SEC Solicits Comment On Quarterly Reports – Part 1

Posted by on March 06, 2019

SEC Solicits Comment On Quarterly Reports – Part 1- Today is the first of a LawCast series talking about the SEC’s recent public inquiry on earnings releases and quarterly reports.  On December 18, 2018, the SEC published a request for comment soliciting input on the nature, content, and timing of earnings releases and quarterly reports made by reporting companies. The comment period remains open for 90 days from publication. The request is not surprising as earnings releases and quarterly reports were included in the pre-rule stage in the Fall 2018 SEC semiannual regulatory agenda and plans for rulemaking.

The request for comment seeks input on how the SEC can reduce burdens on publicly reporting companies associated with quarterly reports while maintaining disclosure effectiveness and investor protections. The SEC also seeks comment on how the existing reporting system, earnings releases and earnings guidance may foster an overly short-term focus by companies and market participants. In addition, the SEC is looking for input on how to make the reporting process less cumbersome to investors, such as by having to compare an earnings release and Form 10-Q for differences.

This has been a hot topic over the years, with President Trump publicly calling for an elimination of quarterly reporting. The April 2016 concept release and request for public comment on sweeping changes to certain business and financial disclosure requirements also requested comment on the subject. The newest request for comment takes into consideration comments received in response to the 2016 release and drills down further on the quarterly reporting process.

The request for comment specifically addresses (i) the nature and timing of disclosures in quarterly reports, including when the disclosures overlap with voluntary earnings releases in Forms 8-K; (ii) how the SEC can make the process more efficient by eliminating duplication and how that can affect capital formation; (iii) whether the SEC should allow some or all reporting companies flexibility on the frequency of periodic reporting; and (iv) how the existing periodic reporting system may affect corporate decision making and may foster an inefficient outlook by focusing on short-term results.