Trump Directs SEC to Study Six-Month Reporting for Public Companies

20 August, 2018, 21:17 | Author: Frank Williams
  • Trump calls for study on ending to quarterly earnings reports

US President Donald Trump has asked stock market regulators to look into ending the requirement for businesses to issue quarterly earnings reports.

Trump said on Twitter that meetings with business leaders had convinced him that the change would give companies more flexibility and reduce costs. He added that he has asked the SEC to examine moving to a six-month reporting schedule, instead of the current system of reporting corporate results every three months.

Half-yearly reporting would mark a huge change in US disclosure requirements and put them in line with European Union and United Kingdom rules.

Tesla CEO Elon Musk, for instance, wrote in a letter to employees last week that being a publicly traded company "subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term".

The SEC requires listed United States companies to issue quarterly and annual financial reports to keep investors informed about their financial position.

Indeed, corporate stocks are known to see sharp gains and falls on the heels of quarterly earnings releases that beat or miss forecasts - and market watchers have often said investors' quick reactions are unwarranted or ill-advised.

He said outgoing PepsiCo Inc (PEP.O) Chief Executive Indra Nooyi had brought it up to him. "In the end, all companies have to balance short-term and long-term performance".

Publicly traded companies in the United States, as well as Canada, now file their earnings reports every three months, or four times per year.

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"I'd like to see twice, but we're going to see", Trump later told reporters when asked about his tweet.

While some business leaders have groaned about the rigours associated with having to disclose financial figures four times a year, the SEC has been reticent to make any changes.

Publicly traded companies with more than $10,000,000 in assets must file a 10-K report with the SEC every year.

Scrapping the quarterly requirement "is a solution in search of a problem", said Charles Elson, a professor and director of the University of Delaware's Weinberg Center for Corporate Governance.

The US Chamber of Commerce and other lobbying groups have also blamed compliance burdens for preventing more companies from selling shares. A statistic they often point to is the drop in initial public offerings over the past 20 years. In 1996, nearly 950 companies went public, according to data compiled by Bloomberg.

The agency could make such a change on its own without Congress passing legislation but that doesn't mean it will, said David Martin, who previously ran the agency unit that oversees corporate filings. That number fell to 237 in 2017.

"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.

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