Trump asks SEC to consider changing filing rules from quarterly to biannually

Devin Lawrence
August 19, 2018

"If public companies moved from quarterly to semi-annual reporting, that would deprive investors of timely information and dramatically increase the potential for insider trading", said Robert Pozen, Senior Lecturer at the MIT Sloan School of Management, who has studied the issue.

President Donald Trump said he's asked the Securities and Exchange Commission to study ending quarterly reporting for USA businesses in order to ease regulations and spur growth.

"I'd like to see twice, but we're going to see", Trump later said to reporters outside the White House, when asked about his tweet about changing SEC reporting requirements.

"That would allow greater flexibility & save money", he said in a post on Twitter on Friday.

While Trump can not force Clayton to make changes, as a matter of courtesy the SEC chairman may promise to study the issue.

The news came via a tweet this morning from the president, who said he received insight from "some of the world's top business leaders", one of whom suggested that if the SEC were to "stop quarterly reporting [and] go to a six month system", it would boost US business growth and employment. It isn't immediately clear what impact it would have on stock markets or the broader economy if public companies moved to reporting their earnings every six months rather than on a quarterly basis. A spokeswoman for Chairman Jay Clayton did not respond to a request for comment.

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But he said energy companies would probably still report some oil and gas well data every three months to please investors.

He picked a good moment to put the idea forward: Elon Musk is in the midst of a dramatic push to take Tesla Inc private in large part, he says, to remove the pressures of having to report quarterly earnings. That was the argument made by Jamie Dimon, the chief executive of JPMorgan Chase, and investor Warren E. Buffett in a widely shared op-ed published by the Wall Street Journal in June. In addition to financial information about earnings and cash flow, these reports also include qualitative information in the form of earnings guidance, which are 'forward-looking' statements from management about what the company plans to do in the future.

Companies that want to move away from short-term scrutiny should instead stop publicly projecting the next quarter's earnings, Pozen added.

"Less frequent reporting can raise the cost of capital", he said.

He said when companies report only twice a year, the reaction in markets to their results is typically more volatile than the reaction to quarterly results.

The US Chamber of Commerce and other lobbying groups have also blamed compliance burdens for preventing more companies from selling shares.

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