WASHINGTON, D.C. (August 10, 2006) – Jim Greenwood, president and CEO of the Biotechnology Industry Organization (BIO), Wednesday commended the Securities and Exchange Commission (SEC) for proposing to extend the deadline for smaller public companies to comply with Section 404 (internal controls) of the Sarbanes-Oxley Act.
“The proposal demonstrates that the SEC is considering the full weight of Section 404 on smaller public companies,” said Greenwood. “Section 404 is creating costly, unintended burdens on smaller firms that frequently operate with limited or no revenues.”
Under the proposal, non-accelerated filers (companies with less than $75 million in market capitalization) would not be required to comply with the costly external auditor attestation requirements in Section 404 until Dec. 15, 2008. The SEC also proposed a transition period for new public companies which would delay Section 404 compliance requirements to the date of a company’s second annual report.
“Four years after enactment of the Sarbanes-Oxley Act, it is necessary to correct sections that are having unforeseen and detrimental effects on smaller public companies. BIO will continue to work with other affected industries and the SEC to ensure that emerging companies remain competitive and are not forced to divert valuable research and development dollars to administrative tasks,” Greenwood said.
The release follows the July 11 publication of a Concept Release on guidance for management designed to assist companies in assessing their internal controls over financial reporting.
BIO intends to submit comments on the Concept Release as well as today’s proposals. In its comments, BIO will provide a detailed reform framework that takes a risk-based, cost-effective approach to internal controls. Section 404 should be based on the level of product revenues, which defines the complexity of corporate structures and the need for increased controls.
BIO represents more than 1,100 biotechnology companies, academic institutions, state biotechnology centers and related organizations across the United States and 31 other nations. BIO members are involved in the research and development of healthcare, agricultural, industrial and environmental biotechnology products.