Trump Urges SEC Reporting Shift

Former President Donald Trump has called on the Securities and Exchange Commission (SEC) to allow publicly listed companies in the U.S. to file periodic disclosures every six months instead of the current quarterly reporting requirements. This proposal echoes arguments made by business groups that the change would cut company costs and allow management to focus more intently on long-term goals. However, the proposal may face opposition from some investors who rely on quarterly information to make informed decisions. Some analysts suggest that the SEC is likely to move toward a "European-style system" by 2027, where companies are only required to release financial reports every six months. Many large companies, however, may choose to stick with the current quarterly reporting format.

Historical Background and Previous Efforts

Trump made similar calls during his first term in office. Months later, the SEC, led by Jay Clayton, solicited public comment on the matter. However, no action was ultimately taken due to a crowded agenda and the disruption of government priorities by the COVID-19 pandemic.

Why This Time Might Be Different

Analysts and Washington insiders suggest that the idea is more likely to become a reality this time around. This is partly because SEC Chair Paul Atkins, a free-market Republican critical of burdensome corporate regulations, is working closely with the White House, which is exerting more control over independent agencies. Unlike traditional practices, the White House has reviewed the SEC’s regulatory agenda and has been pushing the agency on other significant policy changes, including those related to cryptocurrencies and SEC staff reductions.

A Window of Opportunity

The SEC recently released a broad-ranging agenda that includes a project aimed at streamlining company disclosures, tentatively scheduled for April. This project could provide a vehicle to initiate a public consultation process. Atkins would also face a friendlier Congress and a judicial system that leans conservative. Additionally, he has more time to complete the typically lengthy rule-making process, which requires the SEC to assess the impact of changes on market efficiency, competition, and capital formation, and solicit public comment.

Expert Perspective

“Trump 2.0 is very different from Trump 1.0. Trump 2.0 is bolder, so we might actually see action,” said James Angel, a financial regulation expert at Georgetown University’s McDonough School of Business, pointing to the SEC’s quick and early moves favorable to the crypto industry. “I think the odds are much greater this time.”

Potential Investor Concerns

An SEC spokesperson stated that the agency is prioritizing the proposal. Clayton, now the top federal prosecutor in Manhattan, declined to comment. He previously stated that the SEC could lighten reporting burdens for companies without harming investor interests.

White House Support

White House spokesman Taylor Rogers said in a statement that the White House is working with other departments in this administration to achieve a “great long-term American revival.”

Possible Timeline

Brian Gardner, Stifel’s chief Washington policy strategist, said in a Tuesday report that the SEC could release a regulatory proposal as early as this year.

Business Community Support

Large business groups, including the U.S. Chamber of Commerce and the Business Roundtable, have long supported more streamlined reporting rules. “Modernizing disclosures helps alleviate costly and burdensome compliance requirements while streamlining investors’ ability to focus on key information,” said Bill Hulse, senior vice president at the U.S. Chamber of Commerce, in a statement.

Potential Drawbacks

A Washington industry group executive familiar with the matter, who requested anonymity, said that the White House’s keen interest in the SEC’s work makes the rule more likely to become a reality. However, some investors may oppose the changes.

Investor Concerns

“The idea that investors are going to be focused on long-term data rather than three months’ worth sounds good. However, since earnings cover a longer period, corporate earnings could be more volatile,” said Andrew Horowitz, an investment advisor in Fort Lauderdale. The Council of Institutional Investors (CII), a major investor group representing employee benefit funds and retirement savings, emphasized that its position has not changed since opposing the potential change in 2019, arguing that quarterly disclosures are a necessary guide for investment decisions. Nevertheless, some investors who are pushing companies to do more on long-term sustainability issues have expressed cautious support for the idea.

Conclusion

The proposal to move to semi-annual rather than quarterly reporting for publicly listed companies in the U.S. raises a debate between relieving financial burdens on companies and providing adequate information to investors. While proponents argue that it would encourage a focus on long-term growth, opponents fear that it could reduce transparency and increase market volatility. It remains to be seen whether the SEC will take this step, and how it will impact capital markets and the economy as a whole. Investors should closely monitor this development, considering their specific investment goals and risk tolerance.