On September 15, President Donald Trump expressed his support for a significant shift in the U.S. Securities and Exchange Commission (SEC) reporting requirements. He proposed that companies and corporations should transition from the current practice of quarterly earnings reports to a six-month reporting schedule. Trump believes this change would not only save money for businesses but also allow managers to concentrate on effectively managing their companies.
In a post on Truth Social, Trump highlighted the long-term management philosophies embraced by countries like China, stating, "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!!!'" His remarks underscore the notion that the current quarterly reporting system may not be conducive to fostering long-term growth and stability for U.S. corporations.
Currently, the SEC mandates that corporations submit their financial statements every 90 days. Transitioning to half-yearly reporting would represent a monumental shift in disclosure requirements, aligning the U.S. with practices observed in the U.K. and several European Union countries. Proponents of this proposal argue that fewer financial statements could encourage companies to prioritize long-term objectives over short-term gains, potentially benefiting investors in the long run.
However, this change is not without its critics. Opponents argue that extending the reporting period could lead to decreased transparency and increased market volatility, as investors would have to wait longer for critical financial information. The debate surrounding this topic is significant, especially considering that Trump's stance on reducing reporting requirements is not a new one; he previously urged the SEC to consider similar changes during his first term in office.
The SEC has not yet provided a comment on Trump’s latest proposal. It remains uncertain whether changing the reporting requirements would genuinely result in cost savings for companies. Some analysts suggest that such a move might render investing in U.S. stocks less appealing, potentially leading to short-term volatility in public markets. One of the reasons U.S. stocks tend to trade at a premium compared to equities in other regions is attributed to the stringent financial reporting requirements currently in place.
Historically, companies listed in the U.S. did not always adhere to a quarterly reporting schedule. In fact, the SEC mandated the shift from semiannual reporting to quarterly reporting back in 1970. As the discussion around Trump's proposal continues, the implications for both companies and investors remain a hot topic within the financial community.
Reporting by Brendan O'Brien, Doina Chiacu, and Johann M Cherian; Editing by Bernadette Baum and Saumyadeb Chakrabarty.
