The SEC Wants to Free Companies From Quarterly Earnings
The SEC Wants to Free Companies From Quarterly Earnings – Moby THE GIST For 50 years, every public company in America has had to open its books every 90 days whether it wanted to or not. The Securities and Exchange Commission is now preparing to make that optional, and depending on who you ask, it’s…
The SEC Wants to Free Companies From Quarterly Earnings – Moby
THE GIST
For 50 years, every public company in America has had to open its books every 90 days whether it wanted to or not. The Securities and Exchange Commission is now preparing to make that optional, and depending on who you ask, it’s either the most sensible deregulation in a generation or a quiet gift to every executive who ever wished analysts would just leave them alone for a while.
WHAT HAPPENED
The Wall Street Journal reports the SEC could publish the proposal as soon as next month. The rule would not eliminate quarterly reporting outright but give companies the choice to switch to a semiannual schedule. Before it becomes anything, it needs to survive a public comment period and a commission vote, neither of which is guaranteed.
The push has been building since late last year, when the Long-Term Stock Exchange, Eric Ries’s idealistic 2020 experiment in rewiring how public companies think about time, petitioned the SEC to kill the quarterly requirement. President Trump and SEC Chair Paul Atkins both endorsed the idea within days. It’s worth noting Trump floated a nearly identical idea during his first term, got politely nodded at, and watched it evaporate. The difference this time is an SEC chair who appears willing to actually act on it, already talking to officials at the major exchanges about how they’d need to adjust their rules. That’s the bureaucratic equivalent of measuring for curtains before you’ve closed on the house.
Public companies in the U.S. have reported results every 90 days for more than 50 years. The EU and UK both moved away from mandatory quarterly reporting about a decade ago, though many European companies still file quarterly anyway, which is either evidence the market genuinely prefers it or evidence that institutional investors have very particular ideas about what “optional” means in practice.
WHY IT MATTERS
The reformers’ argument has a real foundation. Their case is that quarterly reporting has turned American corporate strategy into a season of The Bachelor with everyone performing for the rose, nobody thinking past the next elimination. CEOs sandbag guidance so they can “beat” estimates. CFOs smooth revenue across quarters to avoid ugly surprises. Boards green-light buybacks timed to earnings windows rather than any coherent view about long-term capital allocation. There is something genuinely farcical about a trillion-dollar company reorienting its entire communications calendar around whether it can beat a number that analysts made up three months ago on a spreadsheet.
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Where the logic starts to strain is the leap from “quarterly reporting creates bad incentives” to “less reporting fixes them.” The information asymmetry between company insiders and the investing public doesn’t close when you halve the disclosure windows; it widens. And the earnings management critique quietly undermines the reform case. If executives are already massaging the numbers every 90 days, giving them 180 days to massage them doesn’t necessarily improve anything. That’s a bit like arguing a speed camera encourages reckless driving and solving the problem by removing the camera.
The transparency argument for keeping quarterly reports isn’t only about hedge funds with Bloomberg terminals and platoons of analysts. Retail investors, creditors, suppliers, and counterparties all use this data, and they generally don’t have the access or resources to independently verify what’s happening inside a company between semi-annual filings. The disclosure calendar is one of the few structural advantages ordinary investors have over insiders, and it is not obvious that making it “optional” helps the people it was designed to protect.
What makes this moment genuinely interesting is that the proposal arrives wrapped in a pro-business, anti-red-tape framing that makes opposition politically awkward. Nobody wants to go on record defending compliance paperwork. The problem is that “optional” tends to develop its own gravitational pull in markets. Once large-cap companies with the resources to absorb reporting costs keep filing quarterly, smaller companies that switch to semiannual will be implicitly signaling something about what they’d rather you not scrutinize too closely. The word “optional” does a lot of quiet work.
WHAT’S NEXT
The public comment period is the first real stress test. The investment management industry, which has the most to lose from reduced disclosure frequency and the most organized infrastructure to file formal objections, will show up in force. Whether the current SEC treats that pushback as a reason to slow down or a bureaucratic obstacle to route around is genuinely unclear.
If the rule passes, watch for the market to quietly bifurcate: large, well-covered companies that keep reporting quarterly because their analysts and investors demand it, and a long tail of smaller companies experimenting with semiannual filings. That second group becomes an accidental natural experiment in whether reduced disclosure actually improves long-term strategy or just makes the next round of surprises considerably larger. Given the historical track record of “trust us, we’re thinking long-term” in corporate America, temper your expectations accordingly.
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