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Regulation

SEC seeks comment on public company disclosure requirements

The Securities and Exchange Commission announced Tuesday that it will solicit comments on the nature, content and timing of earnings releases and quarterly reports made by public companies.

The announcement comes four months after President Donald Trump said in a tweet that he asked the SEC 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.

According to an SEC news release, the request for comment solicits public input on how the commission can "reduce burdens on reporting companies associated with quarterly reporting while maintaining, and in some cases enhancing, disclosure effectiveness and investor protections." The news release also said the agency is seeking comment on how the existing reporting system, earnings releases and earnings guidance, alone or in combination with other factors, "may foster an overly short-term focus by managers and other market participants."

"There is an ongoing debate regarding the effects of mandated quarterly reports and the prevalence of optional quarterly guidance," said SEC Chairman Jay Clayton, in the release. "Our markets thirst for high-quality, timely information regarding company performance and material corporate events. We recognize the importance of this information to well-functioning and fair capital markets. We also recognize the need for companies and investors to plan for the long term. Our rules should reflect these realities."

Amy Borrus, deputy director of the Council of Institutional Investors, Washington, said in an email that companies should continue to report quarterly on their financial performance so investors can make informed decisions.

"Switching to semiannual financial reporting would not help make CEOs more long-term minded," she said. "An extra three months won't suddenly greenlight lots of long-term projects, and six months isn't 'long term' anyway."

Reporting twice a year would make it harder for investors to assess company performance, increasing reliance on rumor and off-the-cuff remarks by top executives, which could make stock prices more volatile, Ms. Borrus added.

"If companies want to avoid short-term scrutiny, they should stop issuing quarterly earnings guidance, which the SEC does not require," she said. "Guidance can lead companies to hold off on investing in technology, hiring and R&D — just to meet their earnings forecasts."

The SEC's comment period will remain open for 90 days following publication in the Federal Register.