With the SEC on the edge of changing reporting periods for listed companies from quarterly to semiannually, businesses must consider priorities in their calculations for making the adjustment, according to experts CCI asked about the change. Where does automation in reporting and lawsuit concerns fit into this equation, and what does the proposal signal about the SEC?
To date, the SEC has received hundreds of thousands of public comments on its May proposal to permit listed companies to report earnings semiannually rather than quarterly. According to a tracker created by Ohio State business professor Tzachi Zach, less than 1% of commenters support the proposal. Despite this, reporting by the Wall Street Journal suggests the commission is likely to move forward with some version of the rule. A final rule has yet to be issued, and as of this writing on Aug. 10, the public comment form was still active.
Among the small number of letters supporting the proposal, a reduction in the compliance burden was the most common rationale, Zach’s analysis found, being cited in 3% of all submissions. On the flip side, those opposed to the proposal were likely to cite investor protection and transparency (39%) and the risk for fraud or insider trading (27%).
Assuming quarterly reporting does become optional rather than mandatory for public companies, whether they switch to semiannual reporting is a question that will come down, as most things do, to each company’s unique circumstances.
“The most important action item is talking to your investors, analysts and bankers before making any recommendations to the board,” Edward “Eddie” Best, co-chair of the capital markets practice at law firm Willkie Farr, said in a written Q&A with CCI. “Any decision by the board must be well-informed.”
Given the nature of being a company that sells stock to investors, that group should be top of mind, wrote Payton McCoy, CEO and co-founder of Greenshoe, an SEC reporting startup: “Companies should ask themselves a simple question: ‘Will reporting less frequently increase or decrease investor confidence?’ If the answer is decrease, any compliance savings could easily be outweighed by a higher cost of capital.”
CCI: Assuming the rule is adopted as written, though the Wall Street Journal also reported people familiar with the matter said it’s possible the rule could change based on that negative feedback, what are the biggest action items for decision-makers inside public companies? How should they go about deciding whether this is a good move for them? What factors should they consider?
Eddie Best: The most important action item is talking to your investors, analysts and bankers before making any recommendations to the board. Any decision by the board must be well-informed. Next, confirm that your debt covenants and debt agreements give you flexibility on timing. Then, check your listing exchange’s rules. Nasdaq rules currently require distribution of quarterly financial information to shareholders, so even if the SEC finalizes the rule as written, Nasdaq-listed companies may still be on the hook for quarterly financial information to shareholders. After that, loop in the audit committee and outside auditors because this touches internal controls, SOX certification cadence and audit timing. Next, determine actual cost/benefit and model the cost of providing some interim data via 8-K. Once management has all of this information, it is in a position to give the board relevant information and its recommendation. In terms of whether semiannual reporting makes sense for a company, companies will need to look at the true cost/benefit analysis and that’s not just the amount saved by only reporting twice a year. Companies will need to assess their investor base. Index funds and buy-and-hold retail investors may be relatively indifferent, whereas active managers, quant funds and sell-side analysts who rely on quarterly data for models and comparables are likely to push back and could apply a valuation discount to less-transparent issuers. You also need to look at what your peers are signaling. Companies don’t want to be outliers, as their results can be harder to benchmark, which analysts and investors may penalize with a “transparency discount” regardless of actual performance. Boards will need to look at their control environment. A company with strong internal audit and real-time monitoring bears the risk of problems going undetected differently than one that relies on the quarterly close process itself as a forcing function. Companies also need to assess how semiannual reporting would impact their capital raising. Companies that raise debt or especially equity capital more frequently may be well-advised to continue quarterly reporting.
Payton McCoy: The decision should be driven by how investors value transparency in your industry. I don’t think we’ll end up with one market standard; I think we’ll end up with industry-specific standards. Some companies may find semiannual reporting makes perfect sense, while others may conclude that communicating more frequently is a competitive advantage. Ultimately, the SEC sets the minimum disclosure standard, but the market will determine the optimal one. Companies should ask themselves a simple question: “Will reporting less frequently increase or decrease investor confidence?” If the answer is ‘Decrease,’ any compliance savings could easily be outweighed by a higher cost of capital. Companies used to compete on products and services. Increasingly, they’ll compete on transparency.
