The Securities and Exchange Commission (SEC) is preparing a proposal to potentially eliminate the requirement for companies to report earnings quarterly, according to sources familiar with the matter. The proposal would give companies the option to share results twice a year instead. The regulator could publish the proposal as soon as next month, initiating a public comment period. After the comment period, the SEC will vote on the proposal; however, there is no guarantee it will be approved.
The potential rule change would not eliminate quarterly reporting altogether but instead make it optional. SEC officials have reportedly been in talks with major exchanges regarding adjustments to their rules. The push for less frequent reporting gained traction after the Long-Term Stock Exchange petitioned the SEC to eliminate the quarterly earnings report requirement. Proponents believe this could attract more companies to go public, citing the time-consuming and costly nature of maintaining publicly traded shares.
Supporters of the change argue that quarterly reporting can pressure corporate management to focus on short-term results and adds compliance costs. Critics, however, warn that less frequent reporting could weaken transparency and delay the release of important financial information. Historically, U. S. public companies have reported results every three months for over 50 years. Publicly listed European companies are no longer required to report quarterly financial results after a 2013 rule change, and the U. K. ended quarterly reporting requirements about a decade ago.
The SEC's potential move could significantly alter the landscape of corporate financial reporting, impacting investors, companies, and market participants. The proposal reflects ongoing debate about balancing the costs and benefits of frequent financial disclosures. It remains to be seen whether the SEC will adopt the rule and what the ultimate consequences will be for U. S. capital markets.
