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Public Statements

Red Tape Reduction and Small Business Job Creation Act

Floor Speech

By:
Date:
Location: Washington, DC

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Mr. FITZPATRICK. Madam Chair, the amendment I'm offering tonight would require the SEC, when reviewing regulations, to consider the burden of applying section 404(b) of Sarbanes Oxley to companies with a public float of less than $250 million. Simply put, this amendment requires regulators to consider the cost of a specific regulation which hinders job creation in my district and across the Nation.

Section 404(b) requires audits of a public company's internal controls. While this sounds innocuous, the cost of external audits can be staggering. Those costs are exponentially more burdensome on smaller companies. Currently, the law extends the auditing requirement to any company with a public float of $75 million or more, and that number has been widely criticized as too low and adds an extremely costly burden on small and growing companies.

Recognizing that burden on emerging growth companies, the House overwhelmingly passed, as part of the JOBS Act, an exemption from 404(b) for companies with up to $1 billion in revenue for 5 years after their initial public offering.

This amendment would merely require the SEC to consider the burden of section 404(b) when reviewing their regulations and would not change current law. This amendment would apply to all companies and would not discriminate based on when a company issued their IPO.

Congress and the SEC have appropriately recognized that all companies are not the same, and smaller companies should be exempt from certain regulations. This amendment asks that the SEC consider these costs on smaller companies.

If companies are priced out of being able to go public, it restricts capital formation and job creation. For those companies that still choose to go public, resources that could otherwise be used to hire and grow are being sucked away by unproductive compliance costs.

Madam Chair, Synergy Pharmaceuticals is a New York-based company that does their entire R&D in Doylestown Borough in my district. They have 10 employees in their Doylestown research facility and 10 employees in New York. These are good-paying jobs, but by most definitions, this is a small company. In fact, their market capitalization exceeds even the increased threshold of $250 million that this bill references, which is why some have advocated exempting companies with a public float as high as $500 million or $1 billion.

I reached out to their chief scientific officer and their chief financial officer to discuss this issue with them, and their comments were very instructive. I heard that 404(b) was one of the most significant regulatory burdens they face. In their words, ``It hurts.''

It was not the direct costs of external audits or the person they had to hire internally to deal with these requirements but the time that was spent and the efforts that were wasted. According to them, hours and even days worth of time was spent finding ways to document and justify their procedures for something as menial as where the checkbook was kept.

What would they do with the extra money if they didn't have to spend it on compliance? The answer I got was that there is no question it would go directly into research and development.

I ask my colleagues, where is this money more productively used: in documenting how the checkbook is stored at night or hiring research assistants in communities like Doylestown and in New York?

Madam Chairman, entrepreneurial companies like Synergy are those we are counting on to create wealth and jobs and restore America's vibrant economy. Their story is not unique, particularly in industries like biotechnology. This Congress recognized the importance of decreasing the regulatory burden on small and emerging companies in a strong bipartisan manner just a few months ago with the JOBS Act. This amendment is an extension of that effort, and I encourage my colleagues to support it.

I reserve the balance of my time.

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