This issue's key takeaways:

• The SEC is pursuing a rule change that would shift reporting for public companies from quarterly to half-yearly, reducing the reporting requirements by half.
• The proposed change, a directive from the Trump administration, would re-shape the regulatory landscape and dramatically alter how financial information is shared, assessed, and acted on.
• Proponents see the change as a way to free companies from burdensome regulations and enhance opportunities for long-range growth and innovation.
• Opponents worry that less financial visibility and transparency will increase risk, scare investors, and promote fraud.

Risk trivia:

According to Forbes, there were 8,800 publicly traded companies in the US in 1997. How many were there at the end of 2024? Keep reading for the answer.

Snapshot: The Risks and Rewards of Half-Yearly Reporting

By James H. Gellert, Executive Chair, RapidRatings

A regulatory shift is looming, with major implications for US public companies, investors, analysts, creditors, auditors, and other economic stakeholders.

Today’s Risk & Resiliency Report will provide an overview of the proposed changes, explain why they are important, and examine potential pros and cons.

The Big Picture

In September last year, Paul Atkins, Chairman of the Securities and Exchange Commission (SEC), announced support for a rule change that would shift the financial reporting obligation for US public companies from quarterly to semi-annually.

This change, first proposed by President Trump in 2018, is proceeding through the rulemaking process, including a public comment period, and is expected to be adopted, with an effective date as early as April 2026.

What does that mean?

Currently, U.S.-listed public companies are required to provide detailed financial information in the form of quarterly reports filed with the SEC. A quarterly report includes:

• The company’s Financial Statements (Unaudited balance sheet, income statement, and cash flow statements for the quarter and year-to-date, including comparisons with the same period of the prior year).
• Management’s Discussion and Analysis (MD&A): Analysis of financial condition and results of operations, explaining material changes, trends, and liquidity.
• Material Changes and Risk Factors: Disclosure of significant developments, such as new legal proceedings, changes in debt, or updated risks since the last 10-K.
• Legal Proceedings: Disclosure of any pending material legal cases.
• Shareholder Changes: Information on share repurchases or changes in capital structure.
• CEO/CFO Certifications: Required under the Sarbanes-Oxley Act to affirm the accuracy of the report.

These reports inform key strategic financial decisions by numerous stakeholders, including investors, analysts, and corporate counterparties. A switch from quarterly to semi-annual reporting would cut reporting requirements by half and alter a regulatory process and a relied-upon disclosure standard that have been in place for 50 years.

A  (very) brief history

In 1934, the Securities Exchange Act both created the SEC and authorized it to require periodic reporting from publicly traded companies.

However, no formal reporting schedule was instituted until 1955, when semi-annual reporting was officially required. The reporting requirement was expanded to quarterly in 1970, where it has remained ever since.

Potential Impacts

Life rarely gives us clear, easy answers. It usually gives us gray. Here are some general observations on the potential theoretical benefits and drawbacks of the SEC’s proposed change.

Upsides

• Reduced regulation: Relaxed regulatory standards create a more favorable business climate by freeing up the resources companies must commit to staying compliant. These resources, in theory, can then be redirected toward alternative business goals, such as growth.
• Long-term focus: Quarterly reporting shapes company strategy by prioritizing short-term earnings targets over a more forward-looking approach that supports innovation and growth. Public companies under less pressure to produce quarterly results can focus on longer-term investments.
• Better allocation of resources: The reporting process is costly and time-intensive for companies, and preparing each report requires a significant allocation of manpower, on top of legal and accounting expenses. Halving the reporting requirement allows companies to direct those resources elsewhere.
• Competitive alignment with other jurisdictions: The proposed change would align US companies with competitors in the European Union (EU), United Kingdom (UK), and Australia, where semi-annual reporting is already the standard.

Downsides

• Reduced regulation: A 50% reduction in mandatory reporting means less information for investors and less analyst coverage, hindering investors’ ability to make well-informed decisions based on accurate financial data. Reduced transparency and governance are opportunities some businesses could exploit.
• More opportunities for fraud and market manipulation: Quarterly reporting has helped US equities trade at a premium by protecting against fraud and manipulation; less reporting could result in more volatility, featuring longer trading blackouts and a drop in overall trading activity.
• Loss of confidence and trust: A decrease in the frequency, quality, and availability of public company financial information could erode investor confidence and increase the overall risk for some companies.
• Information Asymmetry: Quarterly reporting provides a consistent level of information on company performance for the benefit of institutional investors and retail (main street) investors alike. Cutting disclosure in half will disproportionately benefit institutional investors and hurt retail investors. Large institutions have the budget and resources to do independent research and buy data and services of third parties to gather data during the disclosure gaps. For instance, buying data from services that monitor how full the parking lots are at a company’s manufacturing sites is a real way to triangulate whether they are operating at or below capacity. No individual investor can access that information. AI agents built to understand bills of lading and truck and rail capacity, and therefore whether a company is shipping a lot of product or a little, is all to the advantage of an institutional investor, not the little guy. Quarterly reporting doesn’t eliminate this imbalance, but it reduces the gap.

Other factors

The ramifications of this proposed change extend way beyond a simple pro and con list. Here are some other factors that are worth keeping in mind:

• Peer pressure: An interesting factor to consider is how much pressure there will be on companies to stay in line with their peers. We may see organizations continue to report quarterly, as a show of transparency to their investors, customers, and other stakeholders. Will that force peers to do the same?
• But we already have a process in place! Quarterly reporting has been the standard in the US for 50 years, and as a result, companies have well-established processes and protocols for upholding that schedule. For some, the chance to spend half as much time preparing financial reports will be greeted enthusiastically. Others may choose to continue reporting quarterly to avoid operational disruption.
• Unhappy auditors: Less reporting will be a major blow to the “Big 4” accounting firms Deloitte, EY, KPMG, and PwC, which could lose up to 15% of their annual audit fees from this regulatory shift. Losses of that magnitude could force the Big 4 to cut costs via hiring freezes and increased use of automation and AI tools. Just one of many ripples from the regulatory changes.
• Corporate counterparty risk is increased through this route: Investors are not the only affected parties. Corporations that buy from or sell to public companies use those companies' quarterly disclosures to understand their own business risks when working with them. This is counterparty risk. Less information increases risk. With current trade wars, geopolitical unrest, and a new tariff per day, it’s already hard enough for companies to measure corporate commercial risk. Why make that even harder?

Final thoughts

While the rule proposal has yet to be confirmed, it has support in the SEC and from the President, so it’s likely.

The current administration is unabashedly pro-business. Certainly, saving money and being held accountable less is easier for large companies than the alternative. Though some companies will take advantage of quarterly reporting to set themselves apart, many will drop into this blacker hole of half as much reporting.

The financials are one thing, but as I enumerated the other items in a quarterly report above, I couldn’t help but wonder why it is better if companies:

• Don’t explain material changes to their business, trends, and liquidity?
• Don’t disclose new legal proceedings, changes in debt, or updated risks?
• Don’t disclose any material pending legal cases?
• Don’t disclose share repurchases or changes in capital structure.
• Have fewer CEO/CFO certifications of accuracy?

The impact of the switch to semi annual reporting will take a while to be fully felt, but one prediction I feel certain about is that with dramatic change comes uncertainty. There is enough uncertainty today and I’m not sure why we need more. With less information, there is more  risk. Is this really better?

If financial reporting is less stringent, having access to accurate financial health data will be more essential than ever. No matter the regulatory standards, companies should protect themselves and their investors with analytic tools that maintain financial data transparency and visibility.

Stat of the month: $195 billion

That’s how much the US government raised in custom duties in Fiscal Year (FY) 2025, according to the Committee for a Responsible Federal Budget, a non-profit, nonpartisan organization that studies the impact  of fiscal policy.

That’s a $118 billion increase over what was collected in FY 2024, a result of increased tariffs.

Trivia Answer: 3,956 publicly traded US companies by the end of 2024(down from 8,800).

This precipitous drop is attributed to consolidation from mergers and acquisitions and fewer IPOs, in part due to regulatory requirements.

If you’re curious about how RapidRatings offers the most accurate and comprehensive financial data analytics in the industry, check out RapidRatings.com to learn more.

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