SEC proposes rule to allow public companies to report twice a year
Add Axios as your preferred source to
see more of our stories on Google.
SEC chair Paul Atkins wears a hat that reads "Make IPOS Great Again" on the floor of the New York Stock Exchange. Photo: Spencer Platt/Getty Images
The Securities and Exchange Commission released a proposal Tuesday that would allow public companies to report earnings just twice a year.
Why it matters: It would be a fundamental change from the quarterly reporting cadence that has shaped U.S. business for over 50 years.
Catch up quick: The proposed rule is intended to give public companies regulatory flexibility, with the ultimate goal of enticing more businesses to go, and remain, public, SEC chairman Paul Atkins said in a statement.
- The idea was pushed last September by President Trump, who had also raised it late in his first term, in 2018.
Zoom out: Some of America's top business leaders, among them JPMorgan Chase CEO Jamie Dimon and Warren Buffett, have previously called for an end to quarterly reporting, Axios' Ben Berkowitz noted last summer.
- The argument is that it makes companies focus too much on short-term performance at the expense of long-term planning — and can be too expensive for small companies as well.
Friction point: Critics of the proposal fear a loss of transparency and investor protections, lumping the idea with the administration's broader deregulation push.
- "The agency charged with protecting investors should be making it easier, and not harder, for investors to receive the material information that they need so they can invest their hard-earned money safely," Benjamin Schiffrin, the securities policy director for Better Markets, said in a statement Tuesday.
What they're saying: "There's a universe of companies for whom this will be attractive, but at least initially it'll be more small to mid-cap companies," Erik Gerding, a partner at the law firm Freshfields who previously led the SEC Division of Corporation Finance, told Bloomberg.
What we're watching: Atkins noted Tuesday that public companies have an obligation under federal securities laws "to provide information that is material to investors."
- At the same time, he suggested that some disclosure requirements may be unnecessarily onerous.
- He said that disclosure — both financial and non-financial — mandated in interim reports should be "guided by materiality as the North Star."
- SEC staff is currently exploring potential amendments to what is required in financial statements, and Atkins encouraged the Financial Accounting Standards Board to evaluate amendments to its accounting standards.
"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.
What's next: The SEC proposal will be subject to a 60-day public comment period.
