D.C.—Benjamin Schiffrin, Director of Securities Policy forBetter Markets, issued the following statement after the Public Company Accounting Oversight Board (PCAOB), asupposedly independent board but with membership handpicked by the Securities and Exchange Commission(SEC) that oversees the accounting profession,proposed a rule changetoday to facilitate eliminating quarterly reporting by public companies:
“The accounting board’s proposal today will help the SEC eliminate quarterly reporting by public companies and take key information away from investors, who have relied on that information for more than 50 years.When the SEC proposed to take that information away in May,280,000 mostly retail investorsfiled comments telling the SECthat doing so would harm them.Tellingly, joining those retail investors in opposing the SEC were many in the financial industry like the Managed Funds Association, SIFMA and Citadel.
“While the SEC has not yet finalized its proposal to put investors in the dark, the accounting board is proposing a rule to facilitate ending quarterly reporting as if the accounting board already knows that the SEC is going to finalize the rule as proposed.When the SEC proposed semiannual rather than quarterly reporting, itrecognizedthat existing accounting rules could lead public companies to continue to issue quarterly reports for the benefit of investors.The SEC went so far as to ask the public whether those accounting rules should be changed to enable semiannual reporting. Even though more than 99% of the retail investors and many in the financial industry oppose these changes, the accounting board joined the SEC in proposing changes to facilitate taking quarterly information away.
“The accounting board had to do that because existing rules prevent auditors from relying on financial statements in connection with a securities offering that are more than 134 days old. Obviously, this would be a problem if the SEC allowed financial statements to be filed semiannually every 180 days rather than quarterly. Amazingly, the solution appears to be to change the rules so auditors may rely on stale financial statements that are six months old.
“It is bad enough that the SEC is apparently planningon moving forwardwith its semiannual reporting proposal despite the objections of hundreds of thousands of retail investors.This willkeep investors in the darkfor six months at a time about the companies which they supposedly own. Now, that harm will be compounded by a change in accounting rules that will allow auditors to rely on public companies’ last-filed financial statements regardless of when they were filed, which could allow them to rely on statements that are six months old at the time of a securities offering. There is no public benefit to this rule change; the only justification is that the change is necessary so public companies do not need to keep investors informed on a quarterly basis and can still comply with accounting rules. This will enable the SEC to achieve its goal of taking information away from investors and the markets.
“Although the accounting board emphasized that its rule change is only a proposal, there is no question that it intends to follow through. Indeed, at today’s meeting announcing the proposal, the accounting board’s chair thanked the SEC’s staff for its assistance. It is a dark day when the agency that used to be the gold standard of investor protection—the SEC—responds to almost 100% public opposition to a proposed rule by doubling down and supporting additional changes even more hostile to the interests of investors.”
Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visitwww.bettermarkets.org.
