Securities Regulation Daily Wrap Up, NASAA NEWS AND SPEECHES—Securities group takes stand against SEC’s proposed semiannual reporting option, (Jul 20, 2026)

By Suzanne Cosgrove

“Semiannual reporting will not fix short-termism and may in fact make it worse,” the NASAA says.

In a comment letter dated July 6, the North American Securities Administrators Association, Inc. (NASAA), stated it does not support a SEC proposal that would allow companies that make periodic filings under the Exchange Act to file semiannual reports on a new Form 10-S in lieu of quarterly reports on Form 10-Q.

“NASAA stands ready to work with the Commission to improve the vitality of our public markets but believes there are better alternatives to achieve this laudable goal, especially given the adverse impact this proposal will have on critical investor protections and trust in our markets,” the group said in their comment letter sent to the SEC.

“The record makes clear the Proposal would raise capital costs, reduce liquidity, weaken investor confidence, facilitate fraud, and exacerbate certain reporting risks,” the NASAA said. “Such costs are not justifiable, especially given data which shows that other jurisdictions who have made this change have experienced no significant stimulation to their public markets.”

The group’s comment appeared to partly rebut a statement about the proposed change by SEC Chairman Paul Atkins, who said on May 5 that the proposal “is just the first step of the larger, comprehensive effort to review and reshape the current SEC rules governing public companies with respect to their ongoing reporting obligations and their ability to raise capital in the public markets.”

Incentivizing IPOs. In pointed critique, NASAA noted that the SEC’s proposal fails to analyze why public company listings have declined. “The Commission needs to offer a fulsome diagnosis of the reasons public markets are lagging to make the case that the Proposal will be effective,” the group said.

“Indeed, current private market enhancement efforts may further weaken public markets,” NASAA said. Citing research by CFA Institute, it continued, “[i]f private companies can access public capital through investment funds, they may have even less incentive to pursue an IPO.”

The comment letter also quoted Columbia University Professor Shivaram Rajgopal, who said in an article written for Forbes that the proposal would “make[] the IPO market less attractive, not more,” by causing skeptical investors to demand a higher risk premium to buy shares in newly public companies committed to reporting semiannually.

Short-termism. In addition, the NASAA contends that the proposal to allow semiannual reporting rather than quarterly reports “will not fix short-termism” -- a focus on short-term results instead of long-term business strategies. The group notes the Commission has acknowledged other potential causes of short-termism, including “executive compensation design or messaging to investors through, for example, earnings guidance.”

The group said that some of America’s most prominent investors, including Berkshire Hathaway’s Waren Buffett and JPMorgan Chase CEO Jamie Dimon, “are more certain that quarterly earnings guidance is the root of short-termism, not quarterly reporting.”

Guidance builds investor expectations, while reporting provides actual results, the group noted, citing CFA Institute research.

Safeguarding investors. Importantly, the proposal also fails to adequately analyze the effect semiannual reporting would have on investor protection, which is the Commission’s statutory mission, NASAA added.

“Many commenting investors and academics recognize that allowing semiannual reporting will increase issuer information asymmetry, particularly for retail investors,” the NASAA continued. “While the Commission recognizes the possibility that the Proposal could increase information asymmetry … the Commission does not grapple with the likelihood or degree to which informational asymmetries will undermine efficiency, competition and capital formation in our public markets,” the group said.

“The current reporting framework is rooted in the role that disclosure and transparency have played in distinguishing the U.S. capital markets,” the group concluded. “The Commission should not now enact rules that will weaken that framework and result in tilting the playing field in favor of well-resourced investors.”

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