What Would Happen if the SEC Abandoned Quarterly Earnings Reports

Dwayne Harmon
August 19, 2018

American firms should no longer have to report on a quarterly basis, USA president Donald Trump has said.

President Donald Trump had asked the Securities Exchange Commission to study how allowing companies to file reports with the agency biannually instead of quarterly would affect the USA economy.

The SEC has been reluctant to make changes in quarterly reporting, which has always been a cornerstone of United States capital markets.

The idea came from an unnamed "top business leader", Mr. Trump wrote, although the idea has been bandied around for decades.

The SEC consists of five commissioners appointed by the president, although there now are only four in place, three named by Trump, including Clayton.

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. One criticism is that if companies are striving to report profit gains every quarter, they are more likely to buy back shares and cut costs than invest in their businesses. A spokeswoman for Chairman Jay Clayton did not respond to a request for comment.

Trump held a dinner for business executives on Aug 8, two days after Nooyi announced her departure, at his golf club in Bedminster, New Jersey. The statements are generally less detailed than the reports companies file with the SEC.

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Quarterly reporting by public companies has always been a cornerstone of USA capital markets, with Wall Street analysts known for making closely monitored recommendations on buying or selling stock.

Last fall it laid out a blueprint for changes to capital market rules in a U.S. Treasury report, but did not advocate scrapping quarterly reporting.

Companies that want to distance themselves from short-term scrutiny should instead stop publicly projecting the next quarter's earnings, Pozen added. Less-frequent public disclosures could hand another advantage to sophisticated investors with easy access to corporate executives, corporate governance experts said. In 1996, nearly 950 companies went public, according to data compiled by Bloomberg.

Business groups including the US Chamber of Commerce, the Securities Industry and Financial Markets Association and exchange operator Nasdaq have been lobbying hard over the past year for lawmakers and the SEC to relax listing rules, warning that the decline in listings hurts jobs and pension funds.

In theory, this information helps investors make informed decisions about the future success of a company.

"Investors will demand they get their information", Ed Yardeni, founder of Yardeni Research Inc., said in a Bloomberg Television interview.

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