Whether you are a fundamental or quantitative investor, looking at a company’s financial information is essential to valuation.

For the past 55 years, US Public Companies have been required to report quarterly financial earnings within 45 days of their fiscal quarter-end. A proposal set forth by the SEC would allow domestic public companies to opt into semiannual reporting. The proposal will allow a company to choose for itself the reporting frequency that best suits its business process, while potentially reducing the operational burden of reporting.

Proponents of the proposal say that semi-annual reporting may offer cost savings, reduce short-term pressures and more closely align a company’s operations to reporting cycle. Reduced reporting requirements may encourage smaller, private companies to go public. As Bloomberg notes, the number of publicly traded companies in the US has declined by about 36% since 2000. To the issue of less
transparency, analysts point out that if a company has a material development, it can still file a 8-K report. Many of our international peers, particularly those in Europe, only require semi annual reporting.

On the other side, those who are against the ruling say that the shift in reporting could reduce market liquidity and increase the market shock when companies do report. Also, comparing companies within the same industry often provides valuable insights, but differences in reporting periods can affect the validity of the comparison. To further complicate the comparability issue, if a company elects semi-annual reporting in one year, the regulation does not require the same frequency in reporting in the following year. With regards to the comments around the burden of quarterly reporting, advances in AI should help streamline reporting and lower the operational burden.

As far as next steps, the SEC is accepting public comments until 7/6. If passed, the rule could be adopted in 2027 with companies to begin reporting semiannually in 2028.

(Personal note, I attended a CFA conference in 2018 where this was a topic of hot discussion among top Boston based PMs. For what is it is worth, the select group of PMs seemed in favor of semiannual reporting and noted that it gave businesses more bandwidth to focus on actual business and not reporting.)