Experts weigh in on President Trump's SEC reporting proposal

President Trump started the work week with an idea that, if implemented, would unleash a seismic tremor across Wall Street and beyond. 

On Monday, September 15, the president said the U.S. should move to a semi-annual earnings reporting system for publicly traded companies and eliminate Wall Street's 50-year tradition of issuing quarterly reports. 

"Subject to SEC Approval, Companies and Corporations should no longer be forced to 'Report' on a quarterly basis (Quarterly Reporting!), but rather to Report on a 'Six (6) Month Basis,'" President Trump posted on Truth Social.

"This will save money, and allow managers to focus on properly running their companies. Did you ever hear the statement that, 'China has a 50 to 100 year view on management of a company, whereas we run our companies on a quarterly basis???' Not good!!!"

This isn't the first time the president has floated the idea. Back in 2018, during his first term, he tweeted that he asked several top business leaders what they needed to "make business (jobs) even better in the United States."

President Trump then said he directed the Securities and Exchange Commission to investigate whether they should go to a biannual model to "allow greater flexibility & save money."

Tesla's  (TSLA)  Elon Musk didn't have a relationship with the president at the time, but he shared similar sentiments. 

Regarding taking Tesla private, Musk said, "Being public...subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter but not necessarily right for the long-term." 

Musk's blog post no longer appears on the company's website.  

Advocates of six-month earnings reports say they reduce costs

According to President Trump, "the world's top business leaders" came up with the idea. 

In 2018, Warren Buffett and J.P. Morgan CEO Jamie Dimon told CNBC that they were not fans of quarterly guidance. 

“I think it’s a very bad practice to be in the game of earnings guidance, and it is a game," Dimon said.

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Project 2025 is a political white paper published in April 2023 by the Heritage Foundation, which is politically right-leaning. Due to some of its more radical propositions, the political action plan was a toxic political football during the election. 

Then-presidential candidate Trump repeatedly denied even knowing what it was, telling a rally crowd in October, just days before the election, "I’ve never read it, and I never will."

Whether it's funding cuts to the National Institutes of Health or sweeping cuts to university funding, President Trump's second administration has been politically aligned with Project 2025's goals. 

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According to Substack researcher Stephen Bainbridge, Project 2025 "advocates for a simplified securities disclosure system that organizes firms into private, intermediate, and public categories, each with scaled reporting requirements. " 

However, Bainbridge acknowledges that "it's not entirely clear what the authors have in mind here."

He does speculate that one of the SEC changes could "allow small public companies the option to provide biannual or simplified quarterly reports, which reduces reporting frequency and helps alleviate compliance costs without compromising transparency for investors."

Experts challenge President Trump's Wall Street earnings report proposal

While the Heritage Foundation is entirely behind the president's proposal, the more center-leaning Brookings Institute has a differing view. 

In a report analyzing the proposal from 2018, Robert C. Pozen said that President Trump's tweet reflects business leaders' belief that quarterly reporting "pushes public companies away from attractive long-term investments. However, the long-term benefits of semi-annual reporting are doubtful."

Pozen points to the fact that the UK has changed its reporting requirements twice this century as an example of how little effect cutting reporting requirements in half would have. 

The UK moved from semi-annual financial reporting to quarterly reporting in 2007, "yet there was no significant decrease in capital or research expenditures over the next three to six years," according to a study commissioned by the CFA Institute Research Foundation.

In 2013, the UK reversed its decision, going back to its semiannual reporting requirements, "yet the same study did not find any significant increase in UK company spending on capital investment or research after the change."

Even Warren Buffett, who said he is not a fan of having to issue guidance four times a year, sees value in quarterly earnings reports. 

“I like to read quarterly reports as an investor. I like to get those quarterly reports. I do not like guidance. I think the guidance leads to a lot of bad things, and I’ve seen it lead to a lot of bad things," Buffett told CNBC in 2018. “I like getting the figures quarterly, and I hope that stays."

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