The Securities and Exchange Commission formally proposed Tuesday allowing public companies to file earnings reports twice a year rather than four times, giving companies the option to replace their quarterly 10-Q filings with a new semiannual form.
Companies choosing the new schedule would replace their three quarterly filings and single annual report with just two submissions per fiscal year: a semiannual report on a new form called the 10-S and an annual report. The filing deadline for semiannual reports would be 40 or 45 days after the end of the first semiannual period, depending on the company’s filer status. The change would be optional — companies could continue filing quarterly if they chose.
“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,” SEC Chairman Paul S. Atkins said in a statement.
The public comment period will remain open for 60 days after the proposal is published in the Federal Register.
Backers of the change, among them JPMorgan Chase and Nasdaq, contend that the current quarterly cycle is especially costly for smaller companies and pulls management attention toward near-term targets rather than sustained growth, according to Reuters. Opponents warn that moving to twice-yearly disclosures would leave investors with less visibility into company performance and create openings for insider trading, while also giving firms more opportunity to obscure negative results, according to Bloomberg.
The Investment Company Institute, an industry group, pushed back on the idea that frequency alone determines the value of financial reporting. “It is important to strike a balance between reducing unnecessary compliance burdens and preserving the quality disclosure framework that underpins investor confidence,” the group said.
According to Reuters, those in the asset management industry expect that many companies will take a wait-and-see approach rather than switching away from quarterly filings right away. Index providers could face pressure to update their eligibility criteria as well — membership in the S&P 500, for example, currently carries a quarterly reporting requirement that would be thrown into question if constituents began filing less often.
The proposal follows a push by President Donald Trump, who called on social media for an end to mandatory quarterly reporting, saying U.S. companies “should no longer be forced” to report every three months. The quarterly reporting requirement has been in place since 1970. During Trump’s first term, the SEC studied a similar shift to semiannual reporting but did not act on it.
Atkins signaled the agency would move ahead with the proposal shortly after Trump renewed the push, describing it as a “good way forward” in a CNBC interview and saying he had spoken with Trump about the idea. The full rulemaking process at the SEC has historically stretched anywhere from a year and a half to two years, according to Bloomberg.
