We know that the SEC has numerous rulemakings in the hopper – a SEC proposal to limit Rule 15c2-11 to equity securities dropped a few days ago – but we’ve been wondering when some of the “biggies” will make their appearance. According to this WSJ article, a proposal to give companies the choice to move from quarterly to semi-annual reporting might be released next month.
As a refresher, here is what I blogged six months ago that kicked off this rulemaking project: “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 six 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.
- 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