Right-Sized Regulations, Innovation and Investor Protection

Let’s talk about investor protection.

Investors need information about a company and its business plan to make informed investment decisions. They need transparency and accountability to ensure that their money is being used appropriately. And they need companies to have cost-efficient reporting rules so that investment dollars stay targeted at company growth rather than bureaucratic red tape.

Biotech companies support strong investor protections.  When Congress passed the Jumpstart Our Business Startups (JOBS) Act in 2012, it led to a biotech IPO boom. This is largely because it allowed growing companies to spend extra time with potential investors, giving them a chance to share more detailed information about their businesses. The JOBS Act also modified regulatory burdens that weren’t appropriate for emerging businesses without sacrificing important investing safeguards.

Congress has recognized that one-size-fits-all reporting requirements with high costs for small businesses can harm company growth and investor returns. This week, the House Financial Services Committee is considering a bill that would reform another such requirement called XBRL.

XBRL is the name of a computing language (it stands for the eXtensible Business Reporting Language) that all companies – regardless of size – are required to use to report certain financial metrics.  The XBRL requirement exists on top of a small business’s standard compliance requirements and can be very costly for an emerging company.  Even worse, the vast majority of investors report that they don’t use XBRL, so the high costs do not buy any investor protection. This is especially true in the biotech industry, where investors care more about scientific progress than XBRL reports.

Rep. Robert Hurt (R-Va.) has introduced a bill – the Small Company Disclosure Simplification Act (H.R. 1965) – that would provide a temporary exemption from XBRL for newly public and low-revenue companies in order to give the SEC time to reform the XBRL rules.  This commonsense legislation passed the Financial Services Committee last year with a bipartisan 51-5 vote, and I am hopeful that Republicans and Democrats can come together again and do the same this week.

I urge Congress to continue to examine laws and regulations that impact small companies, and to modify those that impose a significant cost burden without providing a corresponding benefit to the investing public.  In doing so, Washington has the opportunity to support small company growth, investor protection and next-generation innovation.


Jim Greenwood is the president and CEO of the Biotechnology Industry Organization (BIO). 

Morning Consult