# Conformed to Federal Register Version > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/agency%3Asec%3A33d750a5d693fb02 ## Record - **Collection:** Agency decision - **Document type:** Agency decision ## Text Conformed to Federal Register Version SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 200, 210, 229, 230, 232, 239, 240, 249, and 260 Release Nos. 33-11414; 34-105368; 39-2563; IC-36140; File No. S7-2026-15 RIN 3235-AN58 Semiannual Reporting AGENCY: Securities and Exchange Commission. ACTION: Proposed rule. SUMMARY: The Securities and Exchange Commission (“Commission”) is proposing amendments to allow companies to file semiannual reports on new Form 10-S in lieu of quarterly reports on Form 10-Q to meet their interim reporting obligations under the Securities Exchange Act of 1934 (“Exchange Act”). The Commission is also proposing changes to the financial statement requirements of Regulation S-X to facilitate semiannual reporting and to simplify rules regarding the age of financial statements. DATES: Comments should be received on or before July 6, 2026. ADDRESSES: Comments may be submitted by any of the following methods: Electronic comments: • Use the Commission’s Internet comment form (https://www.sec.gov/rules/submitcomments.htm). • Send an email to rule-comments@sec.gov. Please include File Number S7-2026-15 on the subject line. Paper comments: • Send paper comments to Vanessa A. Countryman, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090. All submissions should refer to File Number S7-2026-15. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method of submission. The Commission will post all comments on the Commission’s website https://www.sec.gov/rules-regulations/publiccomments/s7-2026-15. Do not include personally identifiable information in submissions; you should submit only information that you wish to make available publicly. The Commission may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. Studies, memoranda, or other substantive items may be added by the Commission or staff to the comment file during this rulemaking. A notification of the inclusion in the comment file of any such materials will be made available on the Commission’s website. To ensure direct electronic receipt of such notifications, sign up through the “Stay Connected” option at www.sec.gov to receive notifications by email. A summary of the proposal of not more than 100 words is posted on the Commission’s website https://www.sec.gov/rules-regulations/2026/05/s7-2026-15. FOR FURTHER INFORMATION CONTACT: Mark Saltzburg, Senior Special Counsel, Office of Rulemaking, Division of Corporation Finance, at (202) 551-3430, or Ryan Milne, Associate Chief Accountant, Office of Chief Accountant, Division of Corporation Finance, at (202) 551-3400, U.S. Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. 2 SUPPLEMENTARY INFORMATION: The Commission is proposing to amend or add the following rules and forms: Commission Reference Name 17 CFR Citation Securities Act of 1933 1 Rule 138 § 230.138 Rule 139 § 230.139 Rule 139b § 230.139b Rule 144 § 230.144 Rule 158 § 230.158 Rule 175 § 230.175 Rule 405 § 230.405 Rule 485 § 230.485 Form S-1 § 239.11 Form S-3 § 239.13 Form S-11 § 239.18 Form S-4 § 239.25 Form F-1 § 239.31 Form F-3 § 239.33 Form F-4 § 239.34 Form F-10 § 239.40 Rule 3a55-1 § 240.3a55-1 Rule 3b-6 § 240.3b-6 Rule 10b5-1 § 240.10b5-1 Rule 12b-2 § 240.12b-2 Rule 12b-25 § 240.12b-25 Rule 13a-10 § 240.13a-10 Rule 13a-13 § 240.13a-13 Rule 13a-14 § 240.13a-14 Rule 13a-16 § 240.13a-16 Rule 13d-1 § 240.13d-1 Rule 14a-5 § 240.14a-5 Rule 14a-8 § 240.14a-8 Securities Exchange Act of 1934 2 1 15 U.S.C. 77a et seq. 2 15 U.S.C. 78a et seq. 3 Commission Reference Regulation S-K (17 CFR 229.10 through 229.1610) Regulation S-X (17 CFR 210.1-01 through 210.15-01) Regulation M-A (17 CFR 229.1000 through 229.1016) Name 17 CFR Citation Schedule 14A § 240.14a-101 Rule 15c2-11 § 240.15c2-11 Rule 15d-10 § 240.15d-10 Rule 15d-13 § 240.15d-13 Rule 15d-14 § 240.15d-14 Form 10 § 249.210 Form 6-K § 249.306 Form 8-K § 249.308 Form 10-S § 249.308b Form 10-K § 249.310 Form 12b-25 § 249.322 Item 10 § 229.10 Item 101 § 229.101 Item 103 § 229.103 Item 201 § 229.201 Item 302 § 229.302 Item 303 § 229.303 Item 308 § 229.308 Item 402 § 229.402 Item 407 § 229.407 Item 408 § 229.408 Item 601 § 229.601 Item 701 § 229.701 Item 1100 § 229.1100 Rule 3-01 § 210.3-01 Rule 3-12 § 210.3-12 Rule 8-03 § 210.8-03 Rule 8-08 § 210.8-08 Rule 10-01 § 210.10-01 Rule 11-02 § 210.11-02 Rule 15-01 § 210.15-01 Item 1010 § 229.1010 4 3 Commission Reference Name 17 CFR Citation Regulation S-T (17 CFR 232.10 through 232.501) Rule 11 § 232.11 Rule 303 § 232.303 Rule 405 § 232.405 Rule 406 § 232.406 Trust Indenture Act of 1939 3 Rule 0-11 § 260.0-11 OMB Control Numbers Assigned Pursuant to the Paperwork Reduction Act (17 CFR 200.800) Rule 800 § 200.800 15 U.S.C. 77aaa et seq. 5 TABLE OF CONTENTS I. II. III. INTRODUCTION............................................................................................................. 7 BACKGROUND ............................................................................................................... 8 DISCUSSION OF PROPOSED AMENDMENTS ............................................................................................................. 16 A. Proposed Amendments for Semiannual Reporting ............................................................25 B. Proposed Amendments to Regulation S-X ........................................................................44 C. Proposed Amendments Regarding Transition Reports ......................................................61 D. Proposed Technical Amendments......................................................................................62 E. General Request for Comment...........................................................................................64 IV. OTHER MATTERS ....................................................................................................... 64 V. ECONOMIC ANALYSIS .............................................................................................. 65 A. Introduction ........................................................................................................................65 B. Broad Economic Considerations........................................................................................68 C. Baseline ..............................................................................................................................78 D. Costs and Benefits..............................................................................................................98 E. Anticipated Effects on Efficiency, Competition, and Capital Formation ........................130 F. Reasonable Alternatives...................................................................................................134 G. Request for Comment ......................................................................................................140 VI. PAPERWORK REDUCTION ACT ANALYSIS .................................................................................................................... 143 A. Summary of the Collections of Information ....................................................................143 B. Estimated Paperwork Burden Effects of the Proposed Amendments ..............................145 C. Incremental and Aggregate Burden and Cost Estimates..................................................145 D. Request for Comment ......................................................................................................150 VII. CONGRESSIONAL REVIEW ACT .......................................................................... 151 VIII. INITIAL REGULATORY FLEXIBILITY ACT ANALYSIS ........................................................................................................... 152 A. Reasons for, and Objectives of, the Proposed Action......................................................152 B. Legal Basis .......................................................................................................................154 C. Small Entities Subject to the Proposed Rules and Amendments .....................................154 D. Reporting, Recordkeeping, and Other Compliance Requirements ..................................157 E. Duplicative, Overlapping or Conflicting Federal Rules ..................................................159 F. Significant Alternatives ...................................................................................................159 G. Request for Comment ......................................................................................................162 STATUTORY AUTHORITY .................................................................................................. 