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The Securities and Exchange Commission on Tuesday ratified President Donald Trump’s call to allow public companies to file earnings reports on a semi-annual basis, rather than quarterly.
The agency unveiled a proposal that would give public companies, including banks, the option of switching to a twice-yearly reporting schedule or continuing to report four times per year.
The 279-page proposal is a win for executives who argue that the current rules require them to devote too much time to earnings reports, which distracts them from running their businesses. It’s a loss for investors who contend that less frequent reporting will lead to less efficient markets.
SEC Chairman Paul Atkins described the proposal, which will be open for comment for 60 days, as part of a bigger effort by the agency to incentivize companies to go public and remain so.
Atkins said in a statement that “the rigidity of the SEC’s rules has prevented companies and their investors from determining for themselves the interim reporting frequency that best serves their business needs and investors.
“Today’s proposed amendments, if ultimately adopted, would provide companies with increased regulatory flexibility in this regard,” he added.
Trump, who first floated the idea of semi-annual reporting during his first term in office, has been pressuring the SEC to act. “This will save money, and allow managers to focus on properly running their companies,” he wrote last fall in a social media post.
Under the SEC’s proposal, companies would have the option of filing a new form 10-S on a semiannual basis, rather than a 10-Q each quarter. Those reports would be due 40 or 45 days after the end of the reporting period, similar to the deadlines for quarterly reports.
The American Securities Association, which represents the capital markets arms of regional financial services firms, praised the SEC’s proposal.
“The companies that want to continue reporting quarterly can and will, while those navigating the compliance costs of going and staying public would have a less burdensome path forward,” the group’s president and CEO, Chris Iacovella, said in a statement.
“What’s important is investors will continue to receive every piece of material information they need to make investment decisions under the 8-K process, regardless of whether these reforms are enacted,” he said.
Even if the SEC’s proposal is approved, banks will still have to submit quarterly financial statements to banking regulators. But the SEC currently requires the reporting of certain information on a quarterly basis that bank regulators don’t.
It’s unclear whether a large percentage of public companies will switch to semi-annual reporting, assuming the SEC’s proposal gets finalized. Jaret Seiberg, an analyst at TD Cowen, expects that initially, only a few companies will try out the revised calendar.
“Only if those experiments go well for the companies will we see broader adoption,” Seiberg wrote Tuesday in a research note.
He predicted that the SEC will finalize the semi-annual reporting rule by the end of the year.
Meanwhile, Atkins made clear that he sees providing the option of filing semi-annual earnings reports as only the start of changes aimed at incentivizing companies to be publicly listed. He described those efforts as his “Make IPOs Great Again agenda.”
“Today’s proposal is just the first step of the larger, comprehensive effort to review and reshape the current SEC rules governing public companies with respect to their ongoing reporting obligations and their ability to raise capital in the public markets,” Atkins said.
“Over the next few months, I expect that the Commission will be considering a series of proposals that, if adopted, will not only redefine what it means to be a public company, but will make being public attractive again.”
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