Column: Quarterly reporting, Wall Street's latest test vs Trump: Ross Kerber

T. Rowe Price

01/10/2025 12:00

The opinions expressed here are those of the author, a correspondent for Reuters. This column is part of the Reuters Sustainable Finance Newsletter, which you can sign up for here https://www.reuters.com/newsletters/reuters-sustainable-finance/.

By Ross Kerber

Oct 1 (Reuters) - Critics of Corporate America say too many companies have bent the knee to U.S. President Donald Trump, paying settlements, granting public ownership or accepting new oversight. Executives argue such steps are practical and necessary in the face of Trump's dramatic expansions of presidential powers.

Now a revived regulatory proposal creates an experiment to show how much Wall Street will stand up for its past priorities.

This week the head of the U.S. Securities and Exchange Commission said the agency would fast-track Trump's push to shift required corporate earnings reports to semiannually rather than quarterly.

We've seen this movie before. During the first Trump administration, the SEC took comments about whether to make a similar change. Some of the strongest pushback came from fund industry trade group the Investment Company Institute.

Among other things, the group said in a comment letter at the time that the proposed change would hinder fund managers' "ability to analyze company performance and make informed investment decisions."

The ICI has not yet weighed in this time around, and declined to comment for this article. Ditto for top fund manager BlackRock BLK.N; in 2019 the firm called quarterly reporting "an important element of transparency for investors."

In their own 2019 letter T. Rowe Price TROW.O leaders said reducing reporting frequency "would be disadvantageous and disruptive for investors without sufficient counter-balancing benefits for corporations." On Tuesday a T. Rowe Price representative declined to comment on its current view.

 Perhaps industry leaders want to see a formal proposal from the SEC before taking a position. But in a social media age the early narratives matter.

Alvin Antonio Velazquez, a corporate law professor at Indiana University, told me it is more likely that companies want to avoid retaliation for speaking against the proposal and annoying Trump or his appointees.

     "I'm not so sure it's keeping their powder dry so much as a keeping-your-head-down effect here," Velazquez told me in a telephone interview. Fund firms face pressure on a number of other fronts including a state lawsuit in Texas, supported by the administration, claiming fund firms violated antitrust law through their climate activism.

The administration also has moved against diversity initiatives, which many funds had supported, and its Republican allies are looking to force "woke" money managers out of state pension plans.

Funds might be triaging their efforts and lobbying resources, Velazquez said, giving ground on reporting frequency to defend bigger priorities.

"There's so much to be concerned about, do they really want to take on Trump on another thing? It seems like the answer, from what they're doing, is 'not necessarily'," he said.

TAKING EUROPE'S LEAD

Backers of the shift away from the quarterly reporting requirement, including the CEO of Nasdaq, see it as way to reduce the costs of publicly listing a stock. Funds' muted opposition would bolster expectations of a U.S. change to mandate financial reports only every six months by 2027, similar to a norm in Europe.

Sandra Peters, senior head of advocacy for the CFA Institute, whose members are investors, cited a study that showed a 2014 shift by the United Kingdom away from required quarterly reporting did not raise corporate investment, as backers of the change had hoped, and that fewer than 10% of companies stopped issuing quarterly reports anyway.

"It's a really nice political narrative, but it doesn't do anything," Peters said of the proposed change. Large companies will continue to issue the reports since they are so closely followed by analysts. "You're going to get a haircut if you don't do it," she said.

Kurt Gottschall, a former SEC regional director now at law firm Haynes Boone, said he expected some investor advocacy groups to keep opposing a shift away from quarterly reporting. The Council of Institutional Investors, which represents big public pension funds, has already done so.

But asset management firms will face a harder decision, Gottschall said. "The industry is still trying to figure out the level of traction they will get in Trump's second term," he said.

(Reporting by Ross Kerber; Editing by David Gregorio)

((ross.kerber@thomsonreuters.com; (617) 412 0093;))