Donald Trump looking to the left, with the American flag behind him

If the SEC does decide to change the current filing system it would have a huge impact on Canadian companies listed in the U.S., and the role of CPAs within those companies. (Photo by Drop of Light/Shutterstock)

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Trump asks SEC to study switch from quarterly to semi-annual reporting

Changes to reporting requirements would have major impact on Canadian companies and CPAs

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A new voice has joined the continuing debate on how often public companies should give updates to investors, with U.S. President Donald Trump might be in order.

Currently, the Securities and Exchange Commission (SEC) in the U.S. and the Canadian Securities Administrators (CSA) in Canada both require companies to file quarterly reports. However, in other regions, such as Europe, companies are only required to file semi-annually. The idea behind loosening the quarterly requirements is that it would help reduce an unhealthy focus on short-term gains while promoting longer term thinking.

After recent meetings with several international business executives, Trump tweeted the following:

The SEC is an independent agency, so Trump does not have the power to directly enforce any changes. That said, considering how deeply intertwined the Canadian and U.S. economies are, if the SEC does decide to change the current filing system it would have a huge impact on Canadian companies listed in the U.S., and the role of CPAs within those companies.

Will Canada switch to semi-annual reporting?

The issue of reducing interim reporting requirements is an issue that has been discussed in the Canadian market for years. Semi-annual reporting considerations featured prominently in a CSA consultation paper on venture issuer regulation and it was a hot topic again in CSA’s 2017 consultation paper on how best to for non-investment fund reporting issuers.

In response to the latest consultation, CPA Canada issued a letter detailing an extensive list of ways the CSA could improve and streamline the current filing process while maintaining a quarterly reporting requirement.

The letter referenced a , which stated a shift from quarterly to semi-annual reporting was “not an effective remedy for undue corporate emphasis on short-termism” and that 90 per cent of U.K. public companies continued to produce quarterly reports even after the regulatory requirements changed to semi-annual reporting in 2014.

“We acknowledge that some quarterly MD&A reporting in practice has deviated from its intended and stated purpose, which is to ‘update’ the company’s annual MD&A. In many instances, quarterly reporting is accompanied by unnecessary, lengthy and repetitive disclosures,” says the letter, which was issued by CPA Canada President and CEO, Joy Thomas.

“Given the unprecedented availability of investment information in the Information Age and the need for quarterly reporting to be aligned with this,” says the letter, “we encourage the CSA to focus on efforts to improve the quality of quarterly reporting as opposed to decreasing the frequency of such reporting.”

And in that light, CPA Canada stated that the right modifications could also help solve the issue of short-termism: “Encouraging more disclosure of long-term goals and progress towards them could help to counter the focus of some investors on only short-term results.”

The CSA has decided to stay put on quarterly reporting thus far and one of the reasons for that is maintaining the same filing timelines as the U.S. If the SEC changes course, it will be interesting to see how Canada responds.