission consider 
a slight modification to one of the exemptions from the independence requirements 
described in paragraph (b)(1)(iv)(B) of proposed rule 10A-3 (the "Proposed Rule") to 
accommodate mutual insurance companies that are not generally required to prepare or 
publish GAAP financial statements.  We believe that this modification is consistent 
with the purpose of the exemption in the Proposed Rule.

There are a few mutual insurance companies which own more than 50% of an insurance 
holding company that is a listed issuer.  Mutual insurance companies (companies 
owned by their policyholders) are generally not required to prepare and do not 
publish GAAP financial statements although many prepare them for internal purposes. 
While the exemption in the Proposed Rule would permit an audit committee member of 
a listed issuer, who otherwise meets the independence requirements of paragraph 
(b)(1)(ii) of proposed rule 10A-3, to sit on the board of both a listed issuer and 
its parent, if the listed issuer is a direct or indirect consolidated majority-owned 
subsidiary of the parent, it does not take into account that the parent of a listed 
issuer may not, in fact, be required to prepare or publish GAAP financial statements.  
The absence of publicly available GAAP financial statements, in our view, should, in 
these circumstances, not render unavailable the relief that would be provided by the 
Proposed Rule.   

We suggest, therefore, that the Proposed Rule be modified to provide that the exemption 
in the Proposed Rule would apply either if the listed issuer is a direct or indirect 
consolidated majority owned subsidiary of the parent or if the listed issuer is a 
direct or indirect majority-owned subsidiary of the parent and the financial statements 
of the listed issuer would be consolidated with those of its parent if the parent were 
required to prepare GAAP financial statements.         

We believe that the exemption is intended to allow an audit committee member of a listed 
company to serve on the boards of both a parent and a consolidated majority-owned 
subsidiary because there is a unity of interest at both the parent and subsidiary level 
for accurate and fair financial reporting and oversight.   The proposed modification 
will not impact the purpose of the exemption.

Thank you for your consideration.                               

Michael Groll
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York  10019-5389


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