The U.S. Securities and Exchange Commission (SEC) previously proposed replacing quarterly reports with semiannual reportsplan, which received limited response among financial analysts. The latest release from the CFA Instituteresearchreveals this attitude.

In a survey conducted by the CFA Institute among chartered financial analysts and portfolio managers, of more than 2,500 respondents, 62% opposed the above proposal. For another element of the plan—allowing issuers broad flexibility to choose their own reporting frequency—the opposition rate was even higher, reaching 70%.

The vast majority of respondents (84%) believed that allowing companies to adopt different or flexible reporting frequencies would make it more difficult for investors to compare companies across industries.

The CFA Institute wrote in its research report: "Respondents emphasized the importance of maintaining comparability and consistency across companies and industries."

The survey was conducted in January and officially released in June.

The survey results further confirm that analysts tend to prefer more disclosure rather than less: 82% of respondents agreed that if semiannual reporting became mandatory, companies should be allowed to voluntarily report quarterly. However, only 32% of respondents expected that, if quarterly reporting became optional, the U.S. companies they invest in would continue to disclose on a quarterly basis.

If Form 10-Q were abolished as envisioned in the SEC's plan, and voluntary quarterly reports were issued only through earnings announcements, 57% of respondents said they expected to receive less information compared to current earnings announcements.

Half of the respondents believed that if reporting frequency were reduced, semiannual reports should include more detailed disclosures to compensate for the information gap caused by longer intervals between reports.

The CFA Institute stated that it received a total of 722 comments from respondents regarding financial reporting frequency. One typical comment supporting the retention of quarterly reports read: "Incremental information helps the market price securities more efficiently. Additionally, reduced disclosure frequency could increase the motivation for market participants to seek material non-public information, further undermining investor trust."

Another comment noted that quarterly reports help analysts better judge future trends in revenue drivers, and given the current heavy concentration of stock market weight in large technology stocks, "we need as much clarity and information symmetry as possible."

Among comments supporting reduced reporting frequency, one respondent said: "If quarterly reporting becomes optional, management will gain greater flexibility to advance long-term strategic initiatives." Another similar comment stated: "Between pre-announcement season, earnings season, and wrap-up season, there is almost no time left within a quarter for meetings, roadshows, and genuine fundamental analysis."

Other survey results are as follows:

  • 74% of respondents were concerned that, with semiannual reporting, important information (especially negative information) would not be released in a timely manner.
  • 56% of respondents were concerned that company management would have greater room to exploit insider information regarding their own buying and selling of shares.
  • 47% of respondents were concerned that, if switching to semiannual reporting, companies might also adjust dividend payment frequency to semiannual.