The Securities and Exchange Commission is proposing to allow public companies to report twice a year, instead of quarterly, at the urging of President Trump.
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Last year, President Trump reiterated his proposal from his first administration, in 2018, saying on
On Monday, the
Under the Exchange Act, public companies are currently required to file quarterly reports on Form 10-Q. But if the proposed amendments were adopted, public companies would be permitted to elect to file semiannual reports on new Form 10-S, instead of quarterly reports on Form 10-Q.
Thus, companies that elect to file semiannual reports would file one semiannual report and one annual report for each fiscal year, instead of three quarterly reports and one annual report. That would enable public companies to opt for the interim reporting frequency that would best serve the company and its investors.
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“Public companies have an obligation under the federal securities laws to provide information that is material to investors,” said SEC Chairman Paul Atkins in a statement Tuesday. “Yet, the rigidity of the SEC’s rules has prevented companies and their investors from determining for themselves the interim reporting frequency that best serves their business needs and investors. Today’s proposed amendments, if ultimately adopted, would provide companies with increased regulatory flexibility in this regard,.
He noted that in determining a company’s reporting cadence, a company might consider factors such as the costs and management time of preparing quarterly reports versus semiannual reports, the expectations of its investors, the potential effects on its cost of capital, the stage of its business development, the nature of its business model, other avenues of disclosure including earnings calls and current reports on Form 8-K, and prospects of increased research coverage, all without undermining fundamental investor protections.
“Ultimately, this flexibility might reduce some of the burdens of being a public company and potentially influence a company’s decision to become or remain public,” said Atkins. “The proposal seeks public input on the optional semiannual reporting framework, and I look forward to the public feedback.”
He pointed out that the frequency of regulatory reporting is only part of the equation for incentivizing companies to go and stay public. He also wants the Financial Accounting Standards Board to amend its standards.
“With respect to the financial statements required in interim reports, I also encourage the Financial Accounting Standards Board to evaluate potential amendments to its accounting standards, with the same goal of eliciting disclosure of material information and avoid compelling the disclosure of immaterial information,” said Atkins.
He added that the proposal is just the first step of the larger, comprehensive effort to review and reshape the current SEC rules governing public companies with respect to their ongoing reporting obligations and their ability to raise capital in the public markets. Over the next few months, he predicted that the SEC “will be considering a series of proposals that, if adopted, will not only redefine what it means to be a public company, but will make being public attractive again.”
Under the proposal, the filing deadline for semiannual reports on Form 10-S would be 40 or 45 days, depending on the company’s filer status, after the end of the first semiannual period of the fiscal year. The proposal also would amend Regulation S-X, which governs the financial statement requirements for periodic reports, registration statements, and proxy statements, to reflect the new semiannual reporting option and simplify the existing financial statement requirements.
There will be a 60-day comment period on the
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