SEC Seeks Comments on Earnings, Quarterly Report Changes
Should companies be allowed to report earnings less frequently?
The Securities and Exchange Commission said Tuesday that the agency wants feedback on how to reduce administrative burdens related to public companies’ earnings and quarterly reports.
The securities regulator will accept comments for 90 days on the nature and timing of disclosures that reporting companies must provide in their quarterly Form 10-Q reports, including when the Form 10-Q disclosure requirements overlap with the disclosures such companies voluntarily provide to the public in earnings releases furnished on Form 8-K.
“There is an ongoing debate regarding the effects of mandated quarterly reports and the prevalence of optional quarterly guidance,” said SEC Chairman Jay Clayton in a statement.
“Our markets thirst for high-quality, timely information regarding company performance and material corporate events. We recognize the importance of this information to well-functioning and fair capital markets. We also recognize the need for companies and investors to plan for the long term. Our rules should reflect these realities.”
In August, President Donald Trump asked the agency to look into ending quarterly reporting.
The agency also wants feedback on how it can promote efficiency in periodic reporting “by reducing unnecessary duplication in the information that reporting companies disclose and how any such changes could affect capital formation, while enhancing, or at a minimum maintaining, appropriate investor protection.”
Other areas open for debate include whether the SEC should allow reporting companies, or certain classes of reporting companies, flexibility as to the frequency of their periodic reporting.
Also, how “the existing periodic reporting system, earnings releases and earnings guidance (either standing alone or in combination with other factors) may affect corporate decision making and strategic thinking, including whether these factors foster an inefficient outlook among reporting companies and market participants by focusing on short-term results.”
The SEC lists the earnings and quarterly reports comment request as an item on its Wednesday open meeting agenda.
The agency is also set to consider on Wednesday whether to propose a new rule and rule amendments to allow funds to acquire shares of other funds (i.e., “fund of funds” arrangements), including arrangements involving exchange-traded funds, without first obtaining exemptive orders from the Commission.
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