President Donald Trump suggested on Monday that public companies should no longer report their earnings on a quarterly basis and instead should report twice per year, subject to approval by the Securities and Exchange Commission.
“Subject to SEC Approval, Companies and Corporations should no longer be forced to ‘report’ on a quarterly basis (Quarterly Reporting!), but rather to Report on a ‘Six (6) Month Basis.’ This will save money, and allow managers to focus on properly running their companies,” Trump posted on social media.
Publicly listed companies in the U.S. are required by the SEC to file a Form 10-Q every quarter and a Form 10-K annually. A periodic reporting cadence is mandated by the Securities and Exchange Act of 1934, although quarterly reporting was not mandated until 1970.
To change SEC regulations, SEC commissioners would, by majority vote, issue a notice of proposed rulemaking, opening a public comment period that typically lasts 30 to 60 days. Commissioners would then vote on a final rule.
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“At President Trump’s request, Chairman [Paul] Atkins and the SEC is prioritizing this proposal to further eliminate unnecessary regulatory burdens on companies,” a spokesperson for the SEC said in a statement.
In some jurisdictions, such as in the European Union, Japan, and the U.K., companies report their earnings every six months—in half-year and final-year reports.
“Did you ever hear the statement that, ‘China has a 50 to 100 year view of management of a company, whereas we run our companies on a quarterly basis???’ Not good!!!” Trump’s account posted.
It is not the first time Trump has floated the proposal to reduce the frequency of corporate finance filings. In 2018, during his first term, Trump called on the SEC to explore a six-month reporting schedule. The same year, Jamie Dimon and Warren Buffett penned an op-ed in the Wall Street Journal, arguing that “short-termism,” specifically related to the provision of quarterly earnings-per-share guidance, was harming the economy.
“In our experience, quarterly earnings guidance often leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability,” the pair wrote.
“The pressure to meet short-term earnings estimates has contributed to the decline in the number of public companies in America over the past two decades,” the Dimon-Buffett commentary continued. “Short-term-oriented capital markets have discouraged companies with a longer term view from going public at all, depriving the economy of innovation and opportunity. Fewer public companies has also meant fewer opportunities for retail investors to create wealth through their 401ks and individual retirement accounts.”
Critics of quarterly reporting have also said that it results in companies having to prioritize short-term earnings and performance over investment in long-term initiatives. Critics point to the high costs and resources required to file required reports periodically.
“ASA has long supported reducing the reporting burden for public companies and we welcome today’s call from President Trump to ditch short-termism reporting requirements,” said Chris Iacovella, the president and CEO of the American Securities Association, in a statement. “As long as material disclosures are filed using an 8-K in the interim, why does a small public company have to spend millions of dollars on quarterly disclosures that aren’t meaningful?”
Others say quarterly reporting encourages investor confidence and promotes transparency with consistent data.
“Fully functioning capital markets rely on complete, timely, and accurate information. Quarterly disclosures provide timely, structured, and relevant information for investment decision-making,” said Sandra Peters, head of global advocacy at the CFA Institute, in a statement. “Such reporting supports efficient markets and investor confidence, especially in an era where data moves fast and capital is allocated across borders. In an era of AI, it seems antithetical to suggest less frequent information is helpful to investors.”
Peters criticized the view that a switch to semiannual reporting would improve capital investments as companies adopt a long-term view.
“Some have touted a move to semiannual reporting, leveraging the narrative that it will enhance ‘long-termism.’ But six months is not long-term. Managers do not forgo viable long-term projects because of quarterly reporting,” Peters said in her statement, noting that 2017 CFA Institute data found no increase in long-term capital investment in the U.K. following the country’s switch to a semiannual reporting schedule.
In 2018, the CFA Institute surveyed its investor members on the issue, with Peters noting that, at the time, they did not support a move to a semiannual reporting schedule.
“Quarterly reporting is a cost they are willing to pay for more timely and accurate information,” Peters said in the statement. “Further, more timely information ensures there is not asymmetry in disclosures of value relevant information and that Form 8-K does serve as a substitute for more relevant quarterly information presented in context of emerging news from companies.”
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Tags: American Securities Association, CFA Institue, Paul Atkins, Securities and Exchange Commission
#Trump #Calls #Semiannual #Schedules #Quarterly #Reporting