WASHINGTON, D.C. (May 19, 2006) -- Jim Greenwood, president and CEO of the Biotechnology Industry Organization (BIO), issued the following statement in response to the Securities and Exchange Commission’s (SEC) release of intended actions related to implementation of Section 404 of the Sarbanes-Oxley Act of 2002:
“BIO is encouraged by the SEC’s statement of intent to review the cost burdens for smaller public companies associated with Section 404 compliance and to consider reforms. BIO considers the decision a positive step toward implementing Sarbanes-Oxley as Congress intended. In a release Wednesday, the SEC said its forthcoming reform concept document will address several issues that may be the subject of Commission guidance to address the needs of public companies. It also states that the SEC will seek input on the appropriate role of outside auditors in connection with the requirements of Section 404 in order for the Commission to provide alternatives to the current approaches.
“The SEC has begun to review and consider the recommendations by various entities, including BIO and its multi-industry coalition. The SEC has indicated its intent to reform internal control requirements so that they are ‘scaled’ and ‘proportional’ to the size and the complexity of the companies, consistent with BIO’s proposals. BIO intends to continue working with the SEC and the Public Company Accounting Oversight Board (PCAOB) to enact revisions favorable to smaller public companies,” Greenwood said.
In the next step, the SEC will release its reform concept document for public comment. BIO intends to 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.
Also in its announcement Wednesday, the SEC said it will propose a postponement of Section 404 requirements for the smallest filers.
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.