President Trump asks SEC to study abolishing quarterly earnings reports

Virginia Carson
August 19, 2018

President Trump called on financial regulators Friday to consider allowing public companies to share information with investors less often, a potentially major shake-up of how corporate America operates.

Trump has asked the Securities and Exchange Commission to study the impact of such a change.

"That would allow greater flexibility & save money", Trump said in a tweet.

Kevin Lamarque/ReutersU.S. President Donald Trump hosts a meeting with business leaders in the Roosevelt Room of the White House in Washington January 23, 2017. The SEC is an independent commission-led agency, and the president can not force it to implement rule changes.

Mr Trump tweeted: "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 US".

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Eliminating the quarterly reporting requirements could also lead investors to fill the information vacuum by relying more heavily on rumors and off-the-cuff remarks made by company executives, corporate governance experts say. The Commissioners' offices did not immediately respond to a request for comment.

Trump later told reporters the idea was especially urged on him by Indra Nooyi, CEO of PepsiCo, who is stepping down in October. The SEC is the regulatory arm of the SEA, and since its formation, quarterly earnings reports have been mandatory.

Public companies must report their sales, profits and the state of the company's balance sheet every quarter.

Tesla chief executive Elon Musk also cited the issue when explaining why he has launched a surprise effort to take the $50 billion auto company private.

In a statement Friday, Nooyi said her comments were part of a broader conversation about how to better focus companies toward long-term goals. "And so they don't do it, because the definition of being a successful business is narrowed to what your quarterly earnings reports are". "And so they don't do it, because the definition of being a successful business is narrowed to what your quarterly earnings reports are".

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

"Less frequent reporting can raise the cost of capital", he said.

But scrapping quarterly reporting is not on the SEC's near-term agenda, according to public records.

"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. In 1996, nearly 950 companies went public, according to data compiled by Bloomberg.

In theory, this information helps investors make informed decisions about the future success of a company.

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