Advisory Panel Votes Overwhelmingly in Favor of Scaled Section 404 Reforms for Small Businesses
WASHINGTON, D.C. (April 21, 2006) – The Securities and Exchange Commission’s (SEC) Advisory Committee on Smaller Public Companies voted overwhelmingly in favor of scaled reform recommendations for Section 404 (internal controls) of the Sarbanes-Oxley Act of 2002. In a 18-3 vote Thursday, the advisory committee agreed to a final set of recommendations for submission to the SEC.
This final report reflects a majority of BIO’s reform recommendations. BIO led industry efforts to reform cost burdens of Section 404 for smaller companies.
“For small public companies, Sarbanes-Oxley can be excruciatingly time-consuming and costly because of its ‘one-size-fits-all’ approach,” said Jim Greenwood, BIO’s president and CEO. “After months of interviewing and meeting with stakeholders representing all industries, it is clear that the advisory panel understands the impact of the unintended consequences of the Sarbanes-Oxley Act.
“Under Section 404, many small biotechnology companies would be forced to choose between funding research and complying with the regulation’s demands. These companies work with cutting-edge science that results in products designed to improve and save the lives of our loved ones.
“BIO applauds the advisory panel’s final report and recommends that the SEC expeditiously take action to incorporate the recommendations in reforming section 404,” Greenwood said.
Highlights in the report include relief from management and external auditor attestation requirements for companies defined as:
· small cap or having market caps of $787 million with less than $10 million in product revenues;
· microcap or the bottom 1 percent in market cap, which usually fluctuates between $125 million and $128 million, and companies with less than $125 million in revenues.
Also, the committee recommended relief for small caps with a market cap no higher than $787 million with less than $250 million in revenues.
BIO intends to work with the SEC as it finalizes regulations associated with Sarbanes-Oxley. On May 10, 2006, Steve Sherwin, M.D., chairman and CEO of Cell Genesys Inc. who also serves as the chairman of BIO’s Emerging Companies Section Governing Body, will represent BIO at the SEC roundtable discussion on the impact of Section 404.
Sarbanes-Oxley, the corporate governance law, applies to publicly traded companies. The SEC’s 21-member Advisory Committee on Smaller Public Companies was formed to consider ways of improving the impact of Sarbanes-Oxley on small public companies.
To view the full report, visit the SEC’s website at http://www.bio.org/tax/sox/20060418.pdf.
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.