The US Securities and Exchange Commission has proposed rule and form amendments that would give public companies the option of filing semiannual reports in lieu of quarterly reports to meet their interim reporting obligations under the federal securities laws.

Here’s the news release summary:

• Public companies, subject to Exchange Act Section 13(a) or 15(d), are currently required to file quarterly reports on Form 10-Q. The proposed amendments, if adopted, would allow these public companies to elect to file semiannual reports on new Form 10-S instead of quarterly reports on Form 10-Q. As a result, companies that elect to file semiannual reports would file one semiannual report and one annual report for each fiscal year in lieu of three quarterly reports and one annual report. The flexibility provided under proposed amendments would enable public companies to choose the interim reporting frequency that would best serve the company and its investors.
• “Public companies have an obligation under the federal securities laws to provide information that is material to investors. Yet, the rigidity of the SEC’s rules has prevented companies and their investors from determining for themselves the interim reporting frequency that best serves their business needs and investors. Today’s proposed amendments, if ultimately adopted, would provide companies with increased regulatory flexibility in this regard,” said SEC Chairman Paul S. Atkins in a statement.
• Under the proposal, the filing deadline for semiannual reports on Form 10-S would be 40 or 45 days, depending on the company’s filer status, after the end of the first semiannual period of the fiscal year. The proposal also would amend Regulation S-X, which governs the financial statement requirements for periodic reports, registration statements, and proxy statements, to reflect the new semiannual reporting option and simplify the existing financial statement requirements.

“Regulatory flexibility” is one of those terms (like “public interest”) that can be used to justify just about anything (the SEC could show itself to be even more regulatorily flexible by doing away with mandatory financial reporting altogether). Atkins suggests that “companies and their investors” form a coherent body of aligned interest, hemmed in to this point by the SEC’s past excesses. But it didn’t take long for commentators to identify how investors might come out behind, for example The Hollywood Reporter:

• One veteran media executive, when asked recently if the move to semi-annual reporting could impact Hollywood, said that the ability to “smooth out” data is not to be underestimated.
• If companies like Netflix, Disney or Paramount choose to report semiannually instead of quarterly (it will be a choice, the SEC notes), datapoints like subscriber numbers (both streaming subscribers, but also pay-TV subscribers as reported by cable companies), as well as ad sales trends, could be shielded from view, or choppiness could be smoothed out.
• One veteran ad sales executive has said that they wished their sales were reported less frequently, given the cyclicality of that business.
• In 2022, Netflix’s Q1 stunned the street, but by the end of Q2 it had begun to stabilize, and by the end of Q3, growth had returned. One wonders how the company would have responded if it only reported semiannually.

Some might take that as an argument in favour of the proposal, on the basis that investors didn’t ultimately need to know about that first quarter stumble. But such arguments would evoke an era of investor passivity that’s long gone, while ignoring prevailing technological trends and possibilities. In the most recent issue of ThinkTwenty20 magazine, Janis Steinmann looked at how AI and XBRL are reshaping financial analysis, commenting:

• The most significant limitation is timing. Annual reports are published once per year. Investors and analysts need ongoing information. The SEC requires quarterly XBRL filings for US public companies, but interim structured data remains limited in many regions. Europe’s ESAP (i.e. the European Single Access Point, a mechanism intended to consolidate access to financial and sustainability reporting across EU member states) will help standardize access across member states, but the fundamental mismatch remains between AI systems expecting continuous data feeds and reporting frameworks built around annual cycles.
• This creates challenges for cross-border analysis as well. While repositories like EDGAR provide comprehensive coverage of US markets, analysts comparing companies across jurisdictions must navigate different filing frequencies, varying taxonomy standards and inconsistent availability of structured data. ESAP should help address this for European markets, but global analysis still requires working with multiple systems and standards.

The SEC’s proposal hardly helps in that regard, and as such seems in line with the US’s bizarre withdrawal on almost all scientific fronts, whether it be the demonization of anything remotely “green” to the slashing of medical research grants. Canadian regulators have already made six-monthly reporting available to a defined population of smaller companies; it’s grimly foreseeable that concerns about “regulatory competitiveness” will draw them into following the US, making it available to all.

The opinions expressed are solely those of the author.