163 6 I. INTRODUCTION We are proposing amendments to provide all companies subject to reporting obligations under Exchange Act Section 13(a) or 15(d) (“Exchange Act reporting companies”) 4 that file quarterly reports the option of filing interim reports on a semiannual basis. Currently, Exchange Act reporting companies must file quarterly reports on Form 10-Q pursuant to 17 CFR 240.13a13 (“Exchange Act Rule 13a-13”) or 17 CFR 240.15d-13 (“Exchange Act Rule 15d-13”), with certain exceptions. 5 Pursuant to these rules, Exchange Act reporting companies file with the Commission three quarterly reports on Form 10-Q each fiscal year, with the fourth fiscal quarter subsumed within the reporting company’s annual report on Form 10-K. The proposed amendments to Exchange Act Rules 13a-13 and 15d-13, if adopted, would allow Exchange Act reporting companies electing to do so to file semiannual reports on new Form 10-S in lieu of quarterly reports on Form 10-Q. Our proposal would provide an Exchange Act reporting company with the flexibility to determine the frequency of interim reporting that best suits its particular circumstances, such as its ability to bear the costs of preparing the quarterly reports, the stage of its business development, and the expectations of its investors, without undermining fundamental investor protections. Providing such regulatory flexibility could reduce the 4 For purposes of this release, with respect to the terms “Exchange Act reporting company” or “Exchange Act reporting companies” (or, where the context is clear, abbreviated terms “reporting company” and “reporting companies”): (A) unless otherwise noted, we use these terms interchangeably with the terms “registrant” or “registrants” in the context of registrants with a reporting obligation under Exchange Act Section 13(a) or 15(d) but, in the context of companies that are “in registration” (i.e., have filed a registration statement that has not yet become effective), we use the term “registrant” to include these companies as well, and (B) we generally limit the use of these terms in this release to those companies that are subject to a requirement to file Form 10-Q quarterly reports, unless the context clearly indicates all Exchange Act reporting companies are referred to. See infra note 5 for discussion of Exchange Act reporting companies that are excluded from Form 10-Q reporting requirements. 5 Exchange Act Rules 13a-13 and 15d-13 exempt investment companies that are required to file reports pursuant to 17 CFR 270.30a-1 (which includes open-end management investment companies, closed-end management investment companies other than business development companies, and unit investment trusts), foreign private issuers, and asset-backed issuers (as defined in Item 1101 of Regulation AB) from the quarterly reporting obligations imposed by these rules. 7 regulatory burden of being a reporting company, which could potentially influence a company’s decision to become or remain a reporting company and encourage more companies to go or remain public. These proposed amendments would not substantively affect investment companies except for business development companies and face-amount certificate companies. 6 We are also proposing amendments to the financial statement requirements of 17 CFR Part 210 (“Regulation S-X”)—including to 17 CFR 210.3-01 (“Rule 3-01”), 17 CFR 210.3-12 (“Rule 3-12”), and 17 CFR 210.8-08 (“Rule 8-08”)—to facilitate semiannual reporting and to simplify rules regarding the age of financial statements in registration statements and other Commission filings. II. BACKGROUND Companies subject to Exchange Act Sections 13(a) and 15(d) must file periodic and other reports as prescribed in Commission rules. Exchange Act reporting companies have been required to file annual reports on Form 10-K since 1935 7 as well as current reports on Form 8-K for certain material events since 1936. 8 In 1946, the Commission required certain reporting companies to file quarterly reports on Form 8-K to disclose, among other things, the dollar 6 See 17 CFR 240.13a-13(b)(3) and 17 CFR 270.30a-1 (together exempting registered investment companies that file Investment Company Act annual reports from the requirement to file a quarterly Form 10-Q). Business development companies currently file Form 10-Q quarterly reports and Form 10-K annual reports. See 17 CFR 240.13a-1 (requiring Exchange Act Section 12 registrants to file annual reports); 15 U.S.C. 80a-2(a)(48) (defining business development company); 15 U.S.C. 80a-53 (making the election to be subject to certain provisions of the Investment Company Act conditional on registration under Exchange Act Section 12). Faceamount certificate companies are a type of registered investment company that is not required to file reports pursuant to 17 CFR 270.30a-1 and thus is required to file periodic reports pursuant to Exchange Act Section 13. See Investment Company Reporting Modernization, Investment Company Act Release No. 32314 (Oct. 13, 2016) [81 FR 81870 (Nov. 18, 2016)], at n.757. 7 Rule Adopting Form 10-K, Release No. 34-445 (Dec. 20, 1935) [not published in the Federal Register]. An annual report requirement for Section 12 registrants remains in place today pursuant to 17 CFR 240.13a-1. See also 17 CFR 240.15d-1 (annual report requirement for Securities Act registrants). 8 Rule Adopting Form 8–K, Release No. 34-925 (Nov. 11, 1936) [not published in the Federal Register]. 8 amount of gross sales (less discounts, returns, and allowances) and operating revenue. 9 In 1953, the Commission ended this quarterly reporting requirement, 10 and, in 1955, it adopted rules requiring semiannual interim reports pursuant to Rules X-13A-13 and X-15D-13. 11 These rules required one semiannual report to be filed each fiscal year by Exchange Act reporting companies on a new Form 9-K. 12 Semiannual reports on Form 9-K, which were due 45 days after the end of the reporting period, did not require the narrative disclosures mandated by Form 10-Q and provided only limited disclosures typically associated with an income statement. 13 After 15 years of this semiannual reporting system, the Commission rescinded semiannual reports on Form 9-K in 1970 and instead required quarterly reporting pursuant to amended Rules 13a-13 and 15d-13. 14 The rules required Exchange Act reporting companies to 9 See, e.g., Current Reports to be Filed and Requirements of Quarterly Reports by Certain Companies, 11 FR 3393 (Apr. 2, 1946) and Current Reports and Instructions for Use Thereof, 11 FR 3394 (Apr. 2, 1946) (together requiring quarterly reports pursuant to Item 11 of Form 8-K to be filed not more than 45 days after the close of a quarter by certain issuers, including those that file annual reports on Form 10-K, but exempting insurance companies, investment companies, common-carriers, and public utility companies). See also Adoption of New and Revised Forms, Release No. 34-4340 (Nov. 2, 1949), 1949 SEC LEXIS 71 (adopting new quarterly report form, Form 9-K, to replace Item 11 of Form 8-K but not making any substantial change in the quarterly reporting requirements). 10 See Rescission of Form 9-K and Rules X-13A-13 and X-15D-13, Release No. 34-4949 (Oct. 9, 1953), 1953 SEC LEXIS 30 (rescinding the quarterly reporting requirements and Form 9-K); Notice of Proposed Adoption of Form 9-K and Rules X-13A-13 and X-15D-13, Release No. 34-5129 (Jan. 27, 1955) [20 FR 771 (Feb. 4, 1955)] (“In October 1952, the Commission proposed revised rules calling for quarterly statements of profit and loss and earned surplus. These rules were not adopted and about a year later the requirement of quarterly reports of sales and revenues was discontinued.”). 11 Adoption of Form 9-K and Rules X-13A-13 and X-15D-13, Release No. 33-3553 (June 23, 1955) [20 FR 4816 (July 7, 1955)]. 12 Certain issuers were excepted from these requirements. The rules provided exemptions from required semiannual reporting for: (1) banks and bank holding companies, (2) investment companies, (3) certain insurance companies, (4) certain public utilities and common carriers filing reports with certain Federal agencies, (5) certain single-crop agricultural commodity producers, (6) certain promotional or development stage companies, and (7) foreign issuers other than private issuers domiciled in a North American country or Cuba. 13 Specifically, semiannual Form 9-K required items including: (i) gross sales (less discounts, returns, and allowances), (ii) operating revenues, (iii) extraordinary items and special items, (iv) net income before tax, (v) provision for tax, (vi) net income, and (vii) earned surplus. Semiannual Form 9-K did not require a detailed balance sheet, statement of stockholders’ equity, or statement of cash flows. 