As noted in this Reuters article, President Trump called for an end to quarterly reporting with the SEC yesterday to ease burdens on companies and instead move to a semi-annual reporting model. Here are seven things to consider (hat tip to Cooley’s Brad Goldberg for his help):
- The SEC announced its prioritizing this push: According to the Reuters article, a SEC spokesperson issued this statement: “At President Trump’s request, Chairman Atkins and the SEC is prioritizing this proposal to further eliminate unnecessary regulatory burdens on companies.”
- This is not new for President Trump: The President made this push during his first term in office which resulted in the SEC issuing this request for comment in 2018 about whether the frequency of periodic reporting should change – which was then followed by a roundtable in 2019. Many people submitted comments on the SEC’s request.
- There’s a lot of corporate support for this concept: Over the years, there has been a lot of commentary on this topic, with many urging a move away from short-termism – including Jamie Dimon and Warren Buffett in this 2018 WSJ op-ed.
- Many investors like quarterly numbers: On the other hand, investor demand for quarterly numbers leads some to believe that many companies would still release quarterly earnings even if filing a Form 10-Q wasn’t mandated.
- A move to semi-annual reports – Form-SA? So perhaps no more Form 10-Qs someday. Hello to Form 10-SAs? Or would it be a Form 6-K, which is what foreign private issuers file right now as their periodic reporting obligation is semi-annual and not quarterly.
- Would Congressional action be required? Or just SEC rulemaking? It’s open to debate on whether a reading of Section 13 of the Securities Exchange Act of 1934 would require Congressional action to accomplish this as Section 13(a)(2) states that every issuer with Section 12 securities must file with the SEC: “such annual reports (and such copies thereof), certified if required by the rules and regulations of the Commission by independent public accountants, and such quarterly reports (and such copies thereof), as the Commission may prescribe” (see page 121 of the ’34 Act). So it might not be simply a matter of the SEC amending or replacing Rule 13a-13 to accomplish this change.
- Quarterly earnings releases not mandated by stock exchange rules in absence of Form 10-Qs: Note that the NYSE requires earnings releases based on whether a listed company is required to file interim financials with the SEC. Section 203.02 of the NYSE Listed Company Manual states: “Any company with voting or non-voting common securities listed on the Exchange that is required to file interim financial statements with the SEC is required to disseminate in a manner consistent with the Exchange’s immediate release policy an interim earnings release as soon as its interim financial statements are available.”
Authored by
Broc Romanek