US SEC preparing to scrap quarterly reporting requirement

ashraymalhotra

It would be interesting to see if reducing reporting requirements allows more startups to go public earlier in their journey, hence opening up more opportunities for public to participate in the upside!

dboreham

That was easy.

mslate

This means that employees would only be able to sell their stock 2 windows a year where they currently can sell 4 windows a year, correct?

deadbabe

If you have earnings too frequently, it encourages companies to become hyper focused on earnings and make less long term investments. But if there is too much gap in between earnings, there is potential for grifting. What to do?

senkora

> The U.S. Securities and Exchange Commission is preparing a proposal to scrap the requirement for companies to report their earnings every quarter and giving them the option to share results twice a year So, at least twice a year would still be mandatory until this change.

gucci-on-fleek

Does anyone have any guesses about how most companies would react to this? Will most keep publishing quarterly reports, will most switch to semiannual reports, or will it be a 50/50 split? Or are the major stock exchanges likely to continue mandating quarterly reports?

readthenotes1

European companies report every 6 months and it doesn't seem to do any harm

kshacker

This is an awesome move. They’re not saying the reports go away—just moving them to every six months. After hating how each company runs on an internal quarterly cycle, I have to welcome it despite how the change originated. Six months is still short from the perspective of perverse incentives, but if you free up one week of charade from execs every 13 weeks, maybe they can focus better. And it’s not just execs, but the whole corporate machinery that takes 3–6 weeks after quarter end to churn out reports. Of course, internally executives should be tracking performance daily, but the quarter-end panic could lessen. If you have a bad quarter, you’re not penalized as much if the surrounding months are good. And anyway, if there is a material adverse change the companies should be expected to disclose, like they are expected now. Ps: I posted the same on Reddit a couple of hours back. Not AI but if you do find the account don't mention them online in the same sentence.

gamblor956

While this will hopefully stop incentivizing companies to focus on super short term results its also going to increase the amount of financial reporting fraud because the remaining reports will become even more important.

p-o

I could give the benefit of the doubt to any other administration doing it. This one? I really have a hard time thinking it's nothing else then another grifting scheme.

ralph84

If you want to discourage short-term thinking, make the vesting period longer on executive stock grants. Making companies' performance less transparent just opens up more opportunities for insider trading.

throw0101c

This idea goes back several years, and Barry Ritholtz had thoughts on it back in 2015: > Back to quarterly earnings. Why do we even require them in the first place? The answer is that thanks to the transparency provided by regularly reported earnings and profits, investors can make informed decisions about which stocks to own or avoid. Owners of public companies have hired managers to run the businesses for them, and they want to see with some consistency how healthy the companies that they own actually are. If there are issues with how the business is being managed by the hired corporate executives, the owners want to know sooner rather than later -- and to have a chance to make course corrections. Quarterly numbers allow that to happen. * https://web.archive.org/web/20151008083649/http://www.bloomb... * Via: https://ritholtz.com/2015/08/worst-idea-ever/ And in 2018 he suggested going in the opposite direction—more frequent—to even daily reporting: > This is exactly backward: More frequent reporting makes the data less significant. In the real world, human behavior emphasizes what occurs less often—meaning doing something less frequently gives it an even greater significance than something that becomes routine or common. > That is the difference between a New Year’s Eve celebration and a married couple’s weekly date night. > Twice-a-year earnings reporting will make the event so momentous, with such focus on it, that any company that misses analysts’ forecasts will find their stock price shellacked. The twice-yearly focus on making the per-share number will become overwhelmingly intense. > This is counterproductive. > My proposal: Report earnings monthly, with the goal of eventually moving to a near real-time, daily, fundamental update. Technology is improving to the point where business intelligence software and big data analyses will make this automated. Indeed, some companies already do much of this internally. > Once financial reporting becomes daily, the short-term earnings obsession will all but disappear. In its place will be a focus on broader profit trends and deeper analytics. […] > The bottom line is so obvious: To make quarterly earnings less important, we should be exploring ways to report results more often, not less. * https://www.fa-mag.com/news/reporting-profits-daily-would-en...

cheriot

Congratulations to the CEOs of fraudulent companies. > Trump, who first floated the idea in his first term as president, has argued the change in requirements would discourage shortsightedness from public companies while cutting costs. Having less information does not change one's time horizon. It just means large investors paying for proprietary data will have more edge.

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so all EDGAR APIs need to be updated to support either 10-Q or 10-H per firm?

MattCruikshank

I hear there's no legislation called "Protecting Unified Monetary Products & Distributing Usury Monetary Profits." In this new legislation, some stocks will not be associated with any corporations. There will be no reporting requirements. The stock will move as the market dictates. And people who have more money than you can buy access to trade it seconds faster than you can. Good luck everyone! I hope the PUMP & DUMP bill works out!

alexpotato

One of my favorite stories about logistics and quarterly earnings deadlines (from when I worked at a pharmaceutical company: "In our business, a truckload of various drugs can easily reach $10-$15 million. Now, if that truck arrives at the depot at 11:59pm March 31st then it's first quarter earnings. If it arrives at 12:01am April 1st then it's second quarter earnings. $15 million is a BIG shortfall, even for us, so you better believe those truck drivers will roll the stop signs, blow red lights etc to make sure that truck arrives before 11:59pm"

ginkoleaf

This seems like bad news for regular investors, and good news for insiders. Reporting is burdensome, sure, but being listed on public exchanges is not a requirement.

vicchenai

Interesting timing given the SEC is also considering changes to 13F disclosure windows. Less frequent earnings could mean more information asymmetry for retail investors - institutions with proprietary data will have even more edge.

CamelCaseName

Why yes, I love having less information to critical financial decisions on. I wonder who this benefits, the people with non public information, or the every day person?