The president has asked the SEC to look at shifting quarterly reports to twice a year
President Donald Trump said in a tweet Friday that he has asked the Securities and Exchange Commission to study halving the number of times public companies are required to disclose information to the public.
Currently, public companies report financial and operational information on a quarterly basis. But, after meeting with several business leaders this week, Mr. Trump said he was told that a six-month reporting system would be better for the economy. "That would allow greater flexibility & save money. I have asked the SEC to study!" Mr. Trump tweeted.
The SEC could not be reached for comment.
After Mr. Trump's tweet, the Council of Institutional Investors said companies should continue to report quarterly on their financial performance. "Investors and other stakeholders benefit when regulations ensure that important information is promptly and transparently provided to the marketplace," said Amy Borrus, CII's deputy director, in a statement. "Investors need timely, accurate financial information to make informed investment decisions."
Tom Quaadman, executive vice president of the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness, said in a statement that the chamber would "welcome an overhaul of a 1930s-era disclosure system that is not user-friendly and no longer meets the needs of a 21st century economy."
BlackRock (BLK) CEO Larry Fink, who in the past has called on CEOs to resist short-term thinking, tweeted on Friday, "I'm encouraged to hear people from both sides of the aisle talking about the need to promote corporate behavior that's more focused on the long-term, though the precise policies for getting there need to be thoughtfully examined and debated."
In 2017, London-based Schroders PLC, which has $589 billion in assets under management and administration, said it would only issue full financial reports at the end of the second and fourth quarters, restricting information for the first and third quarters to changes in assets.
A statement provided by a Schroders' spokeswoman last year said, "We believe that the excessively frequent reporting, and subsequent management of financial performance, increases the pressure to make short-term decisions."
In his statement Friday, Mr. Quaadman said: "The SEC should engage in meaningful disclosure reform and address short-termism. Disclosures are only effective if they help provide investors with decision-critical information, and management should avoid behavior that puts at risk the long-term well-being of a company."
Chris Cummings, CEO of the Investment Association, the U.K.'s money management trade association, had a similar interpretation. "The challenge for many global companies, including a number in the FTSE 100, is that the SEC rules in the USA require them to report quarterly in order to list in America," he said in a statement. "Asking the SEC to study the effect of quarterly reporting, with a view to moving to a longer-term model, is a significant and positive intervention by the president."
A move away from mandatory quarterly reporting would allow companies "greater flexibility to focus on long-term investment rather than short-term targets," Mr. Cummings added.
Bartlett Naylor, financial policy advocate for Washington-based watchdog group Public Citizen, had a different point of view. He said Friday that quarterly reporting "constitutes the heartbeat for corporate transparency and accountability. Doubling the reporting gaps will deprive the information vascular system. Investors want more information, not less.
"Nor does this answer the problem of short-termism," he added. "That stems from misaligned executive compensation designs where CEOs aren't rewarded for sustainable growth."
In 2016, the SEC's Investor Advisory Committee wrote a letter to the SEC's corporate finance division in which it said that while there is room for improvement, "the current degree, quality and frequency of disclosure for U.S. issuers overall is appropriate and a source of strength for the U.S. capital markets. The current system greatly benefits retirees, pension funds, endowments and households that are directly and indirectly market participants."
SEC commissioners would need to approve the change in reporting requirements. The commission currently has four members split along party lines with Republican nominee Elad Roisman making his way through the Senate Banking Committee.