SEC chairman Paul Atkins has defended the agency's controversial proposal to make quarterly reporting optional, arguing that many of the more than 200,000 comment letters submitted in response misunderstand what the rule would actually mandate.
Speaking to Yahoo Finance, Atkins dismissed suggestions that the proposal would reduce transparency, pointing out that the rule would give companies a choice rather than eliminate quarterly disclosures altogether.
'When people say, oh, this could be less transparent or whatnot, we have a one-size-fits-all rule right now,' Atkins said.
Using the example of pre-revenue biotech companies awaiting regulatory approval, he questioned the need for mandatory quarterly filings regardless of a company's circumstances.
'What do I tell a pre-revenue biotech company that's gone public and is waiting for the FDA to say yay or nay to that particular product, so they go for sometimes years without showing any revenue. So, what am I supposed to tell them? You just have to file a 10-Q anyway,' he said.
The proposal would allow companies to file full Form 10-Q reports twice a year instead of every quarter, while still permitting them to provide quarterly earnings releases, earnings calls and guidance.
'This proposal is giving the company the option of doing it semiannually, and then if you don't want to do a full-blown 10-Q, you can disclose quarterly earnings, you can do an earnings call, guidance and that sort of thing,' Atkins said.
Asked whether the SEC would reconsider the proposal after receiving overwhelming opposition, Atkins acknowledged the volume of feedback but suggested much of it stemmed from confusion.
'One strain that comes through a lot of the letters is a misunderstanding about what the proposal is,' he said.
His comments come after the SEC received more than 200,000 comment letters on the proposal, making it one of the most heavily commented rulemakings in the agency's history. According to a tracker maintained by Ohio State University accounting professor Brian Mittendorf, around 99.5 percent of submissions made to date oppose the proposal.
Many investors, governance professionals and market participants argue that reducing mandatory reporting would weaken transparency, limit accountability and make it harder for investors to identify deteriorating corporate performance before it becomes more severe.
The proposal has also faced criticism from institutional investors. According to a recent CFA Institute survey of nearly 4,000 members globally, 62 percent opposed moving to semiannual reporting, while 63 percent said the benefits of quarterly reporting outweigh the associated costs. Around 85 percent expressed concerns that allowing different reporting frequencies would reduce comparability between companies and make investment analysis more difficult.
The proposal has also prompted a strong response from former SEC enforcement attorney John Reed Stark, who has become one of its most vocal critics.
In a recent LinkedIn post, Stark accused the chairman of dismissing widespread investor concerns rather than engaging with them.
His criticism extended beyond the quarterly reporting proposal. In written testimony submitted to the Senate Banking Committee in July, Stark argued: 'The chairman has become, in function and effect, America's Chief Ponzi Officer,' as part of a broader attack on what he described as the SEC's retreat from investor protection.
The quarterly reporting proposal has attracted criticism from across the investor community. Better Markets previously urged the SEC to reopen the consultation after an incorrect email address in the Federal Register notice prevented some comments from being received during part of the consultation period. The SEC later reopened the comment period, resulting in an unprecedented volume of submissions.
Retail investors have also mobilized against the proposal. As previously reported by Governance Intelligence, investor advocates argued that less frequent mandatory reporting would reduce market transparency and leave smaller shareholders at a disadvantage compared with institutional investors and company insiders.
Despite the scale of opposition, the SEC is expected to continue advancing the proposal. With only three sitting commissioners, all Republicans, the commission appears to have the votes necessary to approve a final rule, although changes could still be made following the consultation process.
At the same time, the CLARITY Act – legislation which would establish a regulatory framework for tokenized securities and digital assets – is expected to reach a House vote before Congress breaks for its August recess. Stark has described the bill as one that 'would be the first major financial legislation in American history enacted to answer darkness with less light’.
Natalie Bannerman
Natalie is a former telecoms and infrastructure journalist, a role she held for nearly seven years. Before this, she worked in the B2C startup space, covering lifestyle, arts and culture reporting. As senior reporter for Governance Intelligence she...
