It will be tough for Trump’s SEC to overhaul reporting rules

19 August, 2018, 21:11 | Author: Kevin Carter
  • Trump asks SEC to study ending quarterly earnings for public companies

President Trump wants regulators to study a move that would loosen the reins on public companies.

The US President said he has asked the Securities and Exchange Commission to consider altering rules requiring firms to report every quarter.

The move would improve "flexibility and save money" Trump said. At a July rally in Florida, he said the chief executive of "one of the greatest companies in the world" urged him to press his tariff fight even though it would impact his business. The SEC is an independent commission-led agency, and the president can not force it to implement rule changes.

The news came via a tweet this morning from the president, who said he received insight from "some of the world's top business leaders", one of whom suggested that if the SEC were to "stop quarterly reporting [and] go to a six month system", it would boost US business growth and employment.

Speaking to the New York Review of Books in 2015, Obama said that he had talked to a large number of businesses executives who told him, "Because they've got quarterly reports to shareholders and if they've made a long-term investment that may pay off way down the line, or if they're paying their employees more now because they think it's going to help them retain high-quality employees, a lot of times they feel like they're going to get punished in the stock market".

SEC spokesmen didn't immediately respond to a request for comment.

Donald Trump has called for USA companies to issue financial reports just twice a year rather than four times. "We start preparing three weeks in advance every quarter, essentially taking nearly a third of executives' time each quarter", said Bryan Sheffield, chief executive of shale oil producer Parsley Energy Inc.

More news: Turkey to boycott U.S. electronic goods

It's a move that would benefit businesses and workers, the president said.

Last fall it laid out a blueprint for changes to capital market rules in a U.S. Treasury report, but did not advocate scrapping quarterly reporting. But some argue the quarterly requirement puts unnecessary pressure on companies because it forces them to focus on short-term results. "And so they don't do it, because the definition of being a successful business is narrowed to what your quarterly earnings reports are".

Quarterly earnings guidance is used by Wall Street and City analysts to build their earnings estimates and gauge company performance against these figures.

Europe has backed away from requiring companies to file quarterly reports. Others said that the prospect of fewer financial reports could exacerbate price swings around earnings or fuel insider trading.

The US Chamber of Commerce and other lobbying groups have also blamed compliance burdens for preventing more companies from selling shares. In 1996, nearly 950 companies went public, according to data compiled by Bloomberg.

"They are more likely to react to other types of information and more likely to overreact", said Jill E. Fisch, a co-director of the Institute for Law and Economics at the University of Pennsylvania.

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