Trump backs CEOs, proposes easing corporate reporting rules

How earnings calls go bad

How earnings calls go bad

The US President said he has asked the Securities and Exchange Commission to consider altering rules requiring firms to report every quarter.

In a tweet early Friday, Trump said that after speaking with "some of the world's top business leaders", he's asked the U.S. Securities and Exchange Commission to determine whether shifting to a six-month reporting regimen would make more sense.

Trump tweets the USA could abandon quarterly financial reporting after meetings with business leaders.

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The SEC's chairman said the agency already is studying the issue. Initially, the Act's provisions were created in order to give investors some transparency and instill some confidence after the stock market crash of 1929.

"The president has highlighted a key consideration for American companies and, importantly, American investors and their families - encouraging long-term investment in our country", Clayton said. The report compares company earnings with that of the previous year.

Businesses have long complained that the reports require company executives to focus too much on the short term.

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In a Friday statement, White House spokeswoman Lindsay Walters said Trump is interested in "examining this issue on whether short-term earnings reporting requirements for public companies reduce incentives for them to engage in long-term investing in the United States". Japan, though, moved in the opposite direction, gradually forcing companies to shift from semi-annual to quarterly reporting during the 2000s. One of the reasons Tesla CEO Elon Musk wants to take his company private, he told his employees last week, was the way quarterly reports distort decisions at the company.

Even former President Barack Obama spoke out against the short-term nature of the reporting requirements in 2015. "Many investors and market participants share this perspective on the importance of long-term investing", he said.

SEC Chairman Jay Clayton, a Trump nominee, has said increasing the number of public companies and initial public offerings are among his top priorities. Less-frequent public disclosures could hand another advantage to sophisticated investors with easy access to corporate executives, corporate governance experts said.

"They are more likely to react to other types of information and more likely to overreact", said Jill E. Fisch, a co-director of the Institute for Law and Economics at the University of Pennsylvania.

The president has run privately-held companies that didn't have to report results at all during most of his time in business.

Half-yearly reporting would mark a huge change in US disclosure requirements and put it in line with European Union and United Kingdom rules. "My comments were made in that broader context, and included a suggestion to explore the harmonisation of the European system and the USA system of financial reporting". I find it very rich that he's proposing this with some veil that it's going to help companies think long-term.

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