We concur with the view of SEC Chair Paul Atkins that the SEC has a three-fold mission as enunciated by Congress in the Securities Exchange Act: Protecting investors, furthering capital formation, and safeguarding fair, orderly, and efficient markets. We also recognize that changes in SEC policies and its size and internal structure do occur over time as underlying facts and circumstances change or the party in power in the White House or Congress brings new priorities to the Commission in terms of commissioner appointments, budget, legislation, or rulemaking.
The question is one of balance. How does the leadership of the SEC appropriately balance investor protection with the objectives of furthering capital formation and safeguarding fair, orderly, and efficient markets?
The pace of change at the SEC is concerning. As of its Spring 2025 Agency Rule List, the Commission listed 18 proposed rules including a greater Rule 144 safe harbor, enhancement of emerging growth company accommodations, shelf registration modernization, updating the exempt offering pathways, shareholder proposal modernization, update to small entity definitions for purposes of the Regulatory Flexibility Act, amendments to Form N-PORT, amendments to custody rules, transfer agents, publication or submission of quotations without specified information, amendments to broker-dealer financial responsibility and recordkeeping and reporting rules, trade through rule, definition of dealer, and enhanced oversight of U.S. government securities traded on alternative trading systems.
We are concerned with the pace at which the Commission is adopting, or moving towards adoption of, new rules, and reducing administrative guidance. For example, as discussed below, abandonment of quarterly disclosure and displacement of internal international accounting standards are dramatic changes that deserve the thoughtful and complete analysis that can only be undertaken with focus and time. At a time when staff turnover, vacancies, and loss of experienced staff have created challenges for foundational work, such as disclosure review, careful prioritization and deliberate process are all the more important.
I. The Proposal to End Quarterly Reports
President Trump’s recommendation that the U.S. shift from a periodic disclosure system based on quarterly filings to one based on six-month filings has received the support of SEC Chair Atkins and looks like it will pass the SEC on a party-line vote. This shift has been proposed before and has been debated in both the U.S., Europe, and the UK in recent years. But the public may not perceive the full implications of this shift.
A. History. The United States adopted a mandatory quarterly reporting system in 1970.[1] Thus, the U.S. has had 55 years’ experience with such a system. Unlike the U.S., Europe and the U.K. now use a system of six months interim reporting, having moved away from quarterly reporting in 2013 and 2014, respectively, after having earlier followed the U.S. to quarterly reporting in 2007. But the reaction to this shift by U.K. issuers may surprise the proponents of ending quarterly reporting: Less than 10% of U.K. companies ceased to report quarterly (at least as of the end of 2015).[2] We will not attempt to predict how U.S. issuers may react to any shift from mandatory quarterly reporting, but it seems likely that many would also fear a skeptical reaction from U.S. institutional investors, who might either cease to hold their stock or who, seeing greater uncertainty because of this longer interval between reporting dates, might discount the price of the stock to reflect this uncertainty.
This is also not the first time that the SEC has considered moving away from quarterly reporting. In 2018, toward the end of the first Trump Administration, the SEC issued a “Request for Comment on Earnings Releases and Quarterly Reports,”[3] and this request attracted a sizable number of comments. Still, very few commentators recommended that quarterly reporting be eliminated. Indeed, even the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness did not recommend the elimination of quarterly reports (but in its letter to the SEC, the Chamber and its Center instead criticized the SEC for requiring too much “immaterial disclosures” and urged that quarterly guidance (i.e., estimates of future earnings) be reduced).[4]
Overall, the response of commentators to the SEC’s 2018 request for comments showed a strong majority of responders favoring quarterly reporting (but many complaining about other features of the SEC’s periodic disclosure system). For example, the CFA Institute, which represents financial analysts who are employed both by issuers and by financial firms, surveyed it’s over 28,000 members and found that:
“Investors Strongly Support Quarterly Reporting:”
and
“No Support for Alternative Reporting or Reduced Reporting Frequency.”[5]
This view typified most firms responding to the SEC’s Request for Comment.
Given the near-consensus among responders to the SEC’s 2018- 2019 assessment of quarterly reporting, the SEC proposed no action at that time to reduce reporting intervals and largely abandoned its inquiry.
What has happened since then? Here, we need to look at the asserted justifications for eliminating quarterly reporting or reducing the disclosures mandated.
B. Proposed Justifications. The case for restricting reporting frequency(including eliminating quarterly reporting) rests on basically two arguments:
- Quarterly Reporting Leads to “Short-Termism”; and
- Quarterly Reporting Has High Costs and Low Benefits.
