Paul Atkins is on a collision course with Wall Street investors.
The chairman of the Securities and Exchange Commission is working on a plan aimed at responding to President Donald Trump’s call to relax the quarterly reporting model that has guided U.S. public companies’ disclosures for more than half a century.
C-suite executives, leading large business groups and Trump has argued That quarterly reporting forces companies to focus excessively on short-term profits while burdening them with expensive legal bills. And now, Atkins’ SEC, which is being watched more than ever by Trump’s White House, is expected to unveil a proposal in the coming weeks that could give companies more flexibility in how often they report important financial information to investors.
But SEC’s pressure may face stiff resistance from the investment world.
Executives from GOP megadonor Ken Griffin’s hedge fund Citadel and investment giant Fidelity recently warned at an SEC gathering that moving away from quarterly reporting could hurt companies whose stocks have risen wildly and the costs of raising money in the market are high. wall street firm black Rock And T. Rowe Price When the SEC explored the idea, citing concerns about companies losing critical visibility into their operations and performance in Trump’s first term, there were staunch critics of the move to a twice-a-year reporting model. And some are questioning why the SEC is considering the change.
“It’s a really bad idea. It’s at the end of the day Trump is giving a lot of people exactly what they think they want,” said Carson Block, CEO of Muddy Waters Capital, a prominent investor known for betting on companies’ shares as a short seller. “It’s kind of like, if your view of drug dealers is that you’re just giving people what they want – so that they don’t get addicted to drugs. I think it fits into a similar framework.”
The initial pushback offers a preview of the fierce lobbying battle that is likely to begin once the SEC releases its proposal. The clash could pit some of Wall Street’s biggest names against corporate executives and Republican lawmakers who have voiced support for changes to the SEC’s disclosure rules — to say nothing of Trump, who explicitly called out the agency for raising the issue in a social media post last year.
Atkins will be stuck in the middle.
The SEC chairman has made “Make IPOs great again” a top priority — a play on the long-running Republican campaign to make it easier for companies to go public in the U.S. And cutting the number of times public company executives need to update their shareholders through lengthy and expensive regulatory filings could help, along with broader disclosure reforms, supporters say.
Still, investors have already signaled opposition, saying the effort would be a major test of Atkins’ relationship with the White House in an era where independent agencies are effectively no longer independent. In his first administration, Trump similarly pressured the SEC to study whether to introduce twice-yearly reporting to the market – but the SEC never moved forward with a proposal.
“The environment is different now for Atkins,” said a former SEC official, who was granted anonymity to speak freely. “The White House is more focused on independent agencies, including the SEC.”
“Being accountable to the executive branch here is a real premium,” said another former agency official who worked at the SEC during the first Trump administration.
Of course, the industry’s reaction to the proposal will ultimately depend on its yet-to-be-released specifications. And companies will still face other reporting requirements in relation to financially significant developments in their businesses.
SEC spokesman Ben Watson said in a statement that while Atkins made clear that the SEC’s plan would give companies the option of reporting on a quarterly or twice-yearly basis, “its goal is to remove the agency’s thumb from the scales and allow the market to determine the optimal reporting frequency based on factors such as a company’s industry, size and investors’ expectations.” If approved, the proposal will be opened for public feedback.
Weakening the SEC’s effort is a long-standing disappointment short-termism in the marketsOr the idea that investors are so focused on upcoming earnings results that it could impact the ability of corporate management teams to pursue their big-picture vision or even go public. In his September post, Trump wrote that twice-a-year, or semiannual, reporting would “save money, and allow managers to focus on running their companies properly.”
Representative. Ann Wagner A senior Republican on the House Financial Services Committee from Missouri called the SEC’s effort a “very positive development.”
“We’re trying to reduce as much red tape as possible,” said Wagner, who leads the committee’s capital markets panel. “We’re going to try it and see how it works. But every quarter, for some companies – they’ll finish one report and immediately have to start another.”
Atkins recently said on CNBC that less-frequent disclosures could be “more meaningful” especially for smaller companies. But the SEC Chairman also suggested that he expected many companies to continue quarterly reporting based on the demands of their investors, as is the case for many companies in other jurisdictions, such as the European Union and the United Kingdom, where quarterly reporting is already optional.
“The ultimate owner is the investor,” he told Politico last year. “Why not be flexible rather than one size fits all?”
But many investors are already starting to voice their concerns. And their fears about semi-annual reporting are wide-ranging – from new volatility in markets to favoring those who can pay for expensive alternative data. Some people are also warning that this will make CEOs less accountable.
“Boards fire CEOs when investors get angry, and that often happens around quarterly filings and earnings calls,” said Tyler Gellasch, a former SEC official who leads the Healthy Markets Association, an institutional investor advocacy group. “Reducing the opportunities for that type of accountability may sound good to executives, but it’s a bad deal for most investors.”
Jasper Goodman contributed to this report.
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