SEC Amendments Provide Regulatory Relief for Emerging Biotechs

A recent change to the definition of “smaller reporting company” by the U.S. Securities and Exchange Commission earned praise from the Biotechnology Innovation Organization.

This morning BIO Chief Executive Officer Jim Greenwood heaped praise on the decisionsaying the change in the definition will help “promote capital formation and reduce compliance costs for smaller registrants while maintaining investor protections.” Greenwood said the change in the rule will provide “much-needed relief” to small public companies. The broadened definition will allow emerging biotech companies to “spend more of their limited capital on lifesaving research, rather than unnecessary compliance costs,” Greenwood said.

The SEC amended its definition of “smaller reporting company” as a way to reduce compliance costs for these registrants and promote capital formation, while maintaining appropriate investor protections, the SEC said. The new definition, according to the SEC, “to include registrants with a public float of less than $250 million, as well as registrants with annual revenues of less than $100 million for the previous year and either no public float or a public float of less than $700 million.” BIO noted that the rule change will “increase the number of small companies eligible to provide scaled disclosures under Regulation S-K and Regulation S-X.” Additionally, the reforms are

The SEC also amended the definitions of “accelerated filer” and “large accelerated filer” to preserve the existing thresholds in those definitions, the agency said.

In its announcement, BIO said it welcomes the SEC’s efforts to expand “the non-accelerated filer definition to afford much-needed relief to emerging biotechs from the costly auditor attestation requirement under Sarbanes-Oxley 404(b).”

Greenwood lauded the decisions. The broadening of the accelerated filer definitions will provide relief from “the costly attestation of internal controls required under current law.”

Additionally, the SEC also adopted reforms to the eXtensible Business Reporting Language (XBRL) formatting requirements for financial statements and other public filings, BIO said in its statement. These changes are also expected to benefit smaller biotech firms that face cost burdens from the current requirements. BIO noted that current Inline XBRL will “likely improve data integrity and improve comparability of financial data across larger firms.” However, BIO said the costs associated with the transition and upkeep of Inline XBRL can disproportionately burden smaller filers, which includes emerging biotech companies. The Inline XBRL does not add value for investors in those smaller companies, BIO said. BIO called for the Securities and Exchange Commission to consider further action on exemptions from XBRL requirements for Emerging Growth Companies, SRCs, and non-accelerated filers.

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