Author: Long Yue, Wall Street Journal
From embracing cryptocurrencies to eliminating quarterly reporting, the U.S. Securities and Exchange Commission (SEC) is undergoing a major regulatory shift.
According to the Financial Times on September 29th, newly appointed SEC Chairman Paul Atkins stated that the SEC will consider allowing listed companies to adopt semi-annual reporting, replacing the current requirement to release earnings reports every three months, and emphasizes "minimum effective dose" regulation.
The government should provide a minimum "dose" of regulation necessary to protect investors while allowing businesses to thrive.
It is time for the SEC to remove its influence and let the market determine the optimal reporting frequency based on factors such as a company's industry, size, and investor expectations.
Paul Atkins' move directly echoes Trump's previous proposal to relax the frequency of financial reporting, aiming to provide businesses with greater flexibility. It's the latest example of the Trump administration's pro-business stance and its pursuit of greater control over independent federal agencies. It marks a decisive break with the SEC's broad and stringent regulatory agenda pursued by its predecessor, Gary Gensler. The SEC's approach to the cryptocurrency sector has shifted from aggressive suppression during Gensler's time to a more moderate embrace, and this relaxation of public company disclosure rules confirms the full implementation of this "light-touch" regulatory approach. A "minimum dose" regulatory philosophy, including consideration of abolishing mandatory quarterly reporting. Upon taking office, Paul Atkins quickly set the tone for the SEC under his leadership. He argues that in recent years the SEC has "deviated from the precedent and predictability required to maintain trust in the capital markets" and has departed from the clear mission Congress set for the agency more than 90 years ago. His remarks were seen as a direct criticism of the aggressive regulatory and enforcement stance taken by his predecessor, Gensler, under the Biden administration. Relaxing the frequency of corporate financial reporting is the most notable part of Atkins' "deregulation" agenda. He has actively responded to Trump's call to repeal the rule requiring most US public companies to disclose their financial status every three months. Atkins said, "It is time for the SEC to take its thumb off the scale and let the market determine the optimal reporting frequency based on factors such as a company's industry, size, and investor expectations." He argued that the goal of regulation is to protect investors and allow business to thrive, not to satisfy shareholders who "seek to effect social change or whose motivations are unrelated to maximizing financial returns on their investment." Atkins argues that abandoning mandatory quarterly reporting is neither a novel idea nor a step backward in transparency. He notes that this flexibility already exists for some companies. He cites the UK as an example. After returning to semi-annual reporting in 2014, some large companies have opted to continue issuing quarterly reports out of necessity. He sees this as proof that the market itself can effectively determine the frequency and depth of disclosure. Criticizing the European Model and Opposing "Political Currents" Atkins' regulatory blueprint isn't limited to the United States. He also sharply criticizes the European regulatory model, calling its climate-related regulations driven by "ideologues," and warns against allowing disclosure to be driven by "political currents or distorted objectives." He specifically criticizes the recently adopted European Union Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD). He believes these directives require companies to disclose matters that "may be socially significant but are generally not financially material." Atkins warned, "These mandatory requirements are likely to pass on costs to U.S. investors and clients while providing little information to guide capital decisions." He bluntly stated that if Europe wants to boost its capital markets by attracting more listings and investment, it should focus on reducing unnecessary reporting burdens. Investors Concerned About Loss of Transparency However, this major policy shift by the SEC has also sparked market concerns. Investor advocacy groups have reportedly issued warnings. These groups believe that shifting from quarterly to semi-annual reporting could weaken market transparency and harm the interests of small investors with relatively limited access to information. They worry that this move could, in the long run, undermine the foundations that support the efficient functioning of the U.S. capital market. While Atkins argues that markets can regulate themselves, opponents insist that mandatory, more frequent disclosures are key to maintaining a fair and efficient market.
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