CCI: This rule is part of a stated administration goal to “Make IPOs great again.” In your view, would this rule help achieve that goal, and is that a goal worth achieving? Does going public or staying public necessarily make a company more fiscally sound or successful?
EB: I really don’t think that quarterly vs. semiannual reporting will make a difference to a company’s decision to stay private or go public. The reporting burden is a real but secondary factor in the IPO decision. More important is the need and availability of capital liquidity for existing shareholders, incentivizing employees and having acquisition currency. Whether having more or fewer public companies is debatable, as is whether being public makes a company more fiscally sound or successful. There are numerous examples of public companies going bankrupt or having fiscal scandals, as well as private companies thriving and growing. Going public is a financing and liquidity decision, not a mark of quality. The “success” comes from the business itself, not the listing status. In my view, the regulatory and litigation burden of being a public company should not be impediments to going or staying public.
PM: It’s a goal worth pursuing because strong public markets are one of society’s greatest wealth-creation engines because they allow everyday investors to participate in the growth of great companies. This rule may help reduce some of the friction of being public, but it won’t determine whether a company succeeds. Going public doesn’t make a company better, and staying private doesn’t make it worse. What matters is that companies have the right access to capital while maintaining investor confidence.
CCI: A record number of comments were received and they have been overwhelmingly opposed to the proposal. The SEC is pressing forward anyway, at least according to reporting. What does that tell us about how companies should think about the rulemaking process more broadly, and does it change how they should approach commenting on future rules?
EB: The honest answer is more nuanced than “comments don’t matter” or “comments determine outcomes.” The comment process is not intended to make agency decisions up for the public to vote on. A reviewing court doesn’t look at whether more people support or oppose a rule; it’s whether the agency’s decision was “arbitrary and capricious.” In practice, a court will look at whether the agency considered dealing with significant comments rather than just ignoring them. In my experience, comments rarely reverse an agency’s direction once political leadership has committed to a policy; what they more often do is shape the details.
PM: I don’t think companies should conclude that commenting doesn’t matter. Rulemaking is an iterative process, and thoughtful participation remains important. What I do think it demonstrates is that companies should prepare for multiple regulatory outcomes rather than assuming any proposal will or won’t be adopted.
CCI: The SEC’s position is that Form 8-K and Regulation FD are robust enough to fill the space between semiannual reports. Do you agree, and are there categories of information that routinely appear in quarterly filings that simply wouldn’t make it out to investors on the same timeline under a semiannual schedule?
EB: The SEC’s framing overstates how much 8-K and Reg FD actually substitute for periodic reporting. Form 8-K is event-triggered and involves mostly material non-recurring events. It does not require disclosure of gradual, non-event-driven developments. There is a lot of important information that is typically disclosed in a Form 10-Q that is not covered by Form 8-K requirements. Especially important are financial results and MD&A trend analysis. Regulation FD is a nondiscrimination rule. It only applies when a company chooses to disclose material nonpublic information and doesn’t obligate the company to disclose anything in the first place. A company that simply says nothing to anyone violates no Reg FD provision, no matter how stale the market’s information about it becomes.
PM: 8-Ks and Regulation FD can fill part of the gap, but the bigger point is that investors no longer rely on a single filing for information. Earnings calls, investor presentations, press releases, industry data, social media, peer disclosures, litigation and regulatory developments all shape the market’s understanding of a company in real-time. That makes semiannual reporting more workable than it may have been decades ago, but it also makes the monitoring problem much harder. The relevant information may be spread across a dozen different sources instead of consolidated in one 10-Q.
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Read moreDetailsCCI: The cost-savings argument for semiannual reporting tends to focus on eliminating cycles of auditor reviews, SOX certifications and disclosure committee sign-offs. But financial data collection and reporting have become increasingly automated. How much of the quarterly compliance burden is genuinely reducible through technology, and does that change how companies should think about the cost-savings case for switching?
EB: Automation has certainly reduced the mechanical burden of reporting, but the parts of quarterly reporting that remain expensive are exactly the parts technology hasn’t replaced. This includes auditor review procedures, disclosure committee sign-off and legal review and capital-markets-adjacent work like comfort letters. The SEC itself estimates that the approximate net reduction in direct compliance costs would be only $198,000 per fiscal year for each issuer that switches to semiannual reporting. While “every penny counts,” this amount really won’t move the needle for most public companies.
PM: A meaningful share of the quarterly burden is reducible through technology, particularly data collection, reconciliation, drafting, benchmarking and review. That means the cost savings from switching to semiannual reporting may be smaller over time as quarterly reporting itself becomes cheaper and more automated. Companies should therefore treat cost as one factor (not the deciding factor) and weigh it against investor expectations, transparency, litigation risk and potential effects on their cost of capital.
CCI: Some practitioners have flagged that switching to semiannual reporting could actually increase litigation risk — that a longer gap between formal disclosures gives bad news more time to accumulate before it reaches investors, and that plaintiffs’ lawyers will take note. How real is that concern?
EB: This is a legitimate concern, especially for companies that do not continue to issue quarterly earnings information. Bigger disclosure gaps concentrate more information into single events, which mechanically produces bigger price moves on bad news, and bigger price moves are the raw material plaintiffs’ securities class actions are built on. In addition, any delayed disclosure of adverse material information could expand the class of shareholder plaintiffs who could sue in the event of a significant stock price reaction to a disclosure. Finally, there is a concern that less-frequent disclosure provides a longer runway for something to go wrong before anyone outside the company is required to look.
PM: It’s a legitimate consideration, but it depends on how companies respond. If a company interprets semiannual reporting as permission to think about disclosure only twice a year, I think risk increases. If instead companies adopt more continuous monitoring internally while simply changing the cadence of formal reports, the risk may be much more manageable. In other words, filing less frequently shouldn’t mean paying attention less frequently.
CCI: For a company that decides semiannual reporting makes sense, what does the actual transition look like internally? What are the sequencing issues — financing agreements, investor communications, trading window policies — that need to be resolved before flipping the switch?
EB: I think it’s a multi-step process. First is diligence, including talking to investors, analysts and bankers, and then checking listing rules and material agreements. A company also needs to do a careful cost/benefit analysis. Second, a company needs to decide what information, if any, it would continue to report on a quarterly basis. Third, with all of this information and analysis, a company’s management needs to make a thoughtful recommendation to the board. Fourth, a company needs to adapt its internal policies and procedures to the new reporting cadence. Finally, a company needs to communicate its decision and rationale to the market in a clear and thoughtful manner.
PM: It’s much broader than changing a reporting calendar. Companies would need to evaluate debt covenants, investor expectations, analyst communications, internal controls, disclosure committee processes, board reporting, earnings practices and numerous governance policies. I suspect many companies would spend as much time preparing for the transition as deciding whether to make it in the first place.
CCI: This rule is one of several disclosure-related changes the current SEC has pursued or signaled. Taken together, are these changes moving in a coherent direction, or does the cumulative effect on investor transparency concern you?
EB: There is a coherent, even explicit, program. Chairman Paul Atkins has stated the organizing principle directly: to restore the “foundation” of the SEC’s original mandate on requiring the disclosure of “material” information, with “materiality as the North Star” and disclosure imposed “only when the expected benefits justify the likely costs and burdens.” The SEC’s 2026 rulemaking agenda reflects a broadly deregulatory orientation aimed at cutting compliance burdens, facilitating capital formation, revitalizing public markets, widening retail access to private markets and building a crypto framework. I am not concerned about the general direction the SEC is taking. I personally agree with Chairman Atkins that the SEC has drifted from its statutory mandate. Many of its recent rules did less to protect investors than to advance political interests. On the enforcement side, the SEC seemed to focus less on protecting small investors and more on headline-grabbing settlement amounts for technical violations, such as the over $2 billion of settlements the SEC got for banks using text messaging where there was no allegation that a single investor was harmed. So, from that standpoint, I support the SEC’s agenda. Of course, the devil is in the details, and there are or will be some initiatives that I think may, in fact, lessen investor protections. Depending on the final rules, semiannual reporting may be one of those.
PM: The broader direction is toward giving companies greater flexibility in how they communicate with investors. The important question is whether flexibility ultimately produces better information for the market. My view is that markets tend to reward transparency. The SEC can establish minimum requirements, but investors will ultimately determine what level of disclosure earns confidence and commands a premium.
