Trump wants to let companies make fewer disclosures, thus keeping investors in the dark
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This being the “information age,” it would be understandable if investors sometimes feel inundated with too much information to wade through about the stocks in their mutual fund portfolios.
The Securities and Exchange Commission, bowing like a puppy to the urgings of President Trump, is considering exactly the wrong solution to this supposed burden. It’s proposing to allow public companies to give their investors less information, as though that’s a good thing.
On May 8, the SEC proposed rescinding its mandate that public companies report financial results on a quarterly schedule. Instead, it suggests, semiannual and annual reports should suffice.
This takes an already-unlevel playing field where Main Street investors are already disadvantaged, and makes it more unlevel.
— Dennis Kelleher, Better Markets
The SEC left its proposal open for public comment for 60 days, meaning the window closed Monday. By then, the agency had received more than 68,000 comments, according to a tracker posted online by accounting professor Tzachi Zach of Ohio State.
Almost 99.9% of the comments were negative. Several organizations of institutional investors and auditing professionals, as well as a tsunami of individual investors, expressed opposition.
A similar initiative the SEC aired in 2018, during Trump’s first term, received an overwhelmingly negative response and was eventually dropped.
The tide of opposition coming from individual investors shouldn’t be surprising. “Taking away basic quarterly information means investors are blind for six months at a time,” says Dennis Kelleher, co-founder and chief executive of the investor advocacy nonprofit Better Markets.
That’s especially true for small investors, though perhaps not so much for major institutions, insiders or deep-pocketed individuals. “If you’re a big dog, you’ll get the information anyway,” Kelleher told me. “And insiders, who are trading in their own stock all the time, will have the information. This takes an already-unlevel playing field where Main Street investors are already disadvantaged, and makes it more unlevel.”
Trump set off the latest initiative with a social media post on Sept. 15, advocating the move to a six-month reporting schedule. It read, in part, “This will save money, and allow managers to focus on properly running their companies. Did you ever hear the statement that, ‘China has a 50 to 100 year view on management of a company, whereas we run our companies on a quarterly basis???’ Not good!!!”
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As was usual with Trump, his argument was a string of uninformed and irrelevant non sequiturs.
It’s doubtful that eliminating quarterly reports will save much, if any, money. Most 10-Qs are cookie cutter documents disclosing financial figures already embedded in corporate records.
The idea that managers would become empowered to “focus on properly running their companies” if only they were relieved of the burden of preparing a report every three months is just malarkey: Any CEOs who feel the impulse to drop everything and involve themselves in what is essentially an automated process can’t be very good at their jobs.
As for China’s “50 to 100 year view on management of a company,” what would that even mean, even if it were true? China doesn’t operate on a 50 to 100 year corporate horizon, but rather on a string of five-year plans. The most recent of these was adopted by the government in March, covers the period up to 2030, and is its 15th in a row.
Despite the flaws in Trump’s arguments, Trump’s SEC Chairman Paul Atkins, a former corporate lawyer and securities industry consultant, fell into line. Within a few days of Trump’s post, he showed up on CNBC to minimize the potential effect of the change. Private companies rely on semiannual reports, after all, he noted, although the idea of taking private companies as models for publicly traded corporations might not strike experienced investors as the wisest thing.
Atkins cited an enduring chestnut, for which there’s no evidence, that quarterly reporting is responsible for “short-term thinking” in corporate suites (though he admitted that his evidence was “anecdotal”). And he suggested that small investors have ample access to corporate information even without quarterly reports — why, he said, they can just tune in to CNBC!
“To propose change in what our rules are now would be a good way forward,” he said. “So I welcome the president’s putting this up for discussion.”
Something more insidious undergirds the SEC’s proposal than its immediate effect on corporate behavior. The agency rationalizes its proposal as seeking “a tradeoff between reducing regulatory burdens ... and promoting efficient financial markets through timely disclosure.”
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The problem here, Kelleher points out, is that “reducing regulatory burdens” isn’t part of the SEC’s mission in any way, shape or form. It’s a regulatory agency, and its mission since its founding in 1934 has been to protect investors, not to make things fluffier for stock issuers.
