Nomura Holdings, Inc.

February 18, 2003

Via email: rule-comments@sec.gov

Mr. Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
U.S.A.

Re: File No. S7-02-03, Proposed Rule: Standards Relating to Listed Company Audit Committees

Dear Mr. Katz,

Nomura Holdings, Inc. appreciates the opportunity to comment on the Securities and Exchange Commission's (the "SEC") Proposed Rule: Standards Relating to Listed Company Audit Committees (the "Proposed Rule") required by Section 301 of the Sarbanes-Oxley Act of 2002 (the "SO Act"). We are glad to support the SEC's efforts to further strengthen existing requirements regarding the listed company audit committees. In order to do this, we would like to respectfully submit our comments to the SEC for your consideration.

First of all, we would like to thank the SEC for establishing exemptions in the Proposed Rule for a board of statutory auditors or statutory auditors under the Japanese Commercial Code regarding the requirements of the independence of its members and its responsibilities. We hope that the exemptions will be maintained on a permanent basis.

As noted below, our comments will be divided into two areas in which the Proposed Rule may cause a legal uncertainty with respect to the corporate governance arrangements in Japan.

1. Board of Statutory Auditors System

A board of statutory auditors satisfies all the requirements stipulated in the Proposed Rule if it complies with the relevant provisions of the Japanese Commercial Code and the Law Exceptions to the Commercial Code concerning Audits, etc. of Corporations (the "Special Law"). For your convenience, we would like to provide our analyses on two of the requirements.

(1) Responsibility for the oversight of work of registered accounting firm

10A-3(c)(2)(i)(E) of the Proposed Rule requires that the board of statutory auditors (or similar body) or statutory auditors of a foreign private issuer be directly responsible, in accordance with standards prescribed by home country legal or listing provisions, for the oversight of the work of the outside accounting firm engaged. In Japan, such standards are principally provided by provisions of the Special Law, and the board of statutory auditors, which is separate from the board of directors, performs audit oversight functions in accordance with such standards. The relevant provisions of the Special Law include: the right of statutory auditors to demand the accounting firm to report on its audit (Article 8, paragraph 2); the duty of the accounting firm to deliver its audit report to the board of statutory auditors (Article 13, paragraph 1); the right of statutory auditors to demand the accounting firm to explain its audit report (Article 13, paragraph 3); the right of the statutory auditors to make investigations concerning the accounting firm's audit report (Article 14, paragraph 1); the duty of the statutory auditors to report on their determination that the manner or result of the audit by the accounting firm is not appropriate, if they make such determination (Article 14, paragraph 3); the submission to shareholders of a proposal to appoint or dismiss the accounting firm with the consent, or at the request of the board of statutory auditors (Article 3, paragraph 2 and 3 and Article 6, paragraph 3); and the right to dismiss the accounting firm with the resolution of the board of statutory auditors (Article 6-2, paragraph 1).

In accordance with these broad powers, the board of statutory auditors provides the independent review and oversight of the work of the accounting firm. The copy of the board of statutory auditors' report must be delivered at the time of giving the notice of convening the ordinary general meeting of shareholders together with the report of the accounting firm (Article 283, paragraph 2 of the Commercial Code and Article 15 of the Special Law). In case the audit report of the board of statutory auditors states that the result of audit by the accounting firm is inadequate, the director is required to obtain the approval at the general meeting of shareholders regarding financial reporting (Article 283, paragraph 1 of the Commercial Code and Article 16, paragraph 1 of the Special Law). If there exists any unjust act or any serious fact in violation of laws, orders and articles of incorporation as to directors performing their functions and if necessary investigation for auditing could not be done, the effect and reason must be stated in the report (Article 281-3, paragraph 2 (10) and (12) of the Commercial Code and Article 13, paragraph 2(2) of the Special Law). Furthermore, the statutory auditors are required to attend the shareholders' meeting and to answer to the questions made by the shareholders (Article 237-3, paragraph 1 of the Commercial Code). In this course the shareholders can make an informed decision whether to approve the financials presented by the management.

(2) Funding

10A-3(b)(5) of the Proposed Rule requires that each listed issuer must provide for appropriate funding, as determined by the audit committee (or board of statutory auditors), for payment of compensation to the accounting firm and outside advisers. Under Article 279-2 of the Commercial Code, statutory auditors are authorized to request to the company advance payment of audit expenses including compensation to outside advisers. The company cannot refuse the payment unless it validates that the expenses are unnecessary for execution of the function of statutory auditors. Therefore, the Japanese companies meet the requirement of 10A-3(b)(5)(ii) of the Proposed Rule.

On the other hand, the Commercial Code and the Special Law does not expressly set forth any provision regarding funding for payment of compensation to the accounting firm. However, each Japanese company has already taken some measures that the board of statutory auditors is more or less involved in the process of determination of compensation to the accounting firm. If not, each Japanese company can establish its corporate practice under the Commercial Code and the Special Law that the determination (decision or consent) by the board of statutory auditors is required for payment of such compensation. Also, the revised Commercial Code Rule will require a company to disclose audit fees paid to the accounting firm in the business report. The Japanese company will be required to provide information for shareholders and investors to determine whether the amount of such audit fees is reasonable. Therefore, the Japanese companies meet the requirement of 10A-3(b)(5)(i) of the Proposed Rule.