14 Adoption of Form 10-Q, Rescission of Form 9-K and Amendment of Rules 13a-13 and 15d-13, Release No. 349004 (Oct. 28, 1970) [35 FR 17537 (Nov. 14, 1970)]. 9 file three quarterly reports on Form 10-Q each fiscal year. 15 When it proposed the quarterly report on Form 10-Q, the Commission explained that the new report would “provide detailed information as a back-up to information released pursuant to timely disclosure policies” and would provide “uniform standards” for all Exchange Act reporting companies. 16 The Commission’s move towards a quarterly reporting requirement was also consistent with the recommendation of the 1969 Wheat Report, which concluded “that a regular, quarterly report would be more useful than the present, irregular 8-K report.” 17 Although the Commission has amended Form 10-Q and requirements in connection with quarterly reporting over time, 18 the Commission has not changed this cadence of quarterly interim reporting since it was adopted in 1970. Form 10-Q today requires more detailed information than the rescinded semiannual report on Form 9-K. Form 10-Q requires financial statements (inclusive of footnote disclosures) for the covered quarterly period that are prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”), 19 have been reviewed by an 15 Certain exemptions were provided for: (1) certain investment companies, (2) certain real estate companies, (3) certain foreign private issuers, (4) certain life insurance companies, (5) certain public utilities, common carriers, and pipeline carriers filing reports with certain Federal agencies, and (6) certain promotional or development stage companies. 16 Proposal to Adopt Form 10-Q Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 and to Rescind Forms 8-K and 9-K Under That Act, Release No. 34-8683 (Sept. 15, 1969) [34 FR 14239, 14239 (Sept. 10, 1969)]. 17 Disclosure to Investors—A Reappraisal of Federal Administrative Policies Under the ’33 and ’34 Acts (The Wheat Report) 332 (1969). The Wheat Report was a product of a review of the periodic reporting system from 1967 to 1969 conducted by Commissioner Francis Wheat and staff members of the Commission. 18 See, e.g., Audit Committee Disclosure, Release No. 34-42266 (Dec. 22, 1999) [64 FR 73389 (Dec. 30, 1999)] (requiring interim financial statements included in Form 10-Q to be reviewed by an independent public accountant). 19 Foreign private issuers may voluntarily file on domestic forms, including Form 10-Q, and include financial statements for the covered quarterly period that are prepared in accordance with: (a) International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) without reconciliation to U.S. GAAP or (b) home-country GAAP with reconciliation to U.S. GAAP. 10 independent public accountant (but are not required to be audited), 20 and are data tagged using inline XBRL. 21 It also requires narrative disclosures regarding: • Management’s discussion and analysis of financial condition and results of operations (“MD&A”); 22 • Market risk; 23 • Effectiveness of disclosure controls and procedures and material changes in internal control over financial reporting; 24 • Legal proceedings; 25 • Material changes in risk factors; 26 • Unregistered equity security sales and use of proceeds; 27 20 The regulation at 17 CFR 210.10-01(d) (Rule 10-01(d) of Regulation S-X) requires that, prior to filing, interim financial statements included in quarterly reports on Form 10-Q “must be reviewed by an independent public accountant using applicable professional standards and procedures for conducting such reviews, as may be modified or supplemented by the Commission.” See also 17 CFR 210.8-03. Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard 4105 sets forth the auditing standard that currently applies to an independent public accountant conducting a review of interim financial statements and explains that “the objective of a review of interim financial information pursuant to this section is to provide the accountant with a basis for communicating whether he or she is aware of any material modifications that should be made to the interim financial information for it to conform with generally accepted accounting principles.” See PCAOB Auditing Standard 4105, Reviews of Interim Financial Information, ¶ .07. That standard further explains that the objective of such review “differs significantly from that of an audit conducted in accordance with the standards of the PCAOB” because “[a] review of interim financial information does not provide a basis for expressing an opinion about whether the financial statements are presented fairly, in all material respects, in conformity with generally accepted accounting principles” as an auditor would do when expressing an unqualified opinion in an audit of the financial statements. Id. See also PCAOB Auditing Standard 1000, General Responsibilities of the Auditor in Conducting an Audit, ¶ .18 (setting forth the standard for an auditor to express an unqualified opinion in an audit of the financial statements). 21 See Form 10-Q, Part I, Item 1; 17 CFR 210.10-01 (Regulation S-X Rule 10-01); 17 CFR 210.8-03 (Regulation S-X Rule 8-03); Form 10-Q, Part II, Item 6; 17 CFR 229.601(b)(101)(i)(A). 22 See Form 10-Q, Part I, Item 2; 17 CFR 229.303 (17 CFR Part 229 (“Regulation S-K”) Item 303). 23 See Form 10-Q, Part I, Item 3; 17 CFR 229.305 (Regulation S-K Item 305). 24 See Form 10-Q, Part I, Item 4; 17 CFR 229.307 (Regulation S-K Item 307); 17 CFR 229.308(c) (Regulation SK Item 308(c)). 25 See Form 10-Q, Part II, Item 1; 17 CFR 229.103 (Regulation S-K Item 103). 26 See Form 10-Q, Part II, Item 1A; 17 CFR 229.105 (Regulation S-K Item 105). 27 See Form 10-Q, Part II, Item 2; 17 CFR 229.701 (Regulation S-K Item 701). 11 • Defaults on senior securities; 28 • Material changes to the procedures by which security holders may recommend nominees to the registrant’s board of directors; 29 • Disclosure of director or officer adoptions or terminations of certain plans for the purchase or sale of registrant securities; 30 • Exhibits required under Item 601 of Regulation S-K; 31 and • Certifications by the principal executive and financial officers as exhibits. 32 Form 10-Q reports are filed electronically with the Commission through its EDGAR system. The deadline for filing Form 10-Q with the Commission is 40 or 45 days after the end of a fiscal quarter, depending on the filer status of the reporting company. 33 Finally, securities exchange listing standards generally do not mandate a particular frequency of interim reporting. Instead, they refer generally to compliance with Commission rules requiring interim reports (with at least one exchange making specific reference to quarterly 28 See Form 10-Q, Part II, Item 3. 29 See Form 10-Q, Part II, Item 5(b); 17 CFR 229.407(c)(3) (Regulation S-K Item 407(c)(3)). 30 See Form 10-Q, Part II, Item 5(c); 17 CFR 229.408(a) (Regulation S-K Item 408(a)). 31 See Form 10-Q, Part II, Item 6; 17 CFR 229.601 (Regulation S-K Item 601). 32 See Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, § 302, 116 Stat. 745, 777 (2002); 17 CFR 240.13a-14; 17 CFR 240.15d-14; 17 CFR 229.601(b)(31) (Regulation S-K Item 601(b)(31)) (exhibits regarding certifications that include those related to internal controls, untrue statements of material facts, and material omissions); Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, § 906, 116 Stat. 745, 806 (2002), 17 CFR 229.601(b)(32) (Regulation S-K Item 601(b)(32)) (exhibits regarding certifications related to financial condition and results of operations). 33 Large accelerated filers and accelerated filers, as defined in 17 CFR 240.12b-2 (“Exchange Act Rule 12b-2”), must file Form 10-Q within 40 days after the end of a fiscal quarter and all other Exchange Act reporting companies must file Form 10-Q within 45 days after the end of a fiscal quarter. See Form 10-Q, General Instruction A. 12 reports on Form 10-Q), 34 require availability of interim reports, 35 or require quick dissemination of quarterly earnings information to the market. 