SEC Proposes Big Rule Change for Public Company Reporting

In a pivot from decades of standardized quarterly reporting, the U.S. Securities and Exchange Commission (SEC) on May 5 proposed rule and form amendments that would give public companies the option to file semiannual reports rather than traditional quarterly reports. The federal agency said proposal is designed to reduce corporate compliance burdens and allow businesses to determine the interim reporting frequency that best suits their needs and investors.

Under current federal securities laws, public companies subject to Section 13(a) or Section 15(d) of the Securities Exchange Act are mandated to file quarterly reports on Form 10-Q. This form provides an unaudited snapshot of a company’s financial performance, including income statements, balance sheets and operational updates.

Under the Management’s Discussion and Analysis (MD&A) section within the form, companies must explain the reasons for material changes in revenue and expenses. Fluctuations in labor costs, hiring expenses and workforce reductions are prime factors that must be contextualized for investors. HR leaders should ensure these narratives are accurate and properly aligned with the financial data. Significant talent-related risks (e.g., executive turnover, mass attrition, critical skill shortages) must be updated and highlighted in the form’s Risk Factors section. 

If the SEC’s proposed amendments are adopted, these companies can instead elect to file one semiannual report and one annual report each fiscal year on a newly proposed  Form 10-S. 

The proposed rule was published in the Federal Register on May 7, kicking off the 60-day public comment period (which expires July 6). The SEC also published a fact sheet on the proposal for companies to review.

“Public companies have an obligation under the federal securities laws to provide information that is material to investors. Yet, the rigidity of the SEC’s rules has prevented companies and their investors from determining for themselves the interim reporting frequency that best serves their business needs and investors,” SEC chairman Paul S. Atkins said in a statement. “[The] proposed amendments, if ultimately adopted, would provide companies with increased regulatory flexibility in this regard.”

According to the proposal, the filing deadline for the new semiannual reports on Form 10-S would be 40 or 45 days after the end of the first semiannual period of the fiscal year, depending on the company’s specific filer status. 

To accommodate the alternative filing schedule, the SEC also proposed amendments to  Regulation S-X, which governs financial statement requirements for periodic reports, registration statements and proxy statements. These changes aim to reflect the new semiannual option and simplify the existing financial statement requirements. 

The proposed shift arrives as part of a broader regulatory effort aimed at making public markets more attractive by mitigating the administrative and cost-related pressures of being an Exchange Act reporting company. 

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