Published: Mon, August 20, 2018
Money | By Hannah Jacobs

It will be tough for Trump's SEC to overhaul reporting rules

It will be tough for Trump's SEC to overhaul reporting rules

He suggested that a switch to only half-yearly reporting would save companies money, echoing the wishes of several top chief executives.

U.S. President Donald Trump said Friday that he wanted the Securities and Exchange Commission (SEC) to explore doing away with quarterly corporate reports, replacing them with filings every six months.

Half-yearly reporting would mark a huge change in USA disclosure requirements and put them in line with European Union and United Kingdom rules.

Trump has asked the Securities and Exchange Commission to study the impact of such a change.

The SEC's chairman said the agency already is studying the issue.

Still, Van Sinderen cautions, six months can be a long time for smaller companies - particularly those shouldering hard challenges - and can lead to other issues should those two reports differ drastically.

Trump said the issue was brought to his attention recently by Indra Nooyi, the chief executive officer of PepsiCo Inc. Even SEC Chairman Jay Clayton, a Trump appointee who has made boosting the number of initial public offerings one of his top priorities, hasn't floated the idea of scaling back reporting requirements. "Either way we're talking about a very short-term period", Yardeni added.

She said cutting the required frequency of financial reports was one of several suggestions that she made, with the aim of moving companies toward focusing more on long-term goals rather than immediate results.

Nooyi issued a statement yesterday about the conversation with the president, saying that many market participants "have been discussing how to better orient corporations to have a more long-term view".

Last fall it laid out changes to capital market rules in a U.S. Treasury report, but did not advocate scrapping quarterly reporting.

"And so they don't do it, because the definition of being a successful business is narrowed to what your quarterly earnings reports are". "My comments were made in that broader context, and included a suggestion to explore the harmonisation of the European system and the United States system of financial reporting".

Billionaire investor Warren Buffett and JPMorgan Chase & Co Chief Executive Jamie Dimon wrote in the Wall Street Journal in June that USA companies should move away from giving quarterly guidance, arguing it holds back spending on hiring, investment and research, but did not call for an end to quarterly reporting.

Ultimately, the SEC is an independent commission-led agency and the president can not force it to change policies.

There are also tremendous expenses tied to preparing quarterly and annual reports.

Scrapping the quarterly requirement "is a solution in search of a problem", said Charles Elson, a professor and director of the University of Delaware's Weinberg Center for Corporate Governance.

He would need to draft a proposed rule-change which would then be put to an industry consultation during which investors, companies, exchanges, pension funds and public interest groups would likely bombard the SEC with information.

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