36 Certain companies that are not subject to Section 13(a) or Section 15(d) already report on a semiannual basis under the Commission’s rules, 37 and certain other companies are exempt from quarterly reporting but furnish semiannual information pursuant to other requirements such 34 See, e.g., Nasdaq Stock Market Rule 5250(c)(1) (providing that a company shall timely file all required periodic financial reports with the Commission through the EDGAR system); NYSE Listed Company Manual § 802.01ESEC (providing that, for purposes of remaining listed on the exchange, a company will incur a late filing delinquency and be subject to the procedures set forth in Section 802.01E on the date on which any of several events occurs, including where the company fails to file its annual report (Forms 10-K, 20-F, 40-F or NCSR) or its quarterly report on Form 10-Q with the SEC by the date such report was required to be filed by the applicable form). 35 See, e.g., Nasdaq Stock Market Rule 5250(d)(3)(A) (providing that each company that is not a limited partnership and is subject to Rule 13a-13 under the Exchange Act shall make available copies of quarterly reports including statements of operating results to shareholders either prior to or as soon as practicable following the company’s filing of its Form 10-Q with the Commission). 36 See, e.g., NYSE Listed Company Manual § 202.05 (providing that a listed company is expected to release quickly to the public any news or information which might reasonably be expected to materially affect the market for its securities); NYSE Listed Company Manual § 203.02 (providing that any company with voting or non-voting common securities listed on the exchange that is required to file interim financial statements with the Commission is required to disseminate in a manner consistent with the exchange’s immediate release policy an interim earnings release as soon as its interim financial statements are available and citing Section 202.06 for the exchange’s immediate release policy); NYSE Listed Company Manual § 202.06 (providing that annual and quarterly earnings are examples of news items that should be handled on an immediate release basis). 37 For example, issuers that sell up to $75 million of securities within a 12-month period under the Regulation A exemption (“Tier 2 issuers”) are required to file a Form 1-SA semiannual report with the Commission within 90 days after the end of the first semiannual period of the issuer’s fiscal year and an annual report on Form 1-K within 120 days after fiscal year end. 17 CFR 230.257(b)(3). Semiannual reports on Form 1-SA require interim financial statements and MD&A disclosures. The financial statements are not required to be reviewed (which differs from the requirement that Form 10-Q financial statements be reviewed by an independent public accountant). In adopting the semiannual reporting requirement for Tier 2 issuers, the Commission found that a semiannual, rather than a quarterly, reporting requirement strikes an appropriate balance between the need to provide information to the market and the cost of compliance for smaller issuers. Amendments for Small and Additional Issues Exemption under the Securities Act, Release No. 33-9741 (Mar. 25, 2015) [80 FR 21806, 21847 (Apr. 20, 2015)]. Based on our analysis of Tier 2 issuer filings on Form 1-SA and amendments thereto on the Commission’s EDGAR system, we estimate that there were 470 unique filers of such forms in calendar year 2024 and 448 unique filers of such forms in calendar year 2025. 13 as exchange listing standards. 38 Several foreign jurisdictions also require semiannual reporting of financial information (but not quarterly reporting). 39 Over the years, the Commission at times has reassessed the current periodic reporting system, its impact on Exchange Act reporting companies, and potential alternatives including semiannual reporting. Most recently, as part of the Commission’s disclosure effectiveness review, the Commission issued two releases that addressed and requested public comment on the frequency of interim reporting. 40 In July 2019, the Commission also held a roundtable that 38 Foreign private issuers, as defined in 17 CFR 230.405 (“Securities Act Rule 405”) and 17 CFR 240.3b-4(c), are effectively required by a combination of Commission and securities exchange rules to file with the Commission one semiannual report on Form 6-K (due no later than six months following second fiscal quarter end) for each fiscal year. See 17 CFR 240.13a-16 (requiring every foreign private issuer which is subject to 17 CFR 240.13a1 to make reports on Form 6-K, with certain exceptions); 17 CFR 15d-16 (requiring every foreign private issuer which is subject to 17 CFR 240.15d-1 to make reports on Form 6-K, with certain exceptions); General Instruction B of Form 6-K (requiring foreign private issuers to furnish to the Commission whatever reports that: they make public pursuant to the law of their jurisdiction of domicile or organization; they file or are required to file with a stock exchange on which their securities are traded and that are made public by that exchange; or they distribute or are required to distribute to security holders); NYSE Listed Company Manual § 203.03 (requiring that an NYSE-listed foreign private issuer file with the Commission a Form 6-K that includes (i) an interim balance sheet as of the end of its second fiscal quarter and (ii) a semiannual income statement that covers its first two fiscal quarters); Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the NYSE Listed Company Manual to Adopt a Requirement that Listed Foreign Private Issuers Must, at a Minimum, Submit a Form 6-K to the Securities and Exchange Commission Containing Semi-Annual Unaudited Financial Information, Release No. 34-77198 (Feb. 19, 2016) [81 FR 9563 (Feb. 25, 2016)]; Nasdaq Stock Market Rule 5250(c)(2) (providing for similar semiannual report requirements for foreign private issuers as in NYSE Listed Company Manual § 203.03); Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Order Approving Proposed Rule Change and Amendments Nos. 1 and 2 Thereto to Require Semi-annual Financial Reporting by Foreign Private Issuers, Release No. 34-52192 (Aug. 2, 2005) [70 FR 46241 (Aug. 9, 2005)]. 39 For example, the securities regulations in the European Union (“EU”), the United Kingdom (“UK”), Hong Kong, and Japan provide for such semiannual reporting. Both the EU and the UK transitioned from quarterly to semiannual reporting in the 2010s. See, e.g., Directive 2013/50/EU Amending Directive 2004/109/EC on the Harmonisation of Transparency Requirements in Relation to Information About Issuers Whose Securities are Admitted to Trading on a Regulated Market (Oct. 22, 2013), available at https://eurlex.europa.eu/eli/dir/2013/50/oj/eng; Removing the Transparency Directive’s Requirement to Publish Interim Management Statements, Financial Conduct Authority (Nov. 2014), available at https://www.fca.org.uk/publication/policy/ps14-15.pdf. See also Section 13.46 to 13.50B of the Listing Rules and Guidance of the Hong Kong Exchange Main Board, available at https://enrules.hkex.com.hk/rulebook/main-board-listing-rules and Article 24-5 and the changes to the Japanese securities regulations in the Financial Instruments and Exchange Act (Act No. 25 of 1948), available at https://www.japaneselawtranslation.go.jp/en/laws/view/4633#je_ch2at48 (the revision from quarterly to semiannual reporting was enacted in 2024). 40 Business and Financial Disclosure Required by Regulation S-K, Release No. 33-10064 (Apr. 13, 2016) [81 FR 23916 (Apr. 22, 2016)] (“2016 Regulation S-K Concept Release”); Request for Comment on Earnings Releases 14 discussed issues including the frequency of periodic reporting. 41 The Commission received significant public feedback as a result of these recent efforts, including from companies and their representative organizations, asset managers and institutional investors, investor groups and individual investors, accounting firms, law firms, and other market participants. 42 Commenters expressed a wide variety of views about the frequency of interim reporting requirements, 43 with some supporting the current frequency but others recommending less-frequent interim reporting, such as semiannual reports, due to concerns about compliance costs and short-termism. 44 Finally, and Quarterly Reports, Release No. 33-10588 (Dec. 18, 2018) [83 FR 65601 (Dec. 21, 2018)] (“2018 Request for Comment on Quarterly Earnings and Reporting”). 41 Roundtable on Short-Term/Long-Term Management of Public Companies, Our Periodic Reporting System and Regulatory Requirements, U.S. Sec. & Exch. Comm’n (July 18, 2019) (“2019 Periodic Reporting Roundtable”), available at https://www.sec.gov/newsroom/meetings-events/071819-roundtable-short-term-long-termmanagement-public-companies. 