The history of financial disclosure in the U.S. shows a long-term trend favoring more disclosure, not less. In the 1880s, quarterly reporting by railroads and other transportation companies were common.
Early on, pressure for more frequent disclosure came not from government regulators, who barely existed before 1934, but from investors. The reporting of quarterly earnings, notes corporate finance expert Owen Lamont of Acadian Asset Management, was “a bottom-up historical phenomenon reflecting voluntary arrangements between firms and investors, not a top-down phenomenon imposed by law.”
By 1931, according to financial historians, 63% of New York Stock Exchange-listed firms were publishing their quarterly earnings. The Big Board mandated that frequency for most listed companies in 1939. The SEC mandated semiannual reports in 1955 and quarterly reports, as Atkins said, in 1970.
The evidence in favor of dropping the quarterly reports is uniformly thin. Some advocates cite a 2018 op-ed in the Wall Street Journal by JPMorgan Chase CEO Jamie Dimon and Warren Buffett that was headlined “Short-Termism Is Harming the Economy.”
Couple of points about this: First, the target of Dimon and Buffett wasn’t quarterly financial reporting, but quarterly earnings guidance — that is, the practice of some top executives who project their earnings into the future. (This guidance usually comes at the same time they issue their SEC disclosures.)
It’s guidance, they wrote, that is “a major driver” of short-termism in corporate behavior. That’s because management is giving itself a target it feels obligated to meet, even if factors outside its control interfere with the quest.
Furthermore, Dimon and Buffett wrote, “Our views on quarterly earnings forecasts should not be misconstrued as opposition to quarterly and annual reporting.” They called transparency about financial and operating results “an essential aspect of U.S. public markets ... so that the public, including shareholders and other stakeholders, can reliably assess real progress.”
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Individual investors may be unmoved by the SEC’s proposal because — let’s be candid — how many of them read quarterly earnings reports, anyway? But that’s unimportant, Kelleher says, because other market participants are reading them. “So that information is in the marketplace, and that’s what actually enables price discovery, so stock prices roughly reflect what’s going on at a company, most of the time.”
More to the point, the quarterly reports reflect the highest-quality, detailed information, the information the SEC requires executives to disclose on pain of facing a civil lawsuit from the agency or even criminal liability for faking data. “Main Street investors, whether they read quarterly reports or not, are the real beneficiaries,” Kelleher says.
That’s so. The bottom line is that quarterly financial reporting helps investors. It doesn’t promote short-term behavior and its costs, modest as they are, don’t outweigh its benefits.
Over the decades, scandal-ridden corporations have hidden fraudulent behavior in the interstices between mandated disclosures—think Enron, WorldCom and Tyco, among others. Why give any corporation, even an honest one, the opportunity to disclose less?
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Ideas expressed in the piece
The column argues that the SEC’s proposal, pushed in response to former President Trump’s call to move from mandatory quarterly to optional semiannual reporting, goes in exactly the wrong direction by reducing the frequency of high-quality, standardized information available to investors and making markets less transparent.[4][9][16]
It emphasizes that the change would most harm small, “Main Street” investors, who rely on timely public filings to narrow the information gap with insiders and large institutions, and contends that stretching the interval to six months would leave ordinary shareholders “blind” for long periods while sophisticated players continue to access information through private channels and analyst networks.[3][5][8]
The piece contends that Trump’s stated justifications—that the move would save companies money and let managers focus on running their businesses rather than “managing to the quarter”—are largely unfounded, arguing that 10‑Q reports are largely standardized, generated from data companies already track, and impose only modest incremental costs compared with the benefits of enhanced transparency.[2][11][13]
It further argues that the SEC’s own framing of the proposal—seeking to “reduce regulatory burdens” and give issuers more flexibility—marks a troubling departure from the agency’s core statutory mission, which is to protect investors and maintain fair, orderly markets, not to lighten the load on corporate issuers.[5][9][17]
