WASHINGTON, D.C. – Senators Thom Tillis (R-NC), Gary Peters (D-MI), David Perdue (R-GA), and Kyrsten Sinema (D-AZ) introduced the Fostering Innovation Act of 2019, bipartisan legislation that would provide commonsense regulatory relief for many innovative companies that are in scientific and medical research fields.
Currently, emerging growth companies (EGCs) are exempt from certain regulatory requirements for five years after their initial public offering (IPO). One of the requirements EGCs are exempt from is Sarbanes-Oxley Section 404 (b) – which requires public companies to obtain an external audit on the effectiveness of their internal controls for financial reporting. The Fostering Innovation Act is a very narrow fix that temporarily extends the Sarbanes-Oxley Section 404(b) exemption for an additional five years for a small subset of EGCs with annual average revenue of less than $50 million and less than $700 million in public float.
“North Carolina has a rich and diverse biotech landscape, and is the home of many companies that are on the cutting edge of scientific and medical research. Unfortunately, some of the expiring JOBS Act exemptions are going to harm the ability of some companies to access capital and continue to grow by diverting critical investments away from science towards compliance,” said Senator Tillis. “I am proud to introduce the bipartisan Fostering Innovation Act, and I look forward to working with my Senate colleagues to advance this critical fix.”
“Across Michigan, bio-technology startups are helping create good-paying jobs and developing innovative cures. In order to advance medicine for patients in need, many of these companies must allocate valuable resources to conduct trials and tests before their products can reach the market,” said Senator Peters. “This bipartisan legislation is a commonsense measure that allows these cutting-edge small businesses to cut red tape and focus on critical research and development of new life-saving treatments.”
“Georgia is the number one state in the country in which to do business. Our state has also become a hotbed for fintech, biotech, and other emerging technology companies,” said Senator Perdue. “As a former Fortune 500 CEO, I’ve seen the negative impact that one-size-fits-all regulations have on businesses. This bipartisan action removes one of the most onerous requirements off of these technology startups and will allow Georgia’s industries to compete in public markets and on the global stage.”
“We must continue cutting red tape so that Arizona’s state-of-the-art businesses can develop critical innovations and move our country forward,” said Senator Sinema.
BIO President & CEO Jim Greenwood: “I commend Sens. Tillis, Sinema, Peters and Perdue for championing the Fostering Innovation Act. Over 300 biotechnology companies have gone public since the JOBS Act was enacted, and this important legislation will further promote capital formation while preserving investor protections. Most biotechnology companies remain pre-revenue for a decade or more until they receive their first product approval, long past the original five-year exemption from SOX 404(b) granted by the JOBS Act, causing a damaging diversion of capital from science to compliance. By extending this commonsense exemption of the JOBS Act to qualifying companies, emerging biotechnology innovators will be able to devote more of their limited resources to potentially lifesaving research and development activities.”
A copy of the bill text is available here.