SEC Proposes to End Quarterly Financial Reporting System

The U.S. Securities and Exchange Commission (SEC) has recently formally proposed a significant amendment, which would allow listed companies to choose the frequency of financial reporting at their discretion. According to the proposal, companies can simplify the current model of "three quarterly reports plus one annual report" to "one semi-annual report plus one annual report."

SEC Chairman Paul Atkins frankly stated that rigid rules have fettered the hands and feet of enterprises. He believes that the frequency of disclosure should be decided autonomously by companies and investors based on the characteristics of their business, rather than being forcibly standardized by regulatory authorities.

This change has been brewing for a long time: Last September, the Long-Term Stock Exchange petitioned the SEC to abolish mandatory quarterly reports, which was subsequently highly noted by the White House and the regulatory level. The Wall Street Journal has also previously disclosed the process of formulating related proposals multiple times.

The regulatory action aims to reverse the declining trend of U.S. stock-listed companies. At present, many companies, fearing the high compliance costs of disclosure and cumbersome administrative tasks, would rather remain private for a long time than enter the public market.

If the proposal is approved, companies choosing the new model will discontinue the use of form 10-Q and instead fill out a brand new form 10-S. This form must be submitted within 45 days after the end of the first half of the fiscal year, and the audit standards for related financial statements will also be simplified simultaneously.

For investors, this not only means a reduction in the frequency of obtaining information but also signifies the reshaping of the market's game logic. Supporters believe that it can suppress the short-sighted impulses of management, but investors who rely on high-frequency data worry about the transparency being compromised.

The proposal has entered a 60-day public comment period, and the SEC will make the final decision after the deadline. Investors need to closely monitor which industries will be the first to test the waters, and whether this change in rhythm will significantly amplify the volatility of individual stocks.