SEC’s semiannual reporting proposal draws lukewarm responses
The Securities and Exchange Commission’s proposal to allow public companies to report financial information on a semiannual basis instead of a quarterly one has been among the most headline-grabbing aspects of the Trump administration’s deregulatory push. But the agency says it’s also weighing a bevy of other regulatory rollbacks to encourage companies not only to go public, but to stay public.
In a Monday roundtable discussion hosted by the SEC, players across law and capital markets expressed more optimism about those other proposals than they did about the semiannual reporting idea. The SEC’s other potential changes include widening availability of the Form S-3 registration document to allow companies to get more access to capital, alongside loosening requirements for auditor attestations.
Ryan Mitteness, partner at law firm Fenwick & West, shared details about his company’s survey of just over 100 current or soon-to-be public firms on the semiannual reporting proposal.
“I would say most are not deciding to go public or deciding to stay public based on quarterly reporting or semiannual reporting,” Mitteness said of survey respondents. “That’s not really driving that decision.”
He added that most respondents said they likely wouldn’t even adopt a semiannual reporting cadence if given the option.
Dan Zinn, general counsel and chief of staff at OTC Markets Group Inc., said that a company’s preferred reporting cadence would ultimately be a “very commercial decision” and would vary business to business. He pointed to the example of foreign private issuers, or FPIs, which he said compose a “vast number” of the 12,000 companies trading on his exchange.
Such companies, which are not based in the U.S. but are traded here, already essentially follow a semiannual reporting cadence. But, for other firms, he suggested that marketplace dynamics and an individual company’s capital needs would ultimately determine the reporting cadence that makes sense.
“If you think that … your ability to raise capital over time is going to be adversely impacted by pulling back and only reporting on a semiannual basis, then you’ll put out more information,” Zinn said.
Panelists’ takes on the semiannual reporting idea largely tracked with public comment that’s already poured in on the proposal. As of July 3, the SEC has received just over 8,000 letters on the proposal so far, and nearly all of them opposed it, CFO Dive recently reported.
As for the SEC’s other proposed changes, Zinn said he welcomed “every opportunity to cut down on some of the friction, cut down on some of the costs.”
Another change currently under consideration by the SEC is a proposal to expand exemptions to auditor attestations required under the 2002 Sarbanes-Oxley Act. Under that proposal, only those companies deemed to be large accelerated filers would still face such a requirement.
Joshua Ford Bonnie, partner at law firm Simpson Thacher & Bartlett, said that such a move would be particularly meaningful for newly minted public companies.
“It’s a big-ticket item,” he said of the existing requirement. “It takes a lot of mind share of the CFO and the audit committee.”
He added: “Anything we can do to reduce that burden on companies … makes sense.”
Jaime Kilma, general counsel at the New York Stock Exchange, emphasized that for many companies, going public is just one hurdle among many. She encouraged SEC leaders to keep in mind the price of “longer-term disclosure obligations.”
“A lot of what drives these decisions is not the cost of going public but really the cost of continuing to be public,” Klima said.
