Wall Street’s quarterly earnings era could soon be over
Image: Getty
This week, the Securities and Exchange Commission formally proposed a rule change that would allow publicly traded companies to shift from reporting earnings on a quarterly basis to instead do so twice per year.
The proposal advances a structural change President Trump has pushed for since his first term, including renewed calls last September.
- The SEC has required all publicly traded companies to report quarterly earnings since 1970. Before that, the agency required semiannual reporting beginning in 1955.
- But under its new proposal, companies would be allowed to file semiannual reports in place of traditional quarterly filings, while still submitting a full annual report.
- Companies would also still be free to report earnings on a quarterly basis if they choose.
The idea has been gaining traction. The proposal also echoes one from the Long-Term Stock Exchange, a US-regulated exchange with a focus on long-term, sustainable value creation, while other prominent supporters include JPMorgan Chase CEO Jamie Dimon and Berkshire Hathaway chair Warren Buffett.
European exchanges swapped from quarterly to semiannual reporting following a 2013 rule change, though many companies still continue their 4x/year cadence.
The arguments
Supporters of the move away from quarterly earnings argue it would provide a wide range of benefits to companies, investors, and the US economy as a whole.
- Companies would potentially be able to operate more sustainably by focusing more on long-term goals and efficiency-boosting investments, versus short-term earnings growth.
- Many CEOs and executives would prefer to deal with sell-side analysts and investors fewer than 4x/year.
- Small-cap companies with fewer resources would also appreciate having to offer half as many earnings reports, which typically draw resources and attention away from company operations.
On the flip side: Opponents of less frequent earnings reports argue that the potential downsides of such a change outweigh any potential benefits. They say the high level of clarity and transparency that’s currently required by the SEC is necessary to keep investors informed, to boost trust in US markets, and to reduce the chances of market manipulation.
Looking ahead…The proposal now heads to a 60-day public comment period, after which SEC regulators will vote on whether to formally adopt the rule change.
📊 Flash poll: Do you support or oppose the SEC’s proposal to shift requirements for publicly traded companies from quarterly earnings to a frequency of 2x/year?
See a 360° view of what pundits are saying →
Sprinkles from the Left
- Some commentators argue that while the SEC should modernize outdated disclosure rules that make it harder for companies to go public, regulators also need stronger oversight of the rapidly growing private investment market, where transparency and investor protections can be weaker.
- Others contend that reducing quarterly reporting requirements could make the financial system less transparent, especially for mid-sized banks, by delaying warning signs of financial trouble and increasing the risk of sudden market panic when problems finally come to light.
- “Markets Have Evolved. So Should the SEC's Disclosure Rules”- Bloomberg Editorial Board
- “The Hidden Risk Of Less Disclosure: Why Banks Need Quarterly Reporting”- Mayra Rodriguez Valladares, Forbes
- “Trump is wrong. Nixing quarterly reports won’t fix Wall Street’s ‘short-termism’”- Rita Trichur, The Globe and Mail
Sprinkles from the Right
- Some commentators argue that scaling back quarterly reporting requirements could help shift companies away from obsessing over short-term earnings and encourage a healthier business environment where firms can focus more on long-term growth and innovation instead of constant regulatory pressure.
- Others contend that the SEC should simplify disclosure requirements because decades of expanding regulations and paperwork have overwhelmed companies and investors alike, making public markets less attractive and burying important financial information under excessive reporting rules.
- “Trump is checking assumptions. This time on corporate transparency.”- Washington Post Editorial Board
- “The SEC Is Reviving American Capital Markets”- Paul S. Atkins, WSJ
- “Getting the SEC Back on Mission”- Jennifer J. Schulp, National Review
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