SEC seeks comments on quarterly reporting requirements

The Securities and Exchange Commission seeks comments on earnings releases and quarterly corporate reports, taking aim at the frequency of reporting four months after President Trump asked the agency to look into the matter.

The SEC said in a statement that it is asking members of the industry to comment on the possible ways that it can make quarterly reports more efficient and less burdensome for reporting companies. It is also asking respondents to explain whether the current quarterly reporting system forces managers and market participants to have an “overly short-term focus” on their investments.

“Some have suggested that the practice of providing quarterly forward-looking earnings guidance creates an undue focus on short-term financial results and thereby negatively affects the ability of companies to focus on long-term results,” the SEC said in its request for comment report. “Is this the case and, if so, are there changes we could make to our rules that would discourage this practice or address this concern?”

The public comment period will remain open for 90 days.

The SEC turned to the UK as an example of the effects that reduced reporting requirements can bring; beginning in 2014, UK companies no longer had to disclose quarterly reports. The agency quoted a study that found “a general decline in the analyst coverage of those companies that reduced the frequency of reporting.”

The move could help to reduce duplication by publicly-traded companies – including listed private equity firms such as KKR, Blackstone Group and Apollo Global Management – in reporting their financial statements to the public after turning in separate releases explaining their performance.

This isn’t the first time that the SEC has examined quarterly reports policies. In April 2016, the agency issued a concept release to look into the frequency of reporting and other disclosure requirements.

Trump tweeted in August that the SEC should “stop quarterly reporting” and proceed with a semi-annual reporting system as a means of giving companies “greater flexibility” and allowing them to save money.