As readers know, in May, the SEC proposed a rule that would provide companies currently subject to the agency’s quarterly reporting requirements with the option to instead file interim reports semiannually. Following the agency’s announcement of the proposed rule, the proposal has been subject to public comment. The comment period is now closed, although apparently some late filed comments are still being made public. What does the commentary show? The filed comments show that while public reaction to the proposal has varied, the filed comments were almost exclusively negative.
As far as figuring out what the comments filed with the SEC show, it is important to know that there is an online source that has been tracking the comments. Ohio State University Professor Tzachi Zach has posted a searchable database of the responses. Professor Zach’s tracking database shows that there were over 80,000 comments filed in response to the proposal, of which over 60,000 were form letters. All of the form letters opposed the proposal. Of the non-form comments, over 99% opposed.
Which is not to say that there were no comments in support of the proposal. Notably, in a July 6, 2026, comment letter, the pharmaceutical company Eli Lilly not only expressed its support for the proposal, but also stated that if the proposal is adopted, it would exercise the option to file its periodic reports semiannually. In addition, in a separate letter, nine prominent pharmaceutical companies (including Lilly) also voiced their support for the proposal.
As for the comments opposing the proposal, University of Colorado Ann Lipton has a very interesting breakdown in a July 10, 2026, post on the Business Law Prof Blog. Professor Lipton’s overall observation is that “the comments overwhelmingly come from retail investors – not just the form letters, but even the individualized ones.”
Professor Lipton also notes that a number of the commentators made the observation that the proposal to allow option semiannual reporting is only one of several pending proposals that would affect public company reporting, including for example the SEC’s proposal to limit the number of companies subject to the full set of reporting requirements, and to make S-3 registration available to more issuers. These and other changes, the commentators pointed out, is that “this is a huge number of changes that will dramatically reshape (read: reduce) reporting obligations, and several commenters are concerned that the SEC has not adequately considered the effects individually, let alone collectively.”
Among the commentators making this “collective effects” comment is the group of academics who call themselves the “Shadow SEC”; these academics criticize what they call the agency’s “blunderbuss” approach to revising public company reporting requirements.
Professor Lipton points out that the opposition to the proposal comes not just from retail investors; institutional investors have come out against the proposal as well. For example, Vanguard submitted a comment opposing the proposal, as did SIFMA. The trade association the Investment Company Institute also submitted a comment opposing the proposal.
Interestingly, these institutional investors and investor representatives noted that while they strongly support reducing regulatory burdens for reporting companies, they questioned whether the semiannual reporting proposal would help achieve those goals.
Professor Lipton also notes that the SIFMA letter expresses particular concern that under the proposal, company management is free to choose the reporting cadence they prefer; the SIFMA letter notes that “Throughout the Proposal, the Commission refers to companies selecting the reporting cadence most appropriate for their investors, but leaves all the decision making with the management of publicly listed companies with no need to justify their decision.”
Professor Lipton makes an excellent final point as well, relating to the benefits of having a uniform reporting system applicable to all companies:
One really important aspect to this is how much you think each company stands alone, versus the spillover effects – positive externalities – of having a uniform disclosure system with a rich pool of information available to everyone. If you think of the benefits of that collective system of disclosure, which allows investors (and others) to monitor trends overall, that’s a very different calculus than if you think it’s every company (and its investors) for itself.
What Happens Now?
The official comment period closed on July 6, 2026. Now that the comment period has closed, the proposal now goes into the rulemaking phase. The agency’s staff will now review the comments and present recommendations to the Commission. Any final rule would be subject to Commission vote, either in a public forum or in a written vote. If adopted the final rule would then be published. The agency has not yet announced a timetable for a final decision.
I do not think I am being too cynical in thinking that, notwithstanding the overwhelming retail and institutional investor opposition to the proposal, the likelihood is that some form of the optional semiannual reporting proposal ultimately will be adopted. For starters, the initial proposal to allow semiannual reporting came from President Trump.
Another factor is that the Commission is currently down to only three Commissioners, all of whom are Republican appointees. The Democratic seats on the Commission remain unfilled. Moreover, the Commission will soon be down to only two Commissioners, when Hestor Pierce leaves the agency in November 2026. And one of the two is the Chair, Paul Atkins, who launched the agency’s proposed rulemaking allowing optional semiannual reporting. Not hard for groupthink to set in when the group consists of only two people of the same political persuasion, and it is equally unlikely for dissent to emerge.
Of course, what ultimately will happen remains to be seen. As for myself, I remain of the view that allowing even optional semiannual reporting is poor idea that could lead to reporting problems and potentially increased numbers of securities class action lawsuits. As I said at the time of the initial proposal:
Among other things, the longer the time between reporting periods, the more information there is available to insiders that is not available to investors. For that reason, I think longer reporting periods could contribute to more insider trading, as trading windows inevitably would be open longer, providing more opportunities for managers with insight into company performance to trade on their awareness of how the company is doing.
I also worry that a longer reporting period could mean increasing uncertainty in the later months, which could hurt share prices, or at least make them more volatile. Longer reporting periods also increases the possibility of news disclosure surprises, of the kind that could lead to sharp share price declines – that is, declines of the type and magnitude that can lead to securities class action litigation.
So you can put me down with the 99% of commentators who expressed their opposition to the optional semiannual reporting proposal.
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