42 Additionally, separate from public comments on these releases and the roundtable, the Commission received a petition for rulemaking in 2025 that requested the Commission provide public companies the option to file interim reports semiannually instead of quarterly and that the Commission: issue a notice of proposed rulemaking to amend Rule 13a-13, Rule 15d-13, and Form 10-Q; consider additional conforming amendments to related rules as necessary; and “take such other action as the Commission deems appropriate to address the harmful effects of mandatory quarterly reporting on long-term value creation.” See Long Term Stock Exchange, Inc., Petition for Rulemaking to Amend Quarterly Reporting Requirements Under the Securities Exchange Act of 1934, File No. 4-872 (Sept. 30, 2025), available at https://www.sec.gov/files/rules/petitions/2025/petn4872.pdf. 43 See comments on 2016 Regulation S-K Concept Release, available at https://www.sec.gov/comments/s7-0616/s70616.htm; comments on 2018 Request for Comment on Quarterly Earnings and Reporting, available at https://www.sec.gov/comments/s7-26-18/s72618.htm. One commenter provided survey data from 183 listed public companies that indicated 75% of those companies supported a move to semiannual reporting. Letter from Nasdaq, Inc. (Mar. 21, 2019) (“Nasdaq 2019”) (responses by 183 listed companies to the question “Do you believe that your company and/or your investors would benefit from moving to a semi-annual reporting model?” indicated: Yes: 75%; No: 25%). In this release, generally comment letters cited that are dated 2018 or 2019 are comments received in response to the 2018 Request for Comment on Quarterly Earnings and Reporting and comment letters cited that are dated 2016 are comments received in response to the 2016 Regulation S-K Concept Release; we generally do not provide individual hypertext links for each comment but the comment letters can be found at the links provided above. Comment letters in response to the 2019 Periodic Reporting Roundtable are found at the same link above as the comments in response to the 2018 Request for Comment on Quarterly Earnings and Reporting. 44 Short-termism is an expression commonly used to refer generally to a focus on short-term results instead of long-term business strategies and short-term actions by a company that can have a negative long-term impact on the company; such actions can include: reducing capital expenditure (including investment in intangible assets and research and development); deferring needed maintenance; forgoing opportunities with long-term net present value; reducing advertising; delaying new hires; and earnings management. For examples of comments regarding short-termism, see generally comments on the 2018 Request for Comment on Quarterly Earnings and Reporting, supra note 43. 15 the concept of semiannual reporting was recently discussed at: a meeting of the Commission’s Investor Advisory Committee; 45 the Commission’s 45th Annual Small Business Forum (and the prior year’s forum); 46 and the Commission’s 2025 Small Cap Policy Roundtable. 47 III. DISCUSSION OF PROPOSED AMENDMENTS Interim reports provide investors with material information about the financial performance of their companies during a fiscal year. Yet quarterly reporting may not be the ideal interim reporting frequency for every Exchange Act reporting company, given the varied circumstances each company faces. We are proposing rule and form amendments to provide all Exchange Act reporting companies with the option of filing semiannual reports on new Form 10S in lieu of quarterly reports on Form 10-Q. The flexibility provided under our proposed amendments would enable all Exchange Act reporting companies to choose the reporting frequency that would best serve the company and its investors. Companies that elect semiannual interim reporting may see a reduction in compliance costs of time and money, as they would incur these interim reporting costs only one time in connection with each fiscal year instead of three times in connection with each fiscal year pursuant to quarterly reporting. 48 These companies could then choose to dedicate any compliance cost and resource savings to their business growth. Other potential benefits of semiannual reporting include: less distraction from running the day-to-day business; reallocation of attention from interim reporting to company 45 U.S. Sec. & Exch. Comm’n, Panel Discussion: Public Company Disclosure Reform, in Meeting of the Inv. Advisory Comm., 2026 03 12 Investor Advisory Committee Part 01, YouTube (Mar. 12, 2026), available at https://www.youtube.com/watch?v=y0ZrTZ-uUg0. 46 45th Annual Small Business Forum, U.S. Sec. & Exch. Comm’n (Mar. 9, 2026), available at https://www.sec.gov/files/transcript-45th-sb-forum.pdf; 44th Annual Small Business Forum, U.S. Sec. & Exch. Comm’n (Apr. 10, 2025), available at https://www.sec.gov/files/2025-SBF-508-Transcript.pdf. 47 Small Cap Policy Roundtable: Reassessing the Framework for Small Public Companies, U.S. Sec. & Exch. Comm’n (July 22, 2025), available at https://www.sec.gov/files/small-cap-policy-roundtable-transcript.pdf; 48 See infra economic analysis discussion in Section V.E. 16 strategy; additional time spent on new product development; and ability to engage in transactions that might not be possible when management is focused on preparing interim reports. 49 To the extent that companies could not previously do so due to quarterly reporting, companies electing semiannual reporting may employ business strategies that may help ensure these companies’ long-term viability. In particular, emerging growth companies 50 and smaller reporting companies 51 may value having the flexibility to select the interim reporting requirement that is most appropriate for them and their investors. 52 Additionally, reducing the compliance costs associated with quarterly reporting may contribute to more private companies deciding to enter the public markets and more companies deciding to remain public. Further, the flexibility provided in the proposal may appeal to companies in certain industries where investors may 49 The economic analysis discussion in Section V.E further discusses opportunity costs. See infra note 229 and accompanying text. 50 In 2012, the Jumpstart Our Business Startups Act (Pub. L. No. 112-106, 126 Stat. 306 (2012)) amended the Securities Act and Exchange Act to add provisions regarding and to define an “emerging growth company.” Commission rules also define an “emerging growth company.” Pursuant to Securities Act Rule 405 and Exchange Act Rule 12b-2, the term “emerging growth company” means an issuer that had total annual gross revenues of less than $1.235 billion during its most recently completed fiscal year. Pursuant to these rules, if an issuer qualifies as an “emerging growth company” on the first day of its fiscal year, it maintains that status until the earliest of: (i) the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1.235 billion or more; (ii) the last day of its fiscal year following the fifth anniversary of the first sale of its common equity securities pursuant to an effective registration statement under the Securities Act; (iii) the date on which the issuer has, during the previous three-year period, issued more than $1 billion in nonconvertible debt; or (iv) the date on which the issuer is deemed to be a “large accelerated filer” (as defined in Exchange Act Rule 12b-2). 51 For the definition of smaller reporting company, see 17 CFR 229.10(f)(1); 17 CFR 230.405; and 17 CFR 240.12b-2. Under these rules, “smaller reporting company” is defined as an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that: (1) had a public float of less than $250 million; or (2) had annual revenues of less than $100 million and either: (i) no public float; or (ii) a public float of less than $700 million. 52 Letter from Society for Corporate Governance (Apr. 19, 2019) (survey of 130 public companies who responded to the question “Regardless of any other proposed changes to the reporting scheme, do you think that emerging growth companies or smaller reporting companies should be permitted to elect a semi-annual reporting frequency?” indicated the following results: Yes: 45%; No: 22%; Unsure: 34%). 17 focus more on certain business, product, or regulatory developments than interim financial results. 