Published: Sun, August 19, 2018
Money | By Bruce West

Donald Trump asks SEC to look into practicality of corp

Donald Trump asks SEC to look into practicality of corp

American firms should no longer have to report on a quarterly basis, USA president Donald Trump has said.

"I'd like to see twice, but we're going to see", Trump later said to reporters outside the White House, when asked about his tweet about changing SEC reporting requirements.

Abolishing the rule would "allow greater flexibility & save money" for businesses, Mr. Trump tweeted.

The SEC consists of five commissioners appointed by the president, although there now are only four in place, three named by Trump.

In a Twitter post Friday, Trump wrote: "In speaking with some of the world's top business leaders I asked what it is that would make business (jobs) even better in the U.S. 'Stop quarterly reporting & go to a six month system, ' said one".

Some investors on Friday said quarterly disclosures were essential to making informed investment decisions and supported richer USA valuations, and that shares could become more volatile if companies report only twice yearly. The Commissioners' offices did not immediately respond to a request for comment.

But executives and other investors said Trump's argument made sense because it would cut costs of compiling and filing results and remove short-term distractions for those running companies.

The reports can be found on the SEC's website.

The SEC was created in 1934 in the midst of the great depression and requires publicly-traded companies to issue quarterly and annual earnings reports to keep the public informed on their operations and financial situation. It's unclear whether management at companies that report semi-annually take a longer-term investment strategy than management at companies reporting quarterly, said Salman Arif, a business professor at Indiana University who has studied the difference in reporting periods. Others said that the prospect of fewer financial reports could exacerbate price swings around earnings or fuel insider trading. "She said, two times a year reporting, not quarterly". One of the reasons Tesla CEO Elon Musk wants to take his company private, he told his employees last week, was the way quarterly reports distort decisions at the company. In 1996, nearly 950 companies went public, according to data compiled by Bloomberg. That can pressure executives to engage in reckless practices to hit quarterly targets or even to manipulate earnings reports.

He would need to draft a proposed rule-change which would then be put to an industry consultation during which investors, companies, exchanges, pension funds and public interest groups would likely bombard the SEC with information.

"Investors and other stakeholders benefit when regulations ensure that important information is promptly and transparently provided to the marketplace", said Amy Borrus, CII's deputy director.

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