Trump wants study on quarterly reports
President Donald Trump has asked Wall Street’s top regulator to look into whether U.S. companies should report their financial results less often, a move that could upend long-standing rules and which critics claim could leave investors with too little information about the stocks they own.
Instead of publicly traded companies disclosing how they’ve done every quarter, which are three-month stretches, the president tweeted Friday he wants the Securities and Exchange Commission to study if companies should instead share results every six months.
In his tweet, Trump said that in speaking with business leaders, he asked what would improve business and jobs, and one told him, “Stop quarterly reporting & go to a six month system.” Trump later said it was outgoing PepsiCo CEO Indray Nooyi who called for an end to quarterly reporting in favor of reports every six months.
As a result, the president said he has “asked the SEC to study” the request of having companies report their profits, losses, sales and other data twice a year.
Trump’s move follows years of debate among academics, investors and corporate executives about how often companies should be required to officially divulge corporate results to securities regulators and investors, says Chris Rupkey, chief financial economist at MUFG, a Tokyo-based global bank with offices in New York.
The main arguments for reducing the frequency of corporate reporting is that it will reduce the costly, time-consuming practice of gathering and distributing the data and allow company management to focus more of their attention on executing their long-term business plans and objectives.
Trump’s move follows a recommendation in June from high-powered CEOs Jamie Dimon of JPMorgan Chase and Warren Buffett of Berkshire Hathaway for companies to move away from quarterly earnings “guidance.”
This practice of companies giving investors a heads-up on whether their performance is on track to top or fall short of Wall Street’s expectations, the CEOs noted, “often leads to an unhealthy focus on short-term profits” and can cause executives to hold back on investment and hiring that “would improve future growth.”
But Dimon and Buffett both stressed that their call to do away with corporate “guidance” updates “should not be misconstrued as opposition to quarterly and annual reporting.” The practice of companies reporting their actual results every three months is an “essential part of U.S. public markets” that is necessary for stock owners to “reliably assess real progress,” they said.
Critics of Trump’s push say the more frequently investors get updates via regulatory filings from the companies they invest in, the better.
The SEC did not immediately respond to a USA TODAY email seeking comment.