The column stresses that the long sweep of U.S. financial history has moved toward more frequent disclosure, not less: investors and stock exchanges began pressing for quarterly reporting decades before federal securities regulation, and mandatory quarterly reporting was adopted in 1970 in recognition that timely, standardized information is “the lifeblood of financial markets” and helps level the playing field between insiders and outside investors.[20]
It argues that evidence tying quarterly reporting to destructive “short-termism” in corporate decision-making is thin, and notes that influential business leaders such as Jamie Dimon and Warren Buffett have criticized quarterly earnings guidance—not the reporting itself—while explicitly endorsing quarterly and annual reporting as essential for market transparency and for allowing shareholders to “reliably assess real progress.”[20][11]
The piece warns that lengthening the gap between mandated reports creates more room for manipulation and fraud to go undetected, pointing to past corporate scandals where problems were hidden between disclosures, and maintains that more frequent SEC‑mandated filings, backed by civil and criminal liability for misstatements, are one of the few tools that help detect misconduct early and support accurate price discovery.[18][20]
Finally, the column dismisses comparisons to private companies and some foreign regimes as inapt, arguing that U.S. public markets serve millions of dispersed, mostly small investors, and that allowing public companies to report less often would exacerbate informational asymmetries, make stock prices less reflective of underlying reality, and further tilt an already “unlevel playing field” against ordinary investors.[3][5][19]
Different views on the topic
Supporters of the SEC’s proposal highlight that it would not abolish quarterly reporting outright but would introduce an optional semiannual framework, allowing companies to choose between filing three Form 10‑Qs or a single Form 10‑S for the first half of the year plus the Form 10‑K, which they characterize as a pragmatic effort to modernize disclosure rules and give issuers flexibility.[1][4][9][15]
Backers, including SEC leadership and some business advocates, argue that mandatory quarterly reporting contributes to a culture of short-termism, encouraging executives to focus on hitting three‑month earnings targets at the expense of long‑term investment, and say that a semiannual option could ease the pressure to “manage to the quarter” while still preserving robust annual disclosure.[4][11][12]
A deregulatory and libertarian perspective, reflected in commentary from policy think tanks, contends that the frequency of reporting should be determined by companies and their investors rather than prescribed by the federal government, and frames the SEC proposal as “restoring self‑determination” by letting issuers and shareholders decide whether quarterly or semiannual reporting best fits their needs.[12]
Proponents also emphasize cost savings, pointing to the SEC’s own economic analysis and outside legal commentary estimating that firms switching to semiannual reporting could save on the order of $200,000 per year in preparation, review, and audit-related expenses—resources that, in this view, could be redirected to innovation, hiring, or other productive uses without materially harming investors.[12][13]
Some corporate and legal analysts note that semiannual reporting would align U.S. practice more closely with other major markets, such as the United Kingdom and the European Union, where companies often report on a half‑year basis, and argue that the experience in those jurisdictions suggests that liquid capital markets can function effectively without mandatory quarterly filings.[10][12]
Research on foreign regulatory changes is sometimes cited by supporters: for example, a study of the Tel‑Aviv Stock Exchange’s shift that let smaller firms move from quarterly to semiannual reporting found significant reductions in external audit hours and fees for adopters, which advocates see as evidence that easing reporting frequency can meaningfully reduce compliance burdens without clearly demonstrable long‑term damage to market functioning.[6]
Legal practitioners emphasizing nuance point out that under the SEC proposal, other disclosure obligations—including current reports on Form 8‑K for material events, Regulation FD’s restrictions on selective disclosure, and antifraud provisions—would remain in force, and that the new Form 10‑S is expected to mirror the content of a Form 10‑Q, meaning investors would still receive detailed interim financial and narrative information, just less often.[1][7][9]
A more moderate view among some market participants accepts many investor concerns about reduced transparency but still favors preserving an option for semiannual reporting, arguing that a flexible regime—under which companies willing to bear the cost can continue quarterly reporting, while others can elect semiannual filings with investor consent—might better accommodate diverse business models, provided regulators carefully weigh any rule change against its potential impact on market efficiency and investor protection.[2][11][14]