53 Under the proposal, companies would have the option to elect on an annual basis to comply with the semiannual reporting requirements. Exchange Act reporting companies could continue to file quarterly reports on Form 10-Q under the proposal. Companies might continue to report quarterly, for example, where they determine that quarterly frequency is best for the company and its investors or due to factors such as expectations of investors and securities analysts, disclosure practices in a particular industry, contractual obligations, or other regulatory requirements. 54 It is also possible some companies may view semiannual reporting as increasing the length of time that the company’s directors or employees possess non-public information that may be subject to the company’s closed trading windows and see quarterly reporting as a better approach for the company, because it may provide more frequent open trading windows for the company’s directors and employees. Although one result of the proposal will be a reduction in the frequency of interim reports for some Exchange Act reporting companies, we expect certain material information about these companies between interim semiannual reports and annual reports will continue to be disclosed 53 For example, a pre-revenue biotechnology company could find semiannual reporting best serves the company and its investors where investors’ primary focus is on progress in product development and applicable regulatory approvals and where investors find semiannual reports to be sufficient. See, e.g., Remarks of Charles Baltic, Member, Advisory Comm. on Small & Emerging Cos., in Meeting of the Advisory Comm. on Small and Emerging Cos., U.S. Sec. & Exch. Comm’n 64-65 (Sept. 23, 2015), available at https://www.sec.gov/info/smallbus/acsec/acsec-transcript-092315.pdf (remarking that emerging-growth, small capitalization biotechnology companies do not trade on their financial quarterly reporting but trade on their fundamental clinical development events and regulatory events, that these events follow their own non-quarterly cycle and are captured in Form 8-K filings, and that most capital-intensive companies (in technology generally as well as biotechnology) trade most significantly on basic business developments such as new products as opposed to incremental revenues or earnings on a quarterly basis). See also infra note 141 and accompanying text. 54 For additional discussion of factors that may provide incentives for companies to elect to continue to file quarterly reports, see the economic analysis in this release, infra Section V.D. 18 either voluntarily or as a result of other requirements. Significant regulatory enhancements have occurred since 1970 with regard to disclosure of certain material events during interim periods. Investors currently have access to information through the current reporting system on Form 8-K regarding certain material events that is far more robust and timely than in 1970 when semiannual reports on Form 9-K were last required. Since that time, the Commission significantly accelerated that era’s Form 8-K filing deadline of 10 days after the end of the month in which the applicable event occurred to the current general deadline of within four business days of the event. 55 In addition to shortening the filing deadlines, the Commission over time significantly expanded the list of events that would trigger a filing obligation under Form 8-K and prescribed standardized disclosures that must be provided upon the occurrence of the material event, including through amendments in 2003 and 2004. 56 In fact, several of the Form 10-Q disclosure requirements largely duplicate the Form 8-K requirements. 57 Importantly, in 2003, the Commission added Item 2.02 as a Form 8-K filing trigger event for the furnishing of earnings releases and other material information about companies’ results of operations and financial condition for a completed interim period. 58 Current Item 2.02 requires reporting companies generally to furnish their quarterly earnings releases as an exhibit to Form 8-K on the 55 Release No. 34-13156 (Jan. 13, 1977) [43 FR 4424 (Jan. 25, 1977)] (adopting the general Form 8-K filing deadline of 15 calendar days after the event); Additional Form 8-K Disclosure Requirements and Acceleration of Filing Date, Exchange Act Release No. 49424 (Mar. 16, 2004) [69 FR 15594 (Mar. 30, 2004)] (“2004 Amended Form 8-K Adopting Release”) (adopting the general Form 8-K filing deadline of four business days after the event). 56 See Conditions for Use of Non-GAAP Financial Measures, Release No 34-47226 (Jan. 22, 2003) [68 FR 4820 (Jan. 30, 2003)] (“2003 Amended Form 8-K Adopting Release”); 2004 Amended Form 8-K Adopting Release. 57 For example, both Form 8-K and Form 10-Q require disclosures of recent sales of unregistered securities, mine safety, and defaults on debt securities. 58 2003 Amended Form 8-K Adopting Release. 19 Commission’s EDGAR system. 59 Many Exchange Act reporting companies hold a conference call in connection with their earnings releases. Item 2.02 provides the conference call does not need to be furnished with Form 8-K subject to certain conditions, including that the call occur within 48 hours of the earnings release, the call be accessible to the public, and the call and dialin information be announced in advance to the public. 60 In practice, many public companies make recordings of the call freely available on their website. Recordings of the calls are also commonly freely available on third-party platforms. We believe that the requirements of Form 8-K elicit important disclosures about material events on a more timely basis than quarterly reports on Form 10-Q. We acknowledge, however, that quarterly earnings releases furnished with an Item 2.02 Form 8-K differ from Form 10-Q financial information because they are not required to be reviewed by an independent public accountant or to comply with the Commission’s interim financial statement requirements or certain other requirements in Form 10-Q. 61 We also acknowledge that, if a company elects to take advantage of semiannual reporting and stops reporting quarterly earnings or having quarterly earnings release conference calls, then the disclosures elicited by Item 2.02 of Form 8K would not be available. We expect that a company’s individual characteristics, facts, and 59 The term “earnings release” as used in this release means a public announcement or release by a company, or person acting on its behalf, of material non-public information regarding a company’s results of operations or financial condition for a completed fiscal year or interim period. The requirements of Item 2.02 of Form 8-K are triggered by the disclosure of this information, with the earnings releases furnished under the cover of Form 8K. Forward-looking information provided by a company to its investors on a quarterly basis in a method other than Form 8-K or Form 10-Q is referred to as “forward-looking earnings guidance” or “earnings guidance.” The non-GAAP financial measure rules in 17 CFR 244.100 through 17 CFR 244.102 (“Regulation G”) and 17 CFR 229.10, along with the antifraud provisions of the Federal securities laws (such as Exchange Act Section 10(b) and 17 CFR 240.10b-5 (Exchange Act Rule 10b-5)), apply to earnings releases and earnings guidance. 60 Form 8-K, Item 2.02(b). 61 In addition, the information furnished under Item 2.02 of Form 8-K is not required to be prepared in accordance with GAAP (although it is subject to requirements concerning non-GAAP financial measures in Regulation G and 17 CFR 229.10(e)(i)), is not required to be data tagged, and is not required to include disclosures or certifications related to disclosure controls and procedures or internal control over financial reporting. 20 circumstances will determine whether it would make quarterly earnings releases or announcements after electing to report semiannually. 62 Regulation FD, adopted in 2000, was another significant development in the evolution of disclosure requirements for Exchange Act reporting companies. Regulation FD requires that any material non-public information selectively shared with certain enumerated persons be promptly (in the case of unintentional disclosure) or simultaneously (in the case of intentional disclosure) disclosed to the market by either furnishing or filing a Form 8-K report or disseminating the information through another method that is reasonably designed to provide broad, nonexclusionary distribution. 