Fulton Financial Corporation
One Penn Square
Lancaster, Pennsylvania 17602
D. Scott Huggins, CIA, CFSA, CFE
Senior Vice President & Chief Auditor
Fax: 717-291-2855

April 1, 2003

Jonathan G. Katz
U.S. Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549

Re: File SR-NASD-2002-141; Proposed Amendments to NASD Rules 4200 and 4350

Dear Mr. Katz:

I appreciate the opportunity to comment on the proposed amendments to NASD Rules 4200 and 4350. As a Chief Audit Executive having worked closely with various audit committees spanning my 31-year career in the financial services industry, I can certainly appreciate the requirement for independent audit committee members. During my career I have been integrally involved in setting standards for the internal auditing profession through my membership on The Institute of Internal Auditors' Internal Auditing Standards Board. As part of my role as President of the National Association of Financial Services Auditors (NAFSA), I have also been a strong advocate of independence for both the internal audit function and the audit committee. It is in the capacity of Chief Audit Executive and management team member that I question the meaning and intent of rules 4200 and 4350.

I find the proposed amendments somewhat confusing, specifically relating to Rule 4200(a)(15)(D) and its apparent lack of relationship to Rule 4350(d)(2)(A)(i)(b). Rule 4200 provides for a de minimis exemption if payments to a director do not exceed 5% of the director company's consolidated gross revenues for that year, or $200,000, whichever is greater. Rule 4350 brings into play §10A(m)(3) whereby an audit committee member may not accept any consulting, advisory, or other compensatory fee other than for board service. My understanding is §10A(m)(3) refers to either direct or indirect payments, e.g., fees paid to a law firm where a senior member of that firm sits on an issuer's board of directors and would be disqualified from serving on the issuer's audit committee. Under what scenarios would these two rules both be applicable?

The Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees recognized the importance of independence; however, that committee gave the stock exchanges some leeway in determining what would truly impact independence. As a result, the NASDAQ promulgated de minimis exceptions related to indirect compensation. It is this concept of de minimis exception that I encourage the SEC to consider and incorporate in its final rules regarding independence of audit committee members. Outright disqualification of directors for receiving insignificant compensation was certainly not the mandate created by the Sarbanes-Oxley Act of 2002. The value to an audit committee having an attorney from the community's most reputable law firm as a member of that committee is immeasurable.

Thank you for your consideration of my comments on this important matter.