Third Quarter Financial Services Update – House Bill Would Pare Back Quarterly Reporting Requirements

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A House Republican has reintroduced a measure to dramatically scale back the SEC’s quarterly reporting rules. H.R. 4076, the Modernizing Disclosures for Investors Act, hews closely to the original version Rep. Ann Wagner introduced last year, which was more far-reaching than the watered-downed iteration of the bill that eventually passed the House. H.R. 4076 would allow publicly traded companies to disclose quarterly financial information in a simplified manner, such as through a press release or by a shortened form, instead of on a Form 10-Q.

The bill requires the SEC to issue rules for simplified filings that include a quarterly income statement, a balance sheet as of the last day of the quarter, and a statement of operations. The quarterly filings would also need to include a statement of any material changes in financial condition or results of operations since the company’s most recent financial statements.

The House Financial Services Committee’s Capital Markets subcommittee debated the measure in late May 2018, where witnesses representing industry groups praised the proposed changes. Proponents of the measure said it would cut down on an expensive and redundant filing, and argued that investors have already digested a company’s quarterly financial results through 8-K notices and financial press releases before the formal 10-Q is released.

Wagner later compromised and put forth an amended version of the bill that would require the SEC, within 180 days after enactment, to provide a cost-benefit report to Congress on of the use of Form 10-Q for emerging growth companies (EGCs) and other issuers, as well as on the costs and benefits of alternative formats for quarterly reporting. The compromise measure later passed the house as part of the JOBS Act 3.0 legislative package, which was mostly ignored by the Senate.

The bill’s reintroduction on July 25, 2019, comes as the SEC is, even without a congressional mandate, reviewing its quarterly reporting regime. The commission in December 2018 put out a request for comment on the timing of required disclosures, which came months after a tweet by President Donald Trump urging the U.S. to scrap quarterly reporting in favor of a twice-per-year system. The SEC issued that request in Release No 33-10588, Request for Comment on Earnings Releases and Quarterly Reports.

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