The Security and Exchange Commission’s (SEC) chief elaborated on his support for the effort to rethink quarterly reporting rules, and perhaps move public companies to a less frequent reporting cycle.
“I very much support the president’s question of, are we managing too much for the short term, and what can we do about it,” SEC Chairman Jay Clayton said on Nov. 12, 2018, at Financial Executives International's (FEI) Current Financial Reporting Issues Conference in New York.
The SEC added the issue to its regulatory agenda for 2019, largely at the behest of an August tweet from President Donald Trump that criticized the quarterly reporting regime for imposing a short-term mindset on senior executives at U.S. public companies. Clayton responded at the time with a statement that said the SEC was studying the issue and would consider a rule change.
“The president was right to raise this issue,” Clayton told the FEI attendees. “He touched a nerve because I don’t think any of us want our very important private sector enterprises to be run on a short-term, quarter-to-quarter basis.”
Clayton also acknowledged that financial markets have a need for timely information, including quarterly results. In addition, many loan agreements and business contracts include contingency information that is updated based on quarterly financial information.
Still, Clayton does not see established practices as a barrier to a move to a less frequent reporting system.
“The president raised a very good point, and we’re looking at it,” Clayton said.
Some business lobbyists, including the U.S. Chamber of Commerce, back the reduction in reporting frequency. But some investor groups, such as the Council of Institutional Investors (CII), believe the quarterly reporting system imposes discipline on public companies.
For more information on this topic, or to learn how Baker Tilly SEC accounting specialists can help, contact our team.
We have partnered with Thomson Reuters to issue our monthly SEC accounting insights. Please feel free to contact Baker Tilly at firstname.lastname@example.org if you have any questions related to these articles or Baker Tilly's Accounting and Assurance Services. © 2018 Thomson Reuters/Tax & Accounting. All Rights Reserved.