SEC moves to scrap quarterly earnings reporting requirement for US companies
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The news: The US Securities and Exchange Commission has proposed scrapping a decades-old rule requiring American public companies to report earnings every quarter, giving them the option to report twice a year instead.
Wall Street’s top regulator would allow companies to file one semiannual report and one annual report per year, replacing three quarterly reports and one annual report, according to a statement.
The proposal is open for 60 days of public comment.
The context: The move follows calls by US President Donald Trump for the change, arguing it would “save money, and allow managers to focus on properly running their companies.” Trump made a similar proposal during his first term but the rules were not changed.
Supporters, including Nasdaq and JPMorgan Chase, argue quarterly reporting fosters short-termism at the expense of long-term planning, while critics warn it could allow companies to bury bad news and increase the risk of insider trading.
Many markets including Australia, Europe, Singapore and the UK already require only semi-annual reporting, although companies often provide investors with some update in the off quarters, sometimes in the form of sales or revenue figures.
What they said: “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,” SEC chairman Paul Atkins said in a statement.
The sources: US Securities and Exchange Commission, Bloomberg
