- Key takeaway: The Securities and Exchange Commission's proposed optional reporting schedule is expected to be adopted mainly by smaller banks, while larger institutions that face greater investor and media scrutiny are likely to continue reporting quarterly.
- Expert quote: "Eliminating mandatory quarterly reporting requirements could result in a range of unintended consequences that have the potential to negatively impact investor outcomes, market quality, and the Commission's broader capital formation goals." — Securities Industry and Financial Markets Association, Asset Management Group
- What's at stake: Market watchers expect the SEC to unveil a final proposal sometime before the end of the year.
WASHINGTON — Hundreds of comment letters submitted to the Securities and Exchange Commission reveal a sharp divide over the agency's proposal to let public companies report financial results twice a year instead of quarterly.
Many investors argued that quarterly reporting should remain mandatory to preserve transparency, though some business groups representing public companies say reducing reporting requirements would ease compliance costs and regulatory burdens. Even so, many commenters said the proposal should be revised before moving forward or followed by additional measures to further streamline the reporting process.
The largest banks are expected to continue reporting quarterly to avoid potential stigma associated with moving to semiannual reporting, while smaller institutions facing greater compliance burdens may be more likely to opt in, said Mike Vanscoy, principal of transaction and regulatory advisory services at SolomonEdwards.
"The large institutions are going to continue to do this reporting, because if you're a large mega bank, you're a market mover," said Vanscoy. "But when you get into the regional and smaller banks, I think you're going to find a different approach."
The financial services industry weighed in through trade groups, consultants and other stakeholders, including the American Bankers Association and the Asset Management Group of the Securities Industry and Financial Markets Association.
Joshua Stein, the ABA's vice president of accounting and financial management, wrote that preparing quarterly reports requires continuous coordination across disclosure controls, internal controls, management certifications, legal and accounting reviews, investor relations, audit committee oversight and auditor involvement.
"These steps require significant management time and outside expense each quarter, even when there are no material developments to report," Stein wrote.
The ABA urged the SEC to pair an optional semiannual reporting framework with broader changes to modernize disclosure requirements, emphasizing material information while reducing unnecessary compliance costs.
SIFMA's Asset Management Group took a different approach, urging the SEC to abandon the proposal in favor of reducing duplicative reporting requirements rather than changing how often companies report earnings.
"Eliminating mandatory quarterly reporting requirements could result in a range of unintended consequences that have the potential to negatively impact investor outcomes, market quality, and the Commission's broader capital formation goals," said the Securities Industry and Financial Markets Association's Asset Management Group in its July 6 letter. "We encourage the Commission not to move forward with the current proposal and instead recommend an alternative approach that focuses on reducing duplicative, immaterial, or otherwise unnecessary reporting burdens."
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The ABA said any savings from semiannual reporting would be limited because banks already face extensive regulatory reporting obligations, and rating agencies, lenders and other stakeholders often expect quarterly financial information regardless of SEC requirements.
Smaller institutions remain the most likely candidates to adopt a semiannual schedule, though it is unclear how many would make the switch.
Mayra Rodriguez Valladares, managing principal of MRV Associates, said in
"These banks face actual cost pressures, thinner analyst coverage, and they often have more concentrated risk profiles," Valladares wrote. "While these banks are not globally systemically important, if any were to fail, they would cause significant challenges to the businesses and consumers they serve."
She added that if firms opt to report on a semiannual basis, the markets will receive six months of information in a single disclosure, which she noted "does not reduce risk. It changes its timing and amplifies its release."
Vanscoy said the SEC's window to finalize the proposal could narrow later this year, particularly as attention shifts toward the midterm elections.
"If they don't do this by sometime in October, it's likely not going to happen," predicted Vanscoy.
The SEC declined to comment Wednesday on when it expects to finalize the proposal or whether it plans to make changes in response to industry feedback.
