Trump proposes: companies should report financial results every six months instead of every quarter.

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On Monday local time, U.S. President Trump proposed a new idea: companies would no longer be required to report earnings quarterly, but instead every six months.

In a post on Truth Social, Trump stated that this proposal would need approval from the U.S. Securities and Exchange Commission (SEC), and that it would save money and allow management to focus on properly running their companies.

During Trump's first term, he had asked the SEC to study this issue, but it did not result in any recommendations.

Current SEC regulations require companies to report earnings quarterly, but providing earnings guidance is voluntary. Changes to these rules can be made directly by the SEC or through Congressional amendments.

Procedurally, changing the quarterly reporting system does not require Congressional approval, only a majority vote at the SEC. Currently, Republicans hold a 3-1 advantage on the SEC, with one seat vacant. Sarah Bianchi, Evercore ISI's Chief Strategist for International Political Affairs and Public Policy, said the process could take 6 to 12 months.

SEC Chairman Paul Atkins has yet to comment on the matter. The White House declined to further comment on Trump’s post.

Former U.S. Deputy Trade Representative Bianchi wrote in a report:

Successive U.S. administrations have, to varying degrees, guided SEC policy direction, and with Trump's instruction, this matter must now be seriously considered as a possibility. However, the SEC has also historically operated with a degree of independence.

If efforts to reconsider quarterly reporting advance at the SEC, it may also trigger discussions about when and how companies provide earnings guidance and communicate with investors, which would have significant implications for public markets.

The rationale for the quarterly reporting system has previously been questioned. In 2018, Berkshire Hathaway Chairman Buffett and JPMorgan CEO Dimon suggested in a Wall Street Journal op-ed that quarterly earnings guidance should be scrapped, but did not advocate abolishing quarterly reports. They wrote:

In our experience, quarterly earnings guidance often leads companies to focus excessively on short-term profits at the expense of long-term strategy, growth, and sustainability.

Earlier this year, Norway's sovereign wealth fund proposed switching to semiannual reporting, arguing that a longer reporting cycle would allow companies to focus on long-term development. The Long-Term Stock Exchange (LTSE) trading platform also supports reducing the frequency of financial reporting.

Supporters of the current system say quarterly reports provide investors with timely opportunities and transparency into public companies. B Riley Wealth Management Chief Market Strategist Art Hogan said: “When you weigh the pros and cons on a whiteboard, the advantages of quarterly reports outweigh the disadvantages. If you have to wait six months for official results, I think it brings more difficulties than benefits.”

Although executives have faced some criticism for misleading earnings reports, the use of Generally Accepted Accounting Principles (GAAP) helps ensure standardization. As a result, U.S. financial reports are considered among the most transparent and reliable in the world.

Trump’s proposal is closer to the practice in the UK and EU, where companies are required to report semiannually but may choose to report quarterly.

However, Hogan believes it is unreasonable to compare U.S. companies with European ones. He said: “How many companies in Europe have a market capitalization of a trillion dollars, annual revenue growth of 60%, or gross margins above 50%? For investors, having more frequent information is more appropriate.”

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