Manatt’s Katherine Blair, co-chair of the firm’s capital markets group, prepared a response on behalf of the Corporations Committee of the Business Law Section of the California Lawyers Association to a Request for Comment on Earnings Releases and Quarterly Reports, issued in December 2018 by the Securities and Exchange Commission (SEC). Blair authored the comment letter as a member of the drafting committee, alongside Sarah Payne of Sullivan & Cromwell.
The SEC’s Request for Comment posed various queries to address the burden of quarterly reports, including the frequency of reporting, unnecessary duplication of information and the use of earnings releases by companies without endangering investor protections.
Blair’s comment letter notes that quarterly reports serve an important purpose for many companies, providing transparency and timely, material information to investors. At the same time, these reports allow companies to raise capital and allow insiders to trade in their companies’ securities on a more frequent basis.
The comment letter also proposes, however, that for a small subset of companies not traded on national securities exchanges (as well as satisfying other financial and reporting criteria), reporting on a semiannual basis might be an effective compromise for reducing costs and protecting investors.
As it relates to earnings releases, the committee encouraged the SEC to take a flexible approach in any rule changes since there can be material differences between the information provided in quarterly reports and earnings releases, which are market driven and generally unique to each company or industry sector.
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