Trump asks SEC to mull half-year corporate filings

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 18, 2018. REUTERS/Brendan McDermid

(Reuters) – U.S. President Donald Trump said on Friday he has asked the U.S. Securities and Exchange Commission to study the impact of allowing companies to file reports with the financial regulator every six months instead of every quarter.  “Without any doubt that reduces the transparency for investors and they will be left in the dark for longer. Such a strategy is a great recipe to create the biggest loop hole in the financial system. Moreover, under such conditions, any blunder would create a serious threat not for the markets only but for the economy as well.” “We cannot compare the US markets with other markets because of the sheer size of it. From an investment perspective, you want to know on a regular basis what is going on with the company and this enables you to make more timely decisions.” “Delaying the reporting process to six months does make the stocks less sensitive because there is only limited information available. But when there is a surprise, it tends to bring a much bigger move for the stocks as compared to a situation where they report on a quarterly basis.” “Corporations have long complained about the costs of quarterly filing and that tends to make their attention very short term. So people say that if they get away from quarterly filings and got to somewhat longer filings, that would help companies have a longer-term perspective.

“Unfortunately, research shows that’s not exactly true. Most research suggests that companies that are well-managed and have a longer-term perspective do better anyway and are able to manage their quarterly reports. Furthermore, you give investors less information on what’s going on so there’s a risk of injecting volatility in your stock price because investors are not guided the right way. You’re more likely to surprise investors when you’re reporting just twice a year instead of quarterly.”

“Not happy with that at all … I believe that just because you have to report quarterly doesn’t mean you should have to act quarterly. If you can’t explain your process and your goals as a company and adequately say why the results came out the way they did and you feel compelled to play some sort of accounting games to make it seem like every quarter is better than the last, this is a stock I am not interested in owning.” “Shareholders deserve to have a report every quarter on how the company is doing.” “I don’t believe companies should act in the short-term, but I also don’t believe that just because you report quarterly means you are acting in the short term to make things come out nice. “There’s long been a push for less short-termism in running publicly traded companies and that’s where the debate begins. Do you run a company in a more efficient manner if you’re not thinking about having to talk about your results every 90 days?” “The difficulty in making better long-term decisions away from a quarterly reporting cycle certainly stands out as being beneficial, so we’ll see how it develops. It’s not something that can be done with an executive order, but it’s certainly a conversation that started years ago and one that is certainly getting some traction in the marketplace today.” “It’s a long-term issue that has been around certainly for years, and the whole argument coalesces around better corporate planning for the future, making better long term decisions if you’re not strapped with reporting our results every 90 days. There is credible possibility that you end up making short-term decisions more than long-term decisions because of the nature of your reporting cycle. I think there are studies that prove that that’s probably not a positive.”

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“The other side of that argument would be that the ability to know how things are actually going at a company on a regular basis, you probably are disenfranchised especially as an individual versus an intuitional investors that probably has the ability to get access to management on a more frequent basis.” “He is not the first person to bring this up, It’s been talked about for at least a decade.” “I don’t think it’s a bad idea. What I think is the challenge is that it will be a hard to get people to change to do that, because investors and certainly shorter-term traders want that information. They want to know how companies are doing on a quarterly basis.” “In theory, it should probably lower market volatility, because the most volatile times of the year are when quarterly earnings start coming out. If you had that only twice the year instead of four times a year, overall market volatility would decline.” “The main thing is that this is a big, gigantic fundamental shift in the way business works in this country, in the way capital markets work. It would be like trying to turn around the Queen Mary in a swimming pool.”“This is not something he can change with an executive order.”