"This will save money and allow executives to focus on running their businesses," said Donald Trump, who intends to align US practices with those of the UK and several European countries.

This measure was already mentioned in 2018, and Trump presents it as a way to reduce costs and curb the excesses of short-termism on the stockmarket.

In 2018, the SEC ultimately decided not to change the current regime after public consultation. But this time, the regulatory agency seems ready to take the plunge. "At the request of President Trump, Chairman Atkins and the SEC are making this proposal a priority in order to further reduce unnecessary regulatory burdens on businesses," a spokesperson said.

Transparency versus a long-term vision

Those who advocate for this measure highlight the need for companies to have a long-term vision, the idea being that quarterly disclosures would encourage them to make decisions that beat the consensus on the day, but not necessarily maximize long-term value.

This argument is often heard amongst private managers, who like to emphasize the long-term vision of private equity, as opposed to the "dictatorship of quarterly reports" in the listed world. This expression was used by Jamie Dimon and Warren Buffett in 2018. In an op-ed published in the Wall Street Journal, he denounced the harmful effects of short-termism on the US economy.

On the other side are the advocates of financial transparency. Some investors fear that less frequent reporting will increase volatility and make US stocks less attractive. Others believe it would pave the way for delays or hiding bad news.

However, transparency is also part of the appeal of US markets. "The requirement to file quarterly financial reports is a key element of the timely and accurate information that underpins the quality and efficiency of US financial markets," says Jeff Mahoney, general counsel of the Council of Institutional Investors.

Perhaps Carson Block, the famous short seller at Muddy Waters, sums up the issues at stake in this debate best: "It is legitimate to criticize investors for their short-termism. However, reducing the frequency of reporting undermines transparency, regardless of how you look at it."

Short selling is no longer popular

Beyond the fundamental debate, transparency comes at a cost for listed companies. The publication of quarterly financial statements, and more broadly all the regulatory obligations that listed companies must comply with, require time, energy, and therefore money.

This cost reduces the attractiveness of the stockmarket for companies. This is especially true given that the private financing ecosystem has developed significantly in recent years.

A few years ago, a company that reached a certain valuation level had to go public in order to continue raising funds. This is no longer a necessity today.

The two best examples are OpenAI and SpaceX, valued at $300bn and $350bn respectively in their latest funding rounds.

As a result, the number of listed companies continues to decline. According to the Center for Research in Security Prices (CRSP), the number of publicly traded companies in the US stood at around 3,700 at the end of June. This number has fallen by about half since its peak in 1997.

Rules and practices 

Even if the SEC removes the quarterly reporting requirement, it is not certain that companies will change their practices. They are likely to continue to report every three months to meet market expectations.

This is what we are seeing in Europe. Since a change in regulations in 2013, European companies listed on the stock market are no longer required to publish their quarterly financial results. The UK also ended the quarterly reporting requirement about ten years ago. In both cases, quarterly reporting remains the norm.

In the United States, the Securities Exchange Act of 1934 required US public companies to disclose financial information "periodically." But it was not until 1970 that the SEC instituted quarterly periods.