2. Committee System

The revised provision of Japanese Commercial Code effective on April 1, 2003 will give a company an option to adopt a newly introduced committee system which is a new corporate governance structure alternative in Japan and is different from the current board of statutory auditors (or the statutory auditors) system. (For your better understanding of the committee system, please kindly see the Appendix.)

Under the committee system, a company is required to establish the "audit committee", which sounds similar to an audit committee in the U.S. but is still different in several aspects such as its scope of responsibilities and members' qualifications.

Our understanding is that the Proposed Rule does not address special circumstances like the Japanese committee system. It is unclear whether the audit committee under the committee system (the "Japanese Audit Committee") is deemed to be the board of statutory auditors (or similar body) which is exempt from the application of certain requirements under the Proposed Rule. Therefore, we would like the SEC to consider establishing a provision that also exempts the Japanese Audit Committee from the requirements regarding the independence of its members and its responsibilities. In order to achieve this result, we respectfully request that the words "separate from the board of directors" in 10A-3(c)(2)(i)(B) of the Proposed Rule be deleted or appropriately revised with respect to the Japanese Audit Committee.

In order for the Commission to better understand our request, we would like to explain that the Japanese Audit Committee (described below) as well as the board of statutory auditors has strong powers. The relevant provisions of the Special Law include: the right of the Japanese Audit Committee to demand the accounting firm to report on its audit (Article 21-36, paragraph 1); the right of the Japanese Audit Committee to audit the acts of directors and officers (Article 21-8, paragraph 2(1)); the right of the Japanese Audit Committee member to demand directors, officers and employees to report on the business and investigate the affairs of the company and its property (Article 21-10, paragraph 1); the right of the Japanese Audit Committee member to represent the company for lawsuits between the company and directors (Article 21-10, paragraph 6); the duty of the accounting firm to deliver its audit report to the Japanese Audit Committee (Article 21-28, paragraph 1); the right of the Japanese Audit Committee member to demand the accounting firm to explain its audit report (Article 21-28, paragraph 3); the duty of the Japanese Audit Committee to report on their determination that the manner or result of the audit by the accounting firm is not appropriate, if they make such determination (Article 21-29, paragraph 2(1)); the right of the Japanese Audit Committee to determine a proposal to shareholders to appoint or dismiss the accounting firm (Article 21-8, paragraph 2(2)); and the right with the resolution of the Japanese Audit Committee to dismiss the accounting firm (Article 21-36, paragraph 1). Also, in case the audit report of the Japanese Audit Committee states that the result of audit by the accounting firm is inadequate, the director is required to obtain the approval at the general meeting of shareholders regarding financial reporting (Article 21-31, paragraph 1).

In addition, if there exists any unjust act or any serious act in violation of laws, orders or articles of incorporation as to directors or officers performing their functions, the audit report of the Japanese Audit Committee must state the fact (Article 21-29, paragraph 2(5)). The audit report of the Japanese Audit Committee shall be reported to the general meeting of shareholders (Article 21-31, paragraph 1). Furthermore, in case where an officer has done an act not within the scope of the object of the company or other act in violation of laws, orders or the articles of incorporation and there fears to accrue serious damages to company due thereto, the Japanese Audit Committee member must report to the board of directors and may request the officer to stop the act (Article 21-10, paragraph 4 and 5). As discussed above, the newly established provisions regarding the Japanese Audit Committee are much like those regarding the board of statutory auditors. It might be difficult for the Japanese Audit Committee composed of independent directors only to perform these broad functions. Actually, some of the companies scheduled to adopt the committee system have announced that they will have one full-time audit committee member. It is reasonable that Article 21-8, paragraph 4 of the Special Law requires that the majority of the Japanese Audit Committee members be independent directors, while the SO Act requires the committee composed of independent directors only. Also, no member of the Japanese Audit Committee can be an executive officer of the company, so that the Japanese Audit Committee can be separate from the execution of the affairs of the company. Therefore, there is no perceivable difference between the Japanese Audit Committee and the board of statutory auditors.

We respectfully request that 10A-3(b)(1) of the Proposed Rule be revised to allow the Japanese Audit Committee to be exempt from the requirements of independence under the SO Act, provided that the Japanese Audit Committee satisfies these requirements under the Special Law.

* * * * *

We would be happy to discuss any questions the SEC may have with respect to this letter in order to seek more practical solutions to the issues presented through this letter by us.

Very truly yours,

Nobuyuki Koga
Executive Vice President and Chief Operating Officer
Nomura Holdings, Inc.
1-9-1, Nihonbashi, Cho-ku, Tokyo 103-8691, JAPAN
Tel. 81-3-5255-1000
Fax. 81-3-5255-1064
E-mail. koga-005d@jp.nomura.com

Appendix

Overview of the Committee System