Trump asks SEC to study quarterly earnings requirements for public firms

pulse

August 18, 2018 2:48 AM

President Donald Trump asked the Securities and Exchange Commission to consider eliminating requirements that publicly traded companies post quarterly earnings reports, a move that could do away with a cornerstone of American capital markets.

In a message posted on Twitter early Friday, the president wrote that he had directed the regulator to study moving corporate America to reporting earnings twice a year, saying such a move would allow greater flexibility and cost savings.

The directive does not mean the imminent demise of quarterly earnings reports, which keep investors informed on the financial health of publicly traded companies. The disclosures are required under federal securities law. The commission is independent of the executive branch, although the White House nominates the chairman of the SEC and the other four commissioners, who all serve staggered, five-year terms.

“The president has highlighted a key consideration for American companies and, importantly, American investors and their families — encouraging long-term investment in our country,” the SEC chairman, Jay Clayton, said in a statement. “The SEC’s division of corporation finance continues to study public company reporting requirements, including the frequency of reporting.”

Trump’s suggestion is not unheard-of. In 2013, the European regulators abolished requirements that publicly listed companies file quarterly reports. On the other hand, Japan has moved closer to current U.S. rules, requiring quarterly reporting starting in 2008.

Still, any move away from the system of quarterly reporting would be a significant shift for investors, who have come to rely on the regular financial disclosures on the performance of publicly held companies.

“The fact of the matter is, investors are used to getting updates four times a year on the status of companies’ financials, and changing that would require a change in behavior,” said Ed Clissold, the chief U.S. strategist for Ned Davis Research. “On the positive side, getting frequent updates holds companies accountable. They lay out plans to grow their business, and quarterly updates are a chance for investors to see the progress toward those objectives. The downside is that companies have occasionally managed their businesses to meet those quarterly objectives.”

This article originally appeared in The New York Times.

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