CFOs split as SEC weighs optional semiannual reporting
The SEC is reviewing whether public companies can replace quarterly filings with semiannual reports, drawing broad opposition and CFO input.
By Maya Lindqvist · Senior Technology Correspondent
3 min read
The U.S. Securities and Exchange Commission is considering whether public companies should be allowed to satisfy interim reporting rules with semiannual reports instead of quarterly Form 10-Q filings. The proposal could change the cadence of public-company disclosure, and finance chiefs are telling regulators that cost, investor needs and market transparency point in different directions.
The SEC announced the proposed rule and related form amendments in May, according to the agency. The public comment period closed Monday, and the SEC declined to say how many letters it had received.
Ohio State University accounting professor Tzachi Zach has built an AI-assisted database tracking public comments on the proposal. As of Tuesday evening, Zach’s database showed 8,080 comment letters: 7,994 opposed the proposal, 34 supported it and 52 expressed conditional views.
Zach told Fortune that more submissions could still appear because comments often reach the SEC docket after a delay. His database also classified 33 letters as coming from people in active corporate roles, including CFOs, audit chairs, financial reporting managers, COOs and CTOs; among that group, 25 opposed the plan, two supported it and six were conditional.
Exxon backs flexibility
Among four current public-company CFOs identified in the dataset, one of the most detailed letters came from ExxonMobil. Neil Hansen, ExxonMobil’s senior vice president and CFO, submitted an 11-page letter dated June 24 supporting the SEC’s plan to let companies choose semiannual reporting.
Hansen’s letter did not call for ending quarterly disclosure altogether. He argued that companies should have flexibility in deciding whether quarterly Form 10-Q filings are the right vehicle for those disclosures, given changes in how investors receive information.
According to Hansen, investors now use earnings releases, Forms 8-K, investor presentations, webcasts and corporate websites alongside SEC periodic reports. He told the SEC that more weight is placed on those faster communications and wider information channels than in the past.
Hansen also said a shift to semiannual SEC filings would not materially alter ExxonMobil’s insider-trading policies or blackout periods, because those are tied to quarterly earnings releases rather than Form 10-Q filings. If ExxonMobil chose semiannual reporting, he said, the company would expect to keep issuing quarterly financial disclosures through earnings releases furnished on Form 8-K.
ExxonMobil urged the SEC to keep any semiannual structure optional. Hansen wrote that companies vary by industry, investor base, financing needs and complexity, and should be able to judge whether quarterly 10-Q filings deliver enough value relative to their cost. He also suggested a new Form 8-K item for abbreviated quarterly financial statements instead of requiring a full 10-Q.
Other CFOs offer alternatives
Lora Jones, executive vice president and CFO of National Bankshares, supported the proposal in a comment letter. She told the SEC that the rule would let companies select the approach that fits shareholder preferences and would help them manage reporting resources.
Douglas K. Howell, CFO of Arthur J. Gallagher & Co., also supported reducing reporting frequency but urged regulators to consider more than the quarterly-versus-semiannual choice. Howell told the SEC a “triannual” reporting framework may address concerns from investors who are uneasy about moving to semiannual reports.
Creighton Early, CFO of Willdan Group, took a different view. He told the SEC that relief from periodic reporting burdens would be welcome, but said the larger issue is the breadth of disclosure requirements, including footnotes, acquisitions, taxes and financings. Early said quarterly reporting benefits investors and companies, while the depth of some accounting disclosures consumes time and money.
With the comment period closed, SEC staff will review submissions and recommend whether the commission should adopt, revise, repropose or withdraw the rule. If the SEC proceeds, commissioners would vote on a final rule, including its effective date and any transition period.
This story draws on original reporting from Fortune.