IS LESS DISCLOSURE REALLY A GOOD IDEA? ARE THERE SIGNS THE SEC AGREES WITH PRESIDENT TRUMP?
During Donald Trump’s controversial term as President of the United States, he has never shied away from using social media (Twitter) to make commentary on a wide range of issues. To observers, some of President Trump’s tweets seem calculated, well thought out, and logical and others seem impulsive and driven by personal interests/vendettas. In August 2018, President Trump decided to make a commentary in the following tweet on the SEC’s requirement that companies subject to SEC reporting be required to file quarterly reports and suggested the SEC eliminate the requirement in lieu of semi-annual reporting:
On December 18, 2018, in compliance with the request from President Trump, the SEC published a request for comment soliciting input on the nature, content, and timing of earnings releases and quarterly reports made by reporting companies.
Some of the most recent and impactful SEC regulation has been Regulation Crowdfunding and amendments to Regulation A known as Reg. A+. For more information on Regulation Crowdfunding click here and for more information on Reg. A+ click here. Although Regulation Crowdfunding and Reg. A+ are exemptions from registration, they each require ongoing SEC reporting for any company who chooses to commence an offering pursuant to any of those exemptions. Companies who use Reg. A+ are only to file one semi-annual and one annual report (not including current reports triggered by certain events) which is a departure from the traditional SEC requirement for companies subject to SEC reporting to file three quarterly reports and one annual report (as well as current reports triggered by certain events).
The reporting requirements for companies who use Regulation Crowdfunding are even more reduced with only an annual report required, generally. The SEC’s most recent and important regulation has possibly revealed the SEC’s change in viewpoint that the traditional requirement to file quarterly reports may be too burdensome for smaller issuers (similar to issuers taking advantage of Regulation Crowdfunding and Reg. A+). Although elimination by the SEC of quarterly-reporting is certainly possible for all issuers, it is more probable that the SEC may relax reporting obligations for “smaller reporting companies” due to the fact that the requirement to file quarterly reports is too burdensome for smaller issuers who don’t have the breadth of resources that accelerated and non-accelerated filers have.
For years, smaller reporting companies have been advocating for scaled disclosure and the SEC has responded favorably by issuing new rules that expand the scope of smaller public companies that qualify for scaled disclosures and adopting amendments to simplify and update disclosure requirements.
Will the SEC’s next move be to eliminate quarterly reporting? The SEC’s request for comments today is certainly a sign that a change may be coming. Watch this space.