63 In connection with Regulation FD, Exchange Act reporting companies may disclose material information during a fiscal year through Item 7.01 of Form 8K. 64 Regulation FD seeks to promote full and fair disclosure and may cause a company to disclose material information—whether on Form 8-K or through other means—at various points 62 While specific registrants may base decisions on their specific circumstances, the experience in foreign jurisdictions may be broadly illustrative. A 2017 CFA Research Institute study said, “When quarterly reporting was no longer required of UK companies in 2014, less than 10% stopped issuing quarterly reports (as of the end of 2015).” Robert Pozen, Suresh Nallareddy & Shivaram Rajgopal, The Impact on Reporting Frequency on UK Public Companies (Mar. 2017) (“2017 CFA Study of UK”), available at https://rpc.cfainstitute.org/sites/default/files/-/media/documents/article/rf-brief/rfbr-v3-n1-1-pdf.pdf. Our interpretation of the 2017 CFA Study of UK is that where the study refers to “issuing quarterly reports,” the study is referring to voluntary earnings releases, because companies no longer file quarterly reports with the UK Financial Conduct Authority. See 2018 Request for Comment on Quarterly Earnings and Reporting, at 65602– 65603 (discussing required UK semiannual reporting and the elimination of quarterly reporting). For additional discussion of semiannual filers that may voluntarily release quarterly earnings if the proposal is adopted, see the economic analysis in this release, infra Section V.D. 63 17 CFR 243.100(b)(1); 17 CFR 243.101(e). Regulation FD restricts selective disclosure of material, non-public information to persons including: broker-dealers; investment advisers; investment companies; and securityholders if it is reasonably foreseeable they will trade on the information. If a company or person covered by the rule intentionally discloses material nonpublic information to a covered recipient, then the company must make simultaneous public disclosure and, if the disclosure to a covered recipient is unintentional, then public disclosure must be prompt. See also Selective Disclosure and Insider Trading, Release No. 34-43154 (Aug. 15, 2000) [65 FR 51715 (Aug. 24, 2000)]. 64 A study in 2021 that took a sample of 2,108 public companies found that a public company, on average, files six to eight Form 8-K reports per year, and, among those filings, files one Item 7.01 (Regulation FD disclosure) Form 8-K filing per year. Azi Ben-Rephael et al., Who Pays Attention to SEC Form 8-K?, at 14 (Aug. 20, 2021), available at https://academicweb.nd.edu/~zda/8k.pdf. 21 during a fiscal year, depending on the company and its circumstances (such as whether the company seeks to communicate previously material non-public information to analysts or other persons covered by Regulation FD). Such disclosure results in greater investor access to material information disclosed outside quarterly reports on Form 10-Q. Regulation FD and current Form 8-K disclosure requirements were either not present or less robust when the Commission last required the limited form of semiannual reporting during the period from 1955 to 1970. Although we are proposing to amend our rules regarding frequency of interim reporting, our proposal does not include any general changes to the current regulatory requirements governing: (1) earnings releases, other than proposed technical amendments to Item 2.02 of Form 8-K to include references to semiannual periods, or (2) earnings guidance practices. Federal securities laws do not impose general duties upon Exchange Act reporting companies to announce or publish earnings, conduct earnings calls, or issue earnings guidance. 65 We received public feedback on earnings releases and earnings guidance practice in connection with the Commission’s 2016 Regulation S-K Concept Release and 2018 Request for Comment on Quarterly Earnings and Reporting, with commenters expressing a variety of views on these practices and on a wide range of related topics. Our proposal is focused on the more specific issue of the frequency of interim reporting as mandated by the Federal securities laws, with the goal of providing more flexibility with respect to this mandated disclosure. Although the proposal is not intended to change the regulatory framework for voluntary practices regarding earnings releases and guidance, we welcome comments on the impact of our proposal on these voluntary practices. 65 Certain regulatory requirements that apply to Form 10-Q, however, do not apply to earnings releases. See supra note 61 and accompanying text. When earnings information is selectively disclosed to certain covered persons, however, Regulation FD requires disclosure in a Form 8-K filing or another method that is reasonably designed to provide broad, non-exclusionary distribution. 22 We believe our proposal represents a balanced approach of maintaining a reporting system that elicits material, timely, and regular disclosures in a manner that best suits the needs of both the company and its investors, promoting efficiency by reducing compliance costs, and maintaining robust investor protections. The proposal is one step in a broader Commission effort to encourage more companies to go and remain public by reducing the costs and burdens associated with Exchange Act reporting. A robust public capital market—with more emerging companies and small businesses choosing to become public companies through initial public offerings or other paths—benefits companies and investors alike. Becoming a public company provides companies with access to the public markets that allows them to raise capital to grow their businesses, a broader set of potential investors who may purchase their securities in the secondary trading market, and the benefits of transparent valuations by public markets and of a market following. For investors, public companies represent opportunities to participate in the future growth of promising companies. Initial public offerings represent liquidity opportunities for early-stage investors. Investors in public companies are protected by mandated disclosures and by liability provisions of the Federal securities laws that apply to public companies’ disclosures, such as Securities Act Section 11 and Exchange Act Section 18. 66 We are also proposing amendments to Regulation S-X. Our proposed amendments would incorporate provisions applicable to registrants that elect semiannual reporting frequency into the 66 Securities Act Section 11 provides for liability for an untrue statement of a material fact in a Securities Act registration statement and for an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Many public companies commonly make registered offerings of securities and thus are subject to potential Section 11 liability. Exchange Act Section 18 provides for liability for a false or misleading statement with respect to a material fact in an Exchange Act report. Interim reports on Form 10-Q are not subject to Section 18 liability with respect to Items 1, 2, and 3 of Part I of Form 10-Q (respectively relating to financial statements, management’s discussion and analysis of financial condition and results of operations, and quantitative and qualitative disclosures about market risk). See Form 10-Q, General Instruction F.1. Proposed semiannual reporting Form 10-S would similarly provide that Items 1, 2, and 3 of Part I of the form are not subject to Section 18 liability. See proposed Form 10-S, General Instruction F.1. 23 financial statement requirements for periodic reports. We are also proposing changes to the age of financial statement requirements in Regulation S-X to ensure that financial statements in registration statements filed by semiannual filers would not be considered “stale” under existing rules, which were built along a quarterly reporting framework, and to revise those age requirements for semiannual filers to fit with their reporting schedule. The proposed changes to the age of financial statement rules would also simplify existing rules, including by consolidating the age requirements into a single rule. Finally, we recognize that, if the proposal is adopted, in order to comport with semiannual reporting by public companies, it is possible that changes may be necessary or appropriate to the rules of securities exchanges 67 or to various accounting or auditing standards. 68 If the proposal is adopted, to facilitate any such changes, we expect the Commission staff would coordinate with accounting and auditing standard-setters, securities exchanges, and other market participants. To help inform those efforts, we are soliciting comment in this release on what changes to accounting or auditing standards or rules of securities exchanges should be made to comport with semiannual reporting. 