The nation’s top market watchdog says it is giving top priority to Donald Trump’s proposal to scale back the frequency of corporate earnings reports, after the president once again waded into the long-running battle over transparency in American capitalism.
The Securities and Exchange Commission announced it is advancing a proposal to “further eliminate unnecessary regulatory burdens on companies,” a move that came shortly after Donald Trump took to social media Monday urging an end to the quarterly earnings reports firms use to update investors on their financial performance.
The SEC has required quarterly reporting since 1970, a cornerstone of its post–1929 crash effort to bolster market transparency. Now, the debate over its future could redefine incentives across the world’s largest equity market—deciding whether U.S. companies remain tethered to the short-term earnings cycle or gain greater freedom to pursue long-term growth.
“Subject to SEC Approval, Companies and Corporations should no longer be forced to “Report” on a quarterly basis (Quarterly Reporting!), but rather to Report on a ‘Six (6) Month Basis,'” Trump said on social media. “This will save money, and allow managers to focus on properly running their companies.”
“Moving away from quarterly reporting would be a gigantic step backward,” warned Nell Minow, chair of ValueEdge Advisors, which counsels institutional investors on corporate governance. U.S. markets have thrived on this level of transparency, she noted, because it builds the trust that keeps them strong.
Critics counter that quarterly reporting carries significant drawbacks, driving up costs and pressuring companies to chase short-term results at the expense of investment and innovation. The practice, they argue, also invites knee-jerk reactions from investors.
Whether Trump’s remarks will trigger meaningful regulatory change is still uncertain, but they inject new political momentum into a debate that strikes at the core of how the United States gauges corporate performance.
Following Trump’s 2018 remarks, the agency sought public input on quarterly reporting but ultimately stopped short of making any rule changes.
Adena Friedman, chair and CEO of Nasdaq Inc., said the exchange backs reforms to ease the burden on public companies, including allowing firms to choose between quarterly and semiannual reporting, according to a LinkedIn statement. Earlier this year, Nasdaq outlined the semiannual option in a policy paper.
Trump drew a comparison to China’s reporting system, arguing that Beijing’s approach is more efficient and cost-effective for businesses there.
In Europe, companies are generally required to report only every six months, yet many continue to release quarterly results to meet investor expectations and other considerations.
Proponents of quarterly reporting argue that it is essential for keeping investors informed and helps guard against market manipulation.
“Companies spend far too much time on the churn of quarterly reporting,” said Matt Powell, a longtime sports industry analyst and current senior adviser for BCE Consulting. “On the other hand, you need to balance that with investors having enough good information to make intelligent decisions.”
‘Misses Get Bigger’
Moving to a six-month reporting cycle could heighten uncertainty and amplify volatility in earnings results.
“While the goal would be to get investors and companies to become more long-term focused, it would increase uncertainty in the equity market and could lead to a lowering of valuations,” said Brian Nick, head of portfolio strategy at Newedge Wealth. “Earnings season moves could also be larger as misses get bigger and more consequential.”
SEC Chairman Paul Atkins has long criticized disclosures that many companies see as excessively burdensome, offering little meaningful benefit to shareholders.
The agency flagged a potential proposal on its recently released regulatory agenda to “rationalize disclosure practices”—a broad initiative that could ultimately cover a range of measures.