The first claim asserts that short intervals between reporting dates pressures corporate managers to focus on quarter-by-quarter improvements in revenues or earnings, and thereby dissuades corporate managers from thinking about longer-term planning or investment. This claim that quarterly reporting leads to “short-termism” has been empirically examined and found without support in the available data. If “short-termism” were a realistic problem, one would expect that shifts to shorter reporting frequencies would lead to less long-term investment and shifts away from quarterly reporting would produce more such investment. Remember now that the U.K. moved to quarterly reporting in 2007 and back to semi-annual reporting in 2014. What happened? A careful study found no material increase or decrease in investment at either point (i.e., 2007 or 2014).[6]
Economists have suggested that this assumption that increased reporting frequency produces “short-termism” is simplistic because it ignores the underlying incentive structure that public companies have created for themselves. High compensation linked to brief short-term improvements in performance will indeed produce “short-termism.”
Although there may indeed be a problem with “short-termism,” it has little, if anything, to do with reporting frequency, and a great deal to do with the design of stock options and executive compensation agreements. As the earlier-noted 2019 CFA Institute Report explained:
CFA Institute has long contended that when companies focus on long-term strategy, they are looking at time horizon of three to five years or longer, not six months. Accordingly, extending the reporting period from three to six months would have little impact. We believe that a better approach to deterring short-termism would be to focus on companies’ incentive structure[s].[7]
The second claim that quarterly disclosure has costs that exceed its benefits also seems to ignore recent research. The CFA Institute report found that the costs of quarterly filing have diminished, because of the increased use of A.I. to prepare 10-Q reports.[8] If that was true in 2019, it is even more true in 2025.
More importantly, eliminating quarterly reporting may have high costs, as next discussed.
C. The Hidden Costs of Ending Quarterly Reporting. The hidden costs of eliminating quarterly disclosure fall under four principal headings: (1) an increased cost of capital for American public corporations; (2) increased stock volatility; (3) increased exposure to insider trading and stock manipulation; and (4) decreased precision and reliability of asset pricing, harming the overall allocation of capital in the economy.
First, the U.S. is believed to have a lower cost of capital than Europe and other industrialized nations. This may be the product of many factors, but greater transparency, a stronger securities regulator, and the deterrent threat of private litigation and class actions probably play a sizable role. If so, the cost savings to individual firms from eliminating quarterly reporting may be overwhelmed by the impact of reduced transparency and greater uncertainty about U.S. public corporations’ cost of capital.
Second, as many commentators noted in response to the SEC’s 2018 Request for Comment and as others have already noted in response to President Trump’s recommendation, increased stock volatility is a predictable response, as in the absence of continuing disclosure by the issuer, the issuer’s stock price will be more affected by rumors and uncertainty. This is a cost borne mainly by investors, but also by the issuer.
Third, reduced periodic disclosure will invite increased insider trading and attempts at manipulation. This will be hard to measure (as felons do not disclose their activities), but it is predictable.
Fourth, reduced periodic disclosure – even if many companies continue to report quarterly – will reduce the ability of analysts and investors to compare disclosing companies against industry peers. It will reduce the precision and reliability of important inputs in pricing models, used to value both public and private companies and projects economy-wide, as it will reduce the frequency with which data on price- based ratios and cash flow levels and changes are updated. With less precise and reliable stock prices, overall allocation of capital in the economy will be less efficient.
D. How Will Issuer Behavior Change? The elimination of mandatory quarterly reporting does not mean that issuers will remain silent over the periods in which they otherwise would have been required to file a quarterly report. Indeed, it is simplistic to think that the issuer can remain silent in the face of securities analyst questions, reports by analysts that they disagree with, or claims by rival competitors. But how they speak will change significantly. Instead of filing a Form 10-Q – standardized, relatively comprehensive, and structured so as to permit comparisons between companies – issuers will file earnings releases from time to time. These will be individualized, stressing the positive information that the issuer wants to stress, and they may regularly deviate from GAAP accounting metrics.[9]
E. A Proposal. Although we believe it preferable to retain quarterly reporting requirements, it seems very likely that the SEC in response to President Trump’s recommendation will soon end mandatory quarterly reporting. In that light, we have a fallback proposal. Specifically, eliminating required quarterly reporting does not mean that the Form 10-Q must be withdrawn from the SEC’s disclosure inventory. Rather, it could simply be made optional. Ideally, current shareholders should be asked to vote on a proposal to abandon quarterly reporting, but even if the SEC were to ignore shareholder preferences and drop the requirement without company-specific shareholder approvals, continuing the availability of the Form 10-Q has real advantages. Many issuers may continue to file a Form 10-Q in response to investor We believe the SEC should permit that choice, and continue to post such filings publicly. Other issuers might instead file a briefer quarterly earnings statement, and still others might file nothing at all.
Such an outcome may be a second-best solution, but it is highly preferable to the SEC eliminating the Form 10-Q and refusing to post Form 10-Qs (or reasonable equivalents) that were voluntarily filed.
Preserving the Form 10-Q as a voluntary option provides a means for those issuers who want to signal to investors that they are seeking to satisfy higher disclosure standards. According to the CFA Institute, the consensus among its analysts is that the Form 10-Q provides significantly superior disclosure. Those not seeking to provide such a signal would simply issue an earnings statement and post it on their web site (or possibly even maintain total silence). To be sure, those deciding to file a Form 10-Q would incur greater expense (but that they would also signal their commitment to higher quality disclosure and possibly justify a lower cost of capital).
Although the current SEC might resist this idea of continuing to accept Form 10-Qs for filing on a voluntary basis, it is nonetheless more consistent with the current SEC’s laissez-faire approach than abolishing the Form 10-Q altogether: Those who want to provide more disclosure may do so; those who want to provide less may also do so. Even if the SEC were to refuse to accept such voluntary Form 10-Qs for filing (possibly for political reasons), issuers could still post a disclosure document on their own websites closely resembling a Form 10-Q (possibly with a caption that indicated such a desire). Those desiring to signal their commitment to providing higher-quality disclosure can find multiple ways to send such a signal.
F. Conclusion. In the near future, many issuers wishing to economize on their disclosure costs may eliminate quarterly But in doing so, they may incur greater losses in terms of their cost of capital, the volatility of their stock, and their reputation for a commitment to high standards. This is a difficult trade off that each public company needs to consider carefully.
When Europe and the U.K. shifted back to six-month reporting in 2013 and 2014, the majority of public companies continued to report quarterly. That experience suggests that the U.S. may see a similar pattern with many issuers taking an intermediate position (if they are permitted to do so). No reason exists for denying issuers some choice as to their preferred disclosure policy.
II. The Proposal to End International Financial Standards
On September 10, Chair Paul S. Atkins gave a speech in which he asserted that the SEC may reconsider recognition of International Financial Reporting Standards (IFRS) and rules allowing foreign companies to use IFRS without reconciliation to U.S. generally accepted accounting principles (GAAP).[10] Specifically, he expressed the view, “if the [International Accounting Standards Board (IASB)], does not receive full, stable funding, then one of the underlying premises for the SEC’s elimination of the reconciliation requirement for foreign companies in 2007 may no longer be valid, and we may need to engage in a retrospective review of that decision.” Based on his speech, Chair Atkins’ concerns about IFRS funding support seem to arise solely from the fact that in response to investor requests, the IFRS Foundation formed and the International Sustainability Standards Board (ISSB), which has developed Sustainability Disclosure Standards, which he characterized as a “backdoor to achieve political or social agendas.”[11]
The Chair’s stated concerns do not appear to have any support in the public record or in anything cited in his speech. The IFRS Foundation set up the IASB in 2001 and charged it with consolidating and enhancing various accounting standards in use around the world. By all accounts, IASB has succeeded. More than 140 nations require IFRS Accounting Standards, and financial statements prepared in accordance with IFRS are used by investors, regulators, and others worldwide. It continues to update and develop new components of IFRS, completing ten projects in 2024 alone.[12] For example, IFRS issued “Presentation and Disclosure in Financial Statements” in April 2024 to improve the usefulness of information in financial statements. None of the IASB’s sustainability reporting initiatives have eroded widespread use of IFRS or had any apparent effect on the ongoing work by IASB to support and develop IFRS.
The focus of Chair Atkins’ critical remarks, however, was not actually IFRS or the IASB as a whole, nor anything specifically identified about the IFRS Accounting Standards. He seems to believe, without offering details or reasons, that the creation of the ISSB is somehow threatening the funding stability of the IASB. However, as the IFRS Foundation’s public reports disclose, the IFRS Foundation is funded by a combination of contributed and earned revenue, and the ISSB has been separately funded from IFRS, drawing on specific fixed- term seed funding that the IFRS Foundation is replacing with new streams of contributions and revenue. No public information supports the notion that ISSB puts IFRS at financial risk, it accounts for staff expenses relating to IFRS and IASB separately, and there is no reason to believe the IFRS Foundation as a whole faces any financial threat that would undermine the reliability of IFRS.
We believe the SEC should retain its focus on and full acceptance of IFRS Accounting Standards. It should not allow politics to distract from the value of choice for foreign issuers in how they present their financial results. Indeed, the potential value of issuer choice is something emphasized by Chair Atkins very recently in announcing the SEC’s new rule on arbitration.[13] Any pullback from U.S. acceptance of the globally dominant accounting alternative to GAAP will predictably increase compliance costs, reduce the attractiveness of the U.S. as a home for global capital markets, and reduce capital formation generally.
We conclude by noting an important irony. Chair Atkins’ speech attacks IFRS for being “political.” Yet his attack itself appears to be political. Chair Atkins’ view seems premised on the belief that climate risks and human capital are irrelevant to investors and investment and financial outcomes. This belief, even if held in good faith, would be at odds with the fact that SEC has long required disclosures about such risks, as Commissioner Peirce has emphasized on several occasions.[14] It is at odds with the fact that the SEC expanded human capital disclosures in 2020 because, as then-Chair Jay Clayton stated, “human capital…for various industries and companies can be an important driver of long-term value.”[15] It is at odds with the fact that IASB premised its development of sustainability disclosures on the fact that it was investors that were demanding those disclosures. Finally, we note the SEC has yet to respond to the recent Eighth Circuit decision requiring it to either defend the climate disclosure rules adopted in 2024 or follow a notice- and-comment process under the Administrative Procedures Act if it is to modify or rescind.[16] We hope the SEC’s eventual response is premised on the SEC’s statutory mandates – including investor protection and facilitation of capital formation and capital market integrity – and not on politics.
III. Reductions in Administrative Guidance
Administrative guidance is a central step in the process of facilitating the efficient aggregation of capital while fulfilling the investor protection mission of the SEC. The SEC meets these missions with the transparency and support it provides through interpretative releases bearing on not just its regulatory initiatives but also reviews of registrants’ reporting practices, a thoughtful, transparent, and robust no-action letter culture, a robust internet presence whereby guidance and interpretation of its rules is provided, making its commissioners and staff available for industry gatherings to discuss industry practices and concerns, as well as individual meeting with registrants and their representatives to discuss a registrant’s concerns.
It in this spirit of openness that we join the recommendations set forth in SEC Office of Inspector General, Improved Documentation and Guidance Can Help Strengthen Corporate Disclosure Review Program, Report No. 386 (Aug. 25, 2025). The focus of Report 386 is the SEC’s handling of reviews mandated by Section 408 of the Sarbanes-Oxley Act of 2002.
Section 408 mandates that registrants subject to Section 13(a) or Section 15(d) of the Exchange Act be reviewed no less frequently than once every three years. Subsection(b) sets forth non-exclusive factors the SEC can use for so-called elective annual reviews that can occur more frequently than the mandated minimum prescribed in subsection (c).
Following a review of the SEC’s 2023 and 2024 discharge of its elective reviews, Report No. 386 recommended:
- Require that important information about how annual reports are selected for elective review and scoped, including any relevant risk factors, be documented, among other actions.
- Coordinate with the SEC’s Office of the General Counsel to finalize Sarbanes-Oxley Act of 2002 section 408 guidance, including a description of all six factors to be considered and an interpretation of the minimum review period mandate.
- Consider developing a plan that prioritizes DRP goals and requirements in the event of significant staffing decreases and/or significant workload increases.
Report No. 386 also observes that SEC management concurs with each of the three above recommendations.
Our reasons for selecting this development for comment are not just the importance of periodic SEC staff review of SEC filings being carried out in a consistent and systematic manner pursuant to transparent selection criteria, but also our belief that the ability to carry out these important reviews is jeopardized by not just the recent SEC staff reductions but also by so many of the retirements being among the most senior experienced members of the staff. Simply put, to be able to carry out the reviews mandated by Section 408, the SEC needs to maintain not less than the staffing it could deploy to its annual disclosure review program. We fear the SEC’s ability to do so is at risk. Fear of this risk is also expressed in Report No. 386.
Data document that there has been a dramatic, and worrisome, decline in 2025 of staff comment letters and that there are longer delays in the letters.[17] We note here that the SEC historically has managed its mandated Disclosure Release Program with fewer than 300 employees; this task is challenged by the report of Chair Atkins that since the beginning of 2025 there has been about a 10% reduction in the disclosure review staff and that he “did not rule out further reductions.”[18]
SEC comments are valued by the market and contain new information that is not already priced into stock prices.[19] As observed, we are witnessing a sharp decline in the number of SEC comment letters released on EDGAR between January and August 2025.The SEC has lost 27 of its 299 disclosure review employees since February according to an August 26 Office of Inspector General Report. “When experienced regulators depart in large numbers, the SEC will have fewer employees with a deep understanding of securities regulation and agency practices. With these experienced employees leaving so abruptly, the remaining staff will find it difficult to take overactive cases or begin new investigations both due to knowledge gap and the increased workload.”[20]
More broadly, administrative guidance, such as communicating why certain factors in an existing market setting prompt the SEC to emphasize new or even recurrent considerations for a close review of a class of registrants’ filings, is valuable information to all registrants as well as investors. We therefore believe this information should be shared and is consistent with the underlying purpose of Section 408.
ENDNOTES
[1] See Securities Exchange Act Release No. 9004, 35 Fed. Register 17537.
[2] See CFA Institute, “The Case for Quarterly and Environmental, Social and Governance Reporting” (2019) at p. 41; see also, Robert Pozen, et al., “Impact of Reporting Frequency on UK Public Companies,” (March 2017) https://www.cfainstitute.org/researchfoundation/2017.
[3] See Securities Act Release No. 10,558 (Dec. 21, 2018).
[4] See Letter to Vanessa A. Countryman, Secretary, U.S. Securities and Exchange Commission by Tim Quadman, Executive Vice President, Center for Capital Markets Competitiveness, July 17, 2019.
[5] See CFA Institute Report, supra note 2, at p. 1.
[6] See Robert C. Pozen, Suresh Nallareddy, and Shiva Raigopal, “Impact of Reporting Frequency on UK Public Companies,” Research Foundation Briefs 3, No. 1, (2017).
[7] See CFA Institute, supra note 2, at p.3
[8] Ibid.
[9] For essentially this assessment (made in response to the SEC’s 2018 request for comment), see CFA Institute, supra note 2, at 7-9. It reports that 76% of the responses by financial analysts to a broad survey it conducted agreed that “earnings releases generally include more non-GAAP measures than quarterly reports and, therefore, can present a more positive perspective on a company’s results than quarterly reports.”
[10] https://tinyurl.com/4hhjxmne.
[11] In the same speech, he critiqued European Union frameworks that include “double materiality” standard as a test for relevance of disclosures and due diligence procedures. Those frameworks and that standard are unrelated to IFRS and are not reflected in any SEC rule or exemption. It is uncertain what role the SEC (as opposed to the Department of State or the U.S. Trade Representative) has in advancing international relations policy positions related to other countries’ disclosure regimes and unrelated to the SEC’s statutory missions, even if they apply to US companies; many other examples of disclosure regimes applying based on industry, operations, jurisdiction of incorporation, or revenues long predate the disclosure frameworks attacked by Chair Atkins in his speech.
[12] IASB Annual Report 2024 at 8. By comparison, FASB completed six standards or other final documents in2024. FAF Annual Report 2024 at 13. Acknowledging the difficulty of comparing significantly different qualitative topics addressed by two standard setters with different
[13] https://tinyurl.com/y83nzw63.
[14] E.g., Hester Peirce, Statement (3/6/24) (“Our existing disclosure regime already requires companies to inform investors about material risks and trends – including those related to climate – by empowering companies to tell their unique story to investors”).
[15] https://tinyurl.com/4j4yrwpv.
[16] Iowa v. SEC, No. 24-01522, (8th Cir. 9/12/25).
[17] Usvyatsky, SEC Comment Letter Trends in Three Charts: Fewer Releases and Longer Delays, Deep Quary (Sept. 7, 2025).
[18] Ramonas, SEC Staff Cuts Threaten Company Filing Reviews, Watchdog Says, Bloomberg Law, Aug. 27, 2025.
[19] Michelle Lowry, Roni Michaely, and Ekaterina Volkova, Information Revelation Through Regulatory Process: Interactions Between the SEC and Companies Ahead of the IPO, 33 Rev. Fin. Stud. 5510–5554 (2020).
[20] See https://www.winston.com/en/blogs-and-podcasts/capital-markets-and-securities-law-watch/sec-buyout-program-and-other-initiatives-lead-to-drop-in-enforcement-and-general-counsel-staff.
This post comes to us from the Shadow SEC, whose members are professors John Coates at Harvard Law School, John C. Coffee, Jr. at Columbia Law School, James D. Cox at Duke University School of Law, Merritt B. Fox at Columbia Law School, and Joel Seligman at Washington University School of Law.