69 67 See, e.g., letter from NYSE Group, Inc. (Mar. 21, 2019) (“If the Commission elected to make reporting requirements less frequent, giving public issuers the option to report two or three times a year, the NYSE Exchanges believe we could comply with our regulatory duties by adapting our rules and practices accordingly.”). 68 See supra note 20 and infra notes 92, 93, 188, 191, 214 and accompanying text for discussion of certain auditing standards relevant to quarterly and proposed optional semiannual reporting. 69 We are also aware that the regulations of some Federal agencies contain references to quarterly reports filed with the Commission. These agencies may wish to consider whether they should revise their law to reflect semiannual reporting if the proposal is adopted. See, e.g., 12 CFR 16.6 (providing the Comptroller of the Currency will deem offers or sales of national bank or Federal savings association issued nonconvertible debt to be in compliance with certain regulations if a number of requirements are met, including that each purchaser receives an offering document that contains, among other things, the national bank’s, Federal savings association’s, or the holding company’s (where the national bank or Federal savings association is a subsidiary of a holding company with securities registered under the Exchange Act) Forms 10-K, 10-Q, and 8-K filed under the Exchange Act); 13 CFR 315.7 (requiring companies petitioning the Economic Development Administration, which is part of the U.S. Department of Commerce, for eligibility for trade adjustment 24 Our proposal is discussed in greater detail below. We welcome interested parties to submit comments on any aspects of the proposed rule and form amendments. When commenting, please include the reasoning in support of your position or recommendation and provide any supporting documentation or data. A. Proposed Amendments for Semiannual Reporting We are proposing amendments to Exchange Act Rules 13a-13 and 15d-13 (and other relevant rules and forms that we discuss below) to change the current quarterly reporting requirements for Exchange Act reporting companies to a more flexible system that permits Exchange Act reporting companies to elect to file semiannual reports instead of quarterly reports. 70 Under the proposal, an Exchange Act reporting company that elects semiannual reporting would be required to file one semiannual report and one annual report for each fiscal year. Semiannual filers would file their interim report on new Form 10-S. This form would require the same narrative disclosures and financial information as existing Form 10-Q but would cover a six-month period (rather than a fiscal quarter). The deadline for filing Form 10-S would be 40 or 45 days (depending on the company’s filer status) after the fiscal year’s first semiannual period end—the same as with current Form 10-Q’s fiscal quarter end deadline, which would not change—while the second semiannual period would be subsumed in the annual period presented in the annual report on Form 10-K. 71 Reporting companies that do not elect to report assistance to provide information, including the most recent Form 10–K annual reports (or Form 10–Q quarterly reports, as appropriate) filed with the Commission for the entire period covered by the petition); 10 CFR 50.71 (creating an exemption for companies licensed by the U.S. Nuclear Regulatory Commission from providing an annual financial report if they submit a Form 10-Q filed with the Commission). See also Section VI.C (discussing Federal agency regulations and discussing State law that refers to quarterly filings with the Commission). 70 Proposed Rule 13a-13(b) and Rule 15d-13(b). 71 We are not proposing to require that semiannual filers present separately the second semiannual period interim financial information in Form 10-K but request comment on whether we should require semiannual filers to 25 on a semiannual basis—thereby effectively opting to report on a quarterly basis under the default rules that would apply—would continue to be required to file three quarterly reports on Form 10Q and one annual report on Form 10-K for each fiscal year as under the current system for reporting companies. We are proposing to add a check box to the cover page of Form 10-K as the sole means by which a reporting company would indicate annually whether it is selecting a semiannual interim reporting frequency (by checking the semiannual box) or quarterly reporting (by not checking the semiannual box) and by which the reporting company would disclose the selected frequency to investors and other market participants. We are also proposing amendments to add a similar check box concerning the semiannual reporting election to the cover page of Securities Act registration statements on Forms S-1, S-3, S-4, and S-11 and Exchange Act registration statements on Form 10. Companies that have yet to file Exchange Act reports, such as private companies conducting initial public offerings, would make initial elections to use semiannual reporting by checking the box on the cover page of the registration statement filed. 72 This election would determine what financial statements are required in the registration statement 73 and indicate the company’s planned break out the second semiannual period in their annual reports on Form 10-K and similarly require quarterly filers to break out their fourth fiscal quarter in their annual report on Form 10-K. 72 While the check box on the registration statement forms would be the method by which private companies in registration indicate their planned reporting frequency, there may be other situations where registration statement forms that would contain the new check box are filed by a reporting company. In those other situations, the reporting company would check or leave unchecked the box consistent with the reporting company’s prior election on its most recent Form 10-K or, in the case of a newly public reporting company that has not yet filed a Form 10-K, on its registration statement form where it made its election in connection with becoming a public company. A reporting company filing a registration statement form would not be able to respond differently to this check box than it has indicated in such most recent Form 10-K or, for a newly public company, such registration statement, because, as we discuss below, mid-fiscal-year changes in reporting frequency would not be permitted. 73 An election to use semiannual reporting made in an initial registration statement would not preclude a registrant from providing financial statements more current than otherwise required. 26 interim reporting frequency to investors and other market participants. 74 Similar to current requirements for the first quarterly report for companies that have newly become Exchange Act reporting companies, 75 the first semiannual report on Form 10-S would be due the later of 45 days after the effective date of the registration statement or the date that Form 10-S would otherwise have been due had the company been an Exchange Act reporting company. 76 In connection with our proposed optional semiannual reporting approach, we are proposing to add two new definitions—“quarterly filer” and “semiannual filer”— to 17 CFR 240.12b-2 (and to add two identical definitions to 17 CFR 230.405) to facilitate a number of amendments we are proposing, including a number of technical amendments to insert references to semiannual reporting in rules that currently refer to quarterly-reporting-related concepts. A “quarterly filer” would be defined as a registrant that is required to file quarterly reports on Form 10-Q, pursuant to 17 CFR 240.13a-13(a). A “semiannual filer” would be defined as a registrant that is required to file semiannual reports on Form 10-S, pursuant to 17 CFR 240.13a-13(b). Under our proposed optional semiannual reporting approach, we are proposing to permit a change in interim reporting frequency—either from quarterly to semiannually or vice versa—to be indicated on a Form 10-K by checking the box on the cover page to file semiannually or leaving the box unchecked to file quarterly. As proposed, the determination to report semiannually or quarterly would therefore be made on an annual basis and may not be changed 74 A company that is not a reporting company and that is in registration in connection with an initial registration statement may change its check box answer with respect to semiannual reporting until the initial registration statement becomes effective. Once the initial registration statement becomes effective, the company becomes a reporting