The SEC just took a big step toward letting companies report earnings twice a year
NYSE
- The SEC is proposing that companies report earnings twice a year instead of four times.
- A proposed rule released Tuesday would cut the number of mandatory reports.
- It's the latest step toward enacting a proposal that Donald Trump suggested last year.
The Securities and Exchange Commission is taking a major step toward allowing companies to report earnings twice a year.
A new proposed rule from the SEC would cut the required reporting obligations for public companies from the current four times a year, according to a statement that the regulator issued Tuesday.
Under the proposal, companies could file one semiannual report and one annual report for each fiscal year. That would overhaul the current requirement for companies to file one annual report and three quarterly reports each year.
"The rigidity of the SEC's rules has prevented companies and their investors from determining for themselves the interim reporting frequency that best serves their business needs and investors," SEC Chairman Paul Atkins said.
The SEC is collecting public comments for 60 days before considering the proposed rule.
The proposal comes after President Donald Trump advocated twice-a-year earnings reports, saying they would allow executives to take a longer-term approach to running companies.
Business leaders, including Warren Buffett and Jamie Dimon, have also argued against quarterly earnings reports, especially the practice of issuing quarterly guidance. Such short-term financial goals have "contributed to the decline in the number of public companies in America over the past two decades," the pair wrote in a 2018 op-ed.
Some investors and analysts, meanwhile, oppose eliminating the quarterly earnings requirement. They say that fewer earnings reports would provide less transparency about companies' finances.
Danny Moses, one of the traders featured in "The Big Short," told Business Insider in March that less frequent earnings reports coupled with lax securities law enforcement by federal regulators might allow some "bad actors" to take "advantage at the expense of shareholders."