Review Design & Effectiveness of Controls
What can life sciences companies do to reduce the risk of securities litigation and SEC investigation? To begin with, it is incumbent on every life sciences company to design internal disclosure controls to ensure that any information that might involve a mandatory disclosure under SEC or stock exchange rules or that is otherwise material and could have an impact on the market price of the company’s securities is disclosed.
Next, each company must analyze all the elements of its disclosure system. For example, understanding what type of information is material is important. Managers in key operational areas, such as clinical development and manufacturing, should be aware of how issues within their areas of responsibility can play a role in increasing the risk of securities litigation.
The company must also be aware of who internally needs to have the information. Clearly senior management, the CEO, and the CFO must have information on a timely basis. However, other organizations, such as financial reporting, investor communications, and legal compliance must also be informed.
Lastly, disclosure controls and procedures are effective only if they provide the company reasonable assurance that material information is being identified, gathered, and communicated appropriately on a timely basis. Hence, every life sciences company must implement procedures to disseminate this information internally.