MichBio Helps Spur Passage of the Fostering Innovations Act
Friday, May 27, 2016
Posted by: Kate Oesterle
The US House of Representatives passed H.R. 4139, the Fostering Innovation Act on Monday, May 23rd. The bipartisan legislation was introduced by Reps. Sinema (D-AZ) and Fitzpatrick (R-PA).
The JOBS Act provides emerging growth companies (EGCs) with a five-year exemption from Section 404(b) of Sarbanes-Oxley (SOX), which requires a costly external attestation of a company’s internal financial controls. The Fostering Innovation Act extends the JOBS Act’s SOX 404(b) exemption for an additional five years for former EGCs that maintain a public float below $700 million and average annual revenues below $50 million. The additional five years of cost-savings would allow growing companies to focus their capital on groundbreaking R&D rather than one-size-fits-all regulatory burdens.
Rep. Dan Kildee (D, MI-5), who sits on the House Financial Services Committee, was a key supporter during committee mark-up at the urging of MichBio on the legislation’s merits and potential impact for Michigan’s bioscience start-ups. We’re appreciative for his leadership on this bill, and all others in the Michigan House delegation who voted support final passage.
The bill’s passage came despite a letter to Paul Ryan and Nancy Pelosi from the SEC’s Investor Advocate urging a vote against it. The letter cited empirical research that established the benefits for both investors and companies of the auditor attestation. The Investor Advocate pointed to a 2011 SEC study showing that “companies that do not have an auditor attestation tend to have significantly more material weaknesses in their internal controls and more financial restatements.” He viewed the bill as “ill-advised” as it introduces another category of issuers, further compounding the complexity of public company reporting.
The bill now moves to the Senate for consideration. MichBio will continue its advocacy efforts in concert with BIO and other groups to ensure that the bill becomes law, hopefully by fall 2016.