SEC considers shift to semiannual earnings reports

The US Securities and Exchange Commission (SEC) is working on a proposal to allow public companies to release earnings reports twice a year instead of quarterly, according to the Wall Street Journal. The regulator has already begun discussions with exchanges about potential next steps for the transition. While the proposal could come within the next few weeks, any actual regulatory change is still a long way away. If the SEC does release the proposal, it will be subject to a public comment period and then a vote before any rules are finalized.

The current quarterly reporting requirement is a 50-plus-year-old rule. Over the past year, chatter about making this requirement optional has picked up steam as companies increasingly lament the cost and administrative burden of preparing quarterly earnings. This quarterly requirement is also thought to be one reason why some companies choose to stay private longer. Proponents of the change hope that a semiannual requirement will encourage more companies to go public by making it easier to maintain public company status. Both SEC chairman Paul Atkins and President Donald Trump have voiced support for the idea.

There is clear international precedent for this potential rule change. Roughly a decade ago, both the European Union and the U.K. eliminated mandatory quarterly reporting in favor of semiannual disclosures. According to the Wall Street Journal, even though the mandate was removed, many companies in both of those markets still choose to report quarterly by choice.

Why it matters

This potential regulatory shift aims to lower the administrative burden on public companies, with the hope that it will incentivize more private firms to pursue public listings.