Trade Industry Associations and Academics Oppose SEC Semiannual-Reports Proposal
Various trade industry associations and academics oppose the SEC proposal to allow public companies to file semiannual reports on a new Form 10-S in place of quarterly reports on Form 10-Q. The SEC proposal was framed as part of an effort to cut reporting costs and encourage more companies to go and stay public (see prior coverage).
SIFMA AMG
SIFMA AMG said dropping mandatory quarterly reporting would hurt investors and urged the SEC to shift its focus to the content of reports, not their frequency. The association said less frequent reporting would make it harder for asset managers to evaluate companies and make investment decisions. SIFMA AMG also claimed that the mix between semiannual and quarterly reports would leave investors with less comparable data across issuers and expressed concern that the change could reduce research coverage of smaller issuers. SIFMA AMG said the proposal's assumptions about short-term pressure and IPO activity lack empirical support, stating that the SEC itself acknowledged that less frequent reporting could delay material information, reduce comparability, and result in some lost information. Instead of the current plan, SIFMA AMG recommended cutting duplicative or immaterial requirements within Form 10-Q and offered to help identify specific items to eliminate.
Investment Company Institute
The Investment Company Institute ("ICI") urged the SEC to keep mandatory quarterly reporting. The ICI said its members held mixed views but concluded that the drawbacks of reduced investor disclosure would outweigh the proposal's benefit of encouraging companies to go public. The ICI said quarterly filings at least should include financial statements and management's discussion and analysis but it added that it was open to removing some current parts of Form 10-Q to ease the filing burden.
Managed Funds Association
The Managed Funds Association ("MFA") urged the SEC to withdraw its plan to allow semiannual reports, saying quarterly reports give investors "timely, decision-useful information" about a company's performance. The association said its members rely on quarterly filings to evaluate companies and track their progress. The MFA said it supports modernizing disclosure by focusing on material information and cutting duplicative requirements. The MFA raised three points: (i) semiannual reporting would harm investors and market integrity and the change would widen information gaps, delay price discovery, and weaken corporate accountability; (ii) the SEC's claim that semiannual reporting would reverse the decline in public offerings lacks evidence; (iii) the SEC must weigh less harmful alternatives first. The MFA noted the SEC proposed two related changes days later, on registered offerings and filer status. It said the SEC must assess all three proposed changes together to meet its cost-benefit duty.
"Shadow SEC" Law Professors
A group of securities-law professors (which calls itself the "Shadow SEC") urged the SEC to keep mandatory quarterly reporting. The group credited the SEC for not scrapping quarterly reporting outright but said the proposal is "the lesser of two evils" (i.e., it would be worse to eliminate quarterly reports entirely). The group said that firms often will not volunteer information they believe to be useful to competitors and that comparability across an industry breaks down if some firms reduce reporting. The group said a company that switches on its own could alienate investors and lose share value. The group added that shareholders could vote on the question under Rule 14a-8 (shareholder proposals) and that ignoring such a vote could invite activist campaigns for board seats. The group also said the proposal gives little attention to fraud risk from less frequent reporting. The group also questioned the process behind the proposal, noting that the SEC now has a 3-0 Republican majority, leaving no commissioner to question the White House-driven proposals. The group cited recent SEC staff cuts and argued the proposal received less internal review than usual. The group also argued that the stock market's current overall strength undermines the case for the proposal. Additionally, the group said that the proposal failed to seriously engage with international evidence on comparable rule changes, stating that a UK study found that only 10 percent of companies chose to move to semiannual reporting when given the option. Also, the group said the proposal cites an Israeli study to support a narrow point about audit hours while ignoring that same study's findings of negative stock-price reactions for companies that made the switch and better governance outcomes for those that did not.