Trump backs CEOs, proposes easing corporate reporting rules

Mae Love
August 19, 2018

WASHINGTON-President Trump on Friday said he had asked the Securities and Exchange Commission to study moving financial reporting for publicly traded companies to a six-month schedule rather than the current quarterly system.

In a tweet dispatched Friday morning, Trump said he had spoken to "some of the world's top business leaders" about making business and jobs "even better" in the US and they had advocated an end to quarterly reporting.

Trump tweeted, "I have asked the SEC to study!", but it officially can only be a request, not an order.

"Many market participants, as well as the Business Roundtable which we are a part of, have been discussing how to better orient corporations to have a more long-term view", Nooyi said in a statement emailed to Reuters.

No. While the Securities Exchange Act of 1934 requires companies to report periodically, the SEC has the discretion to draw up or change the specific rules on how frequently this happens.

"If public companies moved from quarterly to semi-annual reporting, that would deprive investors of timely information and dramatically increase the potential for insider trading", said Robert Pozen, Senior Lecturer at the MIT Sloan School of Management. One criticism is that if companies are striving to report profit gains every quarter, they are more likely to buy back shares and cut costs than invest in their businesses. Using Bloomberg data that looks at 10-day volatility in single stocks since 2010, price swings during the four reporting periods are roughly 10 per cent higher than in the rest of the year.

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The agency could make such a change without US Congress passing legislation but that doesn't mean it will, said David Martin, an attorney who previously ran the agency unit that oversees corporate filings.

"We are looking at that very, very seriously". "In the end, all companies have to balance short-term and long-term performance", Nooyi said.

The SEC has been reluctant to make changes in quarterly reporting, which has always been a cornerstone of United States capital markets.

Currently, all publicly traded companies in the USA must file reports with the SEC four times a year, every three months.

Companies that want to distance themselves from short-term scrutiny should instead stop publicly projecting the next quarter's earnings, Pozen added. Well-known chief executives, including JPMorgan Chase boss Jamie Dimon, Warren Buffett and BlackRock's Larry Fink have raised concerns about the focus placed on earnings reports and guidance.

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. "She said, two times a year reporting, not quarterly". They found that long-term investments declined at companies that were required to step up the frequency of their reporting.

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