US SOX regulations to be eased for biotechs

The Biotechnology Industry Organization has welcomed provisions to give US small businesses relief from what it terms "unnecessarily burdensome SARBOX compliance costs," referring to the financial regulations imposed under the Sabannes-Oxley Act (SOX or SARBOX) of 2003. The accounting and reporting controls, which have been blamed for encouraging biotechnology firms to raise capital outside the USA (Marketletters passim), were introduced as a political response to the Enron scandal.

The Home Ownership, Manufacturing and Economic Growth (HOME) Act, which is designed to stimulate the US economy at a time of recession fears, includes the SOX relief. One item particularly welcomed by the BIO is the order to the Securities and Exchange Commission to provide a threshold definition for small public companies. This, the biotechnology group argues, would provide "an objective standard as to who is eligible for a scaled audit under the newly-adopted auditing Standard No 5 (AS-5)," as well as the notorious Section 404 of the SOX Act.

The likely level for the exemption would be set where a firm has a market capitalization of $700.0 million or less and reported annual revenue of no more than $250.0 million, assuming that the recommendations of the SEC Advisory Committee on Smaller Public Companies are enacted.