The SEC is gutting quarterly disclosure to give corporate insiders a six-month head start. The proposal would make the Form 10-Q — the quarterly report of record that every public company files with the Commission — optional, replacing four filings a year with a reviewed semiannual report and an audited annual one.
Quarterly disclosure is built on Section 13 of the Securities Exchange Act of 1934. Anyone who has read that section knows why it exists: a registration statement is a snapshot, and snapshots go stale. That section is how the public finds out what changed.
Here are the numbers, from the people who would do the work. KPMG surveyed 156 chief financial officers, chief accounting officers and controllers at publicly traded companies on what they would do if the proposal becomes law. Thirty-nine percent said they would publish quarterly earnings press releases but submit regulatory filings only twice a year. An additional 39% said they would file 10-Qs as they do now and publish quarterly releases. Seven percent would publish select data outside the twice-year reporting periods. Three percent would file semiannual with no quarterly updates. Twelve percent were undecided. Ninety-four percent said they would maintain quarterly governance and oversight practices internally regardless of the SEC’s filing calendar. Brian DelGhiaccio, the chief financial officer of Republic Services, told The Wall Street Journal that “the internal effort to provide that information is not substantially different than if you went the extra effort to file a 10-Q.” Eli Lilly, in its public comment letter, made the same concession in plain language: it plans to file semiannually and annually while continuing to publish earnings quarterly. The cost saving the agency cites — lower auditor fees, less time on the every-three-month grind — is the cost of the regulatory filing, not the cost of disclosure.
That filing carries the §302 Sarbanes-Oxley certification that the 10-Q requires: signed certification by the chief executive and chief financial officer, plus an accountant’s review. Without those, the quarterly number travels into the market without the same securities-fraud liability exposure, and the data carries weaker third-party verification before investors see it. The periodic-reporting apparatus the 1934 Act built around the quarterly number is what the proposal removes. The second survey is smaller and says the same thing. The Society for Corporate Governance asked 100 companies whether the change would lighten the burden. Over a third said the relief would be minimal or nonexistent. Half said moderate. Eight percent said they were very likely to adopt semiannual reporting within three years. The group’s president, Paul Washington, backs the proposal as an option each company can choose — a fair position only if one ignores who would decide which way.
The Commission’s comment file carries the relevant testimony. David Wells, who served as finance chief of Netflix from 2010 to 2019, put the substantive case against the proposal in his comment letter. The four-times-per-year cycle, he wrote, “underpins trust, drives rigor and creates a level playing field for individual investors and large institutions” — the institutions that can request check-ins with management directly. He named the bogies of the slower reporting cycle: fraud, “a greater value placed on insider knowledge,” and “a longer shelf life for bad corporate strategy.” He added that some companies would adopt semiannual reporting because they lack the financial discipline to keep the cadence. Serge Tanjga, the finance chief at Appian, made the case from inside a company that already keeps the quarterly internal cadence: “We learn a lot, and we become better, and we hold each other internally accountable by going through that process.” Curtiss Bruce, the chief financial and operating officer of Honest Company, told the Journal that “particularly as a small-cap company, where our strategy is to attract more long-only investors, sharing less frequently is not advantageous to us.”
This is the standard “burden on companies” move applied to disclosure: trade associations argue issuers need relief from quarterly cadence, while the issuers on the record say the opposite. The proposal preserves the relief so executives can save the regulatory cover sheet — the document the §302 certification attaches to. The stated reasons are lower auditor fees, less time, an end to the every-three-month grind. That is the standard laundering operation: a reduction in mandatory disclosure, dressed as modernization. The workload does not move; the document does.
The cadence the Commission proposes to loosen is the cadence that put $9.6 billion in tariff refunds from more than forty S&P 500 companies into 10-Q footnotes on the public record this month. Under semiannual reporting, that interval would double, and the windows during which insiders can act on the information would double with it. The buyers of securities oppose the change; the sellers are its constituency. The defense of an option is that a company can always choose to keep telling the truth. True. The companies the option is for are exactly the ones that will not. If the Commission wanted more companies in the public market, the real costs are the concentrated audit market, the duplicative compliance machinery, and the litigation regime — each harder to fix than this. Cutting the cadence of the signed number is the one reform that helps the companies that least deserve the help. Three percent. Eight percent. “Not substantially different.” The comment file holds David Wells’s list of what the slower cycle buys: fraud, a greater value placed on insider knowledge, a longer shelf life for bad corporate strategy. The asymmetry the disclosure regime was built to eliminate is being re-installed by the regulator whose job is to eliminate it. The Commission knows what is in its own rulemaking file. This is a deliberate choice.