Deregulating Innovation Capital: The Effects of the JOBS Act on Biotech Startups

Since the start of the COVID-19 pandemic, everyone from politicians to reporters to ordinary Americans have been talking about drug treatments, vaccines, and the Federal Drug Administration (FDA) approval process. These discussions have centered on vaccine developments by well-known pharmaceutical giants such as Pfizer and AstraZeneca as well as emerging startups like Moderna Therapeutics and BioNTech.

Almost a decade ago, lawmakers and regulators took steps to improve capital access for startups by easing the regulatory requirements for publicly selling stock. Under the Jumpstart Our Business Startups (JOBS) Act of 2012, Congress and the Securities and Exchange Commission (SEC) significantly reduced … Read more

Spinning the CEO Pay Ratio Disclosure

The growing compensation gap between CEOs and rank-and-file employees has generated considerable debate about potential adverse consequences at both the firm and societal levels. Despite interest in the topic, assessing vertical pay disparity has been difficult due to the lack of public disclosure about employee compensation.

While companies have long reported top-executive pay, transparency on employee compensation was recently enhanced when the SEC adopted the CEO Pay Ratio Rule requiring most reporting companies to provide new disclosures of the median employee’s pay and a ratio comparing the CEO’s compensation with this value.[1] For example, if the CEO and median … Read more

Quantified Cost-Benefit Analysis at the SEC

In their recent article, Jeff Schwartz and Alexandra Nelson critique the Securities and Exchange Commission’s cost-benefit analysis accompanying the Conflict Minerals Rule.[1] This rule requires public companies using conflict minerals in their production to annually disclose whether the minerals come from certain war-torn areas such as the Democratic Republic of Congo. Schwartz and Nelson contend that the SEC’s estimate of $3-4 billion in compliance costs was grossly overstated due to numerous flaws. They point to early evidence estimating actual compliance costs at $710 million to support their criticism. The article also chastises the SEC for failing to quantify expected … Read more

The Evolving Role of Economic Analysis in SEC Rulemaking

Four years ago, the SEC set out to improve its cost-benefit approach in rulemaking. After enduring a series of judicial setbacks (e.g., Business Roundtable v. SEC) and criticisms from the Members of the Senate Banking Committee, the SEC conducted an introspective review to identify weaknesses and inconsistencies in its economic analysis process. This assessment resulted in the March 2012 publication of a memorandum (hereafter, the ‘New Guidance’) that formulates how the SEC would conduct cost-benefit analysis moving forward.[1]

The New Guidance mandates that every SEC economic analysis must include: (i) a stated need for rulemaking; (ii) a well-defined … Read more