To the Editor:
Much has been written about rocketing biotech stock prices and the opening of public markets to biotech companies over the past 18 months. But access to public funding brings with it substantial costs and regulatory burdens imposed by the disclosure requirements of US securities laws. Public companies undertake an onerous burden of providing disclosure, sometimes with so much detail that investors are overwhelmed. It is, therefore, timely that the chair of the US Securities and Exchange Commission (SEC), Mary Jo White, is acknowledging this disclosure burden and mandating that SEC staff undertake regulatory changes to reduce it. This presents an opportunity for biotech companies and the Biotechnology Industry Organization (BIO; Washington, DC, USA) to make their voices heard and provide recommendations to the SEC on what changes would reduce the disclosure burden while still providing investors with the necessary information on which to base investment decisions.
Over the years, as a result of corporate scandals involving companies such as Enron (Houston) and WorldCom (Jackson, MI, USA), class-action litigation, court and administrative decisions, and SEC regulatory requirements affecting disclosure, accounting and other areas, the burden of preparing prospectuses and periodic reports for investors has increased dramatically both in volume and complexity. The Jumpstart Our Business Startups Act (JOBS Act) enacted in the United States in 2012 was a welcome step in recognizing the unnecessary expense and impediments for small companies seeking to access the US public capital markets. Part of that law involved streamlining some of the requirements for many companies seeking to raise capital through an initial public offering (IPO) and mandated that the SEC review and revise the disclosure requirements imposed on public companies. In addition to the report issued by the SEC staff pursuant to this legislation, SEC commissioners have acknowledged the problem of investors being overwhelmed by unnecessarily detailed and repetitive information presented in response to an ever-increasing list of SEC requirements, in some cases arising out of politically motivated disclosure mandated by the US Congress. These have included disclosure with respect to "conflict minerals" that originated in the Democratic Republic of the Congo and are used in a company's products, as well as "pay ratio" rules requiring companies to disclose the ratio of CEO pay to that of employees. For the most part, these burdensome disclosures are not material to an investment or voting decision by an investor in a particular company.
Last October, in a speech made at the Leadership Conference of the National Association of Corporate Directors in National Harbor, Maryland, SEC Chair White announced that the SEC will consider disclosure reform to eliminate redundancy, historical...