Following a softening of its attitude towards cryptocurrencies, the new chairman of the U.S. SEC is promoting a "minimum effective dose" regulatory philosophy, which not only echoes Trump's pro-business policies but also plans to eliminate mandatory quarterly reports, allowing companies to substitute them with semi-annual reports.

Written by: Long Yue

Source: Wall Street Insights

From embracing cryptocurrencies to eliminating quarterly reports, the regulatory direction of the U.S. Securities and Exchange Commission (SEC) is undergoing significant changes.

According to a report by the Financial Times on September 29, the newly appointed SEC chairman Paul Atkins stated that the SEC will consider allowing publicly traded companies to adopt semi-annual reports instead of the current requirement to release performance reports every three months, emphasizing "minimum effective dose" regulation.

The government should provide the "minimum effective dose" of regulation needed to protect investors while allowing businesses to thrive.

Now is the time for the SEC to remove its influence and let the market determine the best reporting frequency based on factors such as company industry, size, and investor expectations.

Paul Atkins' move directly echoes Trump's previous proposal to relax the frequency of financial reporting, aiming to provide greater flexibility for businesses. This action is yet another example of the Trump administration's pro-business stance and its quest for greater control over independent federal agencies. It marks a complete break from the broad and stringent regulatory agenda pursued by former chairman Gary Gensler.

Previously, the SEC's attitude towards cryptocurrencies had shifted from the aggressive crackdown during Gensler's tenure to a more moderate acceptance, and this relaxation of disclosure rules for publicly traded companies confirms that this "light-touch" regulatory approach will be fully implemented.

The "minimum dose" regulatory philosophy considers abolishing mandatory quarterly reports

After taking office, Paul Atkins quickly set the tone for the SEC under his leadership. He believes that in recent years, the SEC has "strayed from maintaining the precedent and predictability of capital market trust," deviating from the clear mission set for the agency by Congress over 90 years ago.

These remarks are seen as a direct criticism of his predecessor Gensler's aggressive regulatory and enforcement stance under the Biden administration.

Relaxing the frequency of corporate financial reporting is the most notable part of Atkins' "deregulation" agenda. He actively responded to Trump's call to abolish the requirement for most U.S. publicly traded companies to disclose their financial status every three months.

Atkins stated, "Now is the time for the SEC to take its thumb off the scale and let the market determine the best reporting frequency based on factors such as company industry, size, and investor expectations."

He argues that the goal of regulation is to protect investors and allow business to prosper, rather than to satisfy those "seeking to achieve social change or whose motives are unrelated to maximizing financial returns for investors."

Atkins believes that abandoning mandatory quarterly reports is not a novel idea and is "not a regression in transparency." He pointed out that this flexibility has already been granted to certain companies.

He cited the UK as an example, where after reinstating the semi-annual reporting system in 2014, some large companies still chose to continue publishing quarterly reports based on their own needs. In his view, this proves that the market can effectively determine the frequency and depth of information disclosure.

Criticism of the European model and opposition to "political trends"

Atkins' regulatory blueprint is not limited to the U.S. He also sharply criticized the European regulatory model, stating that its climate-related regulations are driven by "theorists," and warned against allowing "political trends or distorted objectives" to drive information disclosure.

He specifically criticized the EU's recently passed Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD). He believes these directives require companies to disclose "matters that may have social significance but generally lack financial importance."

Atkins warned, "These mandatory requirements may shift costs onto U.S. investors and customers, while providing almost no benefit in guiding capital decision-making."

He bluntly stated that if Europe wants to promote its capital markets by attracting more listings and investments, it should focus on reducing unnecessary reporting burdens.

Investor concerns about transparency erosion

However, this significant policy shift by the SEC has also raised concerns in the market. According to reports, investor advocacy groups have issued warnings about this.

These groups believe that shifting from quarterly to semi-annual reports may weaken market transparency and harm the interests of smaller investors, who have relatively limited access to information.

They worry that this move could undermine the foundations that support the efficient operation of U.S. capital markets in the long run. While Atkins believes the market can self-regulate, opponents insist that mandatory, more frequent disclosures are key to maintaining market fairness and efficiency.

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