Matt Franker and Matt Gehl were featured in a Bloomberg Law article discussing the U.S. Securities and Exchange Commission’s (SEC) newly proposed rule that would give public companies greater flexibility to choose their reporting schedules, while introducing potential insider trading and compliance considerations.
According to Matt Franker, companies that shift to a semiannual reporting model but continue issuing quarterly earnings releases are unlikely to face major insider trading policy challenges. However, he cautioned that a move to pure semiannual reporting, without quarterly earnings disclosures, could create significant uncertainty.
If companies only report every six months and eliminate quarterly earnings releases, it raises a lot of questions,” Franker explained.
Under the SEC proposal, companies could legally forgo both formal quarterly reports (Form 10-Q) and earnings releases. Franker noted that complications may arise if companies continue to generate undisclosed quarterly financial information internally, which could be considered material to investors.
“It raises the question of whether companies are holding quarterly information that may be material,” Franker said, highlighting potential insider trading risk.
Matt Gehl added that these dynamics could lead to longer trading blackout periods, during which corporate insiders are restricted from buying or selling shares. If nonpublic financial information circulates internally on a quarterly basis, companies may need to extend blackout windows, an outcome that directors and officers would likely resist.
To mitigate these risks, Franker suggested that companies adopting semiannual reporting may need to increase their use of Form 8-K filings and press releases to publicly disclose material information and “cleanse” the market, thereby reopening trading windows.
Gehl emphasized that companies will need to find practical alternatives to maintain market transparency:
“The key question is whether there’s something companies can do quarterly to replicate the ‘cleansing’ effect of traditional reporting—without the burden of filing a full 10-Q.”
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