SEC Proposes to Allow Semiannual Reporting for Registered Issuers

The SEC proposed amendments to allow Exchange Act reporting companies to file semiannual reports on a new form in lieu of quarterly reports on Form 10-Q.

If adopted, amendments to Exchange Act Rules 13a-13 and 15d-13 would permit reporting companies to elect semiannual reporting on new Form 10-S. (See also, SEC Fact Sheet.) The new Form 10-S would cover a six-month period and retain substantive disclosure requirements, including reviewed (but not fully audited) financial statements, management's discussion and analysis, risk factor updates, disclosure controls certifications, legal proceedings updates, and executive officer certifications.

The SEC also proposed amendments to Reg S-X Rules 210.3-01: ("Consolidated balance sheets"); 210.3-12: ("Age of financial statements at effective date of registration statement"); and 210.8-08 ("Age of financial statements") to facilitate semiannual reporting and simplify rules governing the age of financial statements required in registration statements and other filings.

All standard Exchange Act reporting companies that currently file Form 10-Q would be eligible to elect semiannual reporting. The proposal excludes: registered investment companies (other than business development companies and face-amount certificate companies); foreign private issuers; asset-backed issuers.

Comments are due 60 days after publication in the Federal Register.

Commissioner Mark T. Uyeda argued that mandatory quarterly reporting - rooted in post-World War II industrial policy - may distract management from long-term strategy and impose compliance burdens that do not produce commensurate investor benefits. Mr. Uyeda said the reporting framework should allow companies and investors to select the cadence that best reflects their business model, noting that Form 8-K obligations for material events would remain unchanged.

Commissioner Hester M. Peirce questioned whether the Commission should slim down Form 10-Q requirements rather than - or in addition to - making quarterly reporting optional. She noted that companies choosing to remain on a quarterly schedule would not be signaling satisfaction with Form 10-Q's existing requirements, which many find onerous, and invited public comment on whether adjusting the substance of the form should be addressed in this rulemaking or as part of the Commission's broader disclosure review.

The Investment Company Institute ("ICI") supported the proposed rule but cautioned that the quality of disclosure is more important than its frequency. The ICI said the SEC should strike a balance between reducing unnecessary compliance burdens and preserving the disclosure framework that underpins investor confidence and effective price discovery.