SEC prepares plan to scrap quarterly reporting
Proposal would shift US companies to semi-annual disclosures, aligning with EU and UK practices
The Securities and Exchange Commission is preparing a proposal that would eliminate mandatory quarterly financial reporting for US public companies, marking the most significant change to corporate disclosure requirements since 1970. The rule would allow companies to shift from quarterly Form 10-Q filings to a semi-annual schedule, aligning the United States with practices in the European Union and United Kingdom.
SEC Chair Paul Atkins is fast-tracking the proposal, with the rule expected to be released for public comment in late 2025 or early 2026. Even if approved, the change would take more than a year to go into effect. The initiative has the backing of President Donald Trump, who has advocated reducing regulatory burdens on corporations.
Proponents argue that quarterly reporting imposes costly "red tape" and encourages "short-termism" by forcing management to focus on three-month results rather than long-term strategy. The SEC and its supporters contend that semi-annual reporting would allow executives to devote more attention to fundamental business operations while reducing compliance costs, particularly for smaller companies.
However, the proposal faces substantial opposition from academics, institutional investors, and shareholder advocacy groups. The Council of Institutional Investors has expressed concerns that reduced reporting frequency would create an "information vacuum" for market participants and increase stock price volatility.
Research suggests that semi-annual reporting can lead to investors overreacting to peer-firm earnings news and result in less efficient stock prices. A study of the Tel-Aviv Stock Exchange found that stocks of firms adopting semi-annual reporting experienced an average 2% price decline, reflecting market apprehension toward reduced transparency.
Institutional investor groups have raised particular concerns about the potential for increased information asymmetry and heightened opportunities for insiders to trade on non-public information over longer periods between disclosures. Some professional investor organizations argue that merely extending the reporting period may not genuinely foster longer-term management thinking, suggesting that changes to executive compensation structures would be more effective.
International experience offers mixed evidence. When the UK eliminated mandatory quarterly reporting requirements, research indicated no clear impact on longer-term decision-making. Many multinational corporations in Europe continued providing voluntary quarterly updates to satisfy investor demand for more frequent information.
Should the proposal become law, companies would likely need to manage investor expectations through alternative communication channels. Analysts suggest firms might compensate for reduced mandatory disclosures through voluntary earnings releases, key performance indicator dashboards, or more frequent Form 8-K filings for material events.
The proposal has triggered a broader debate about the balance between reducing corporate compliance costs and maintaining market transparency that protects investors, particularly retail shareholders who may have fewer resources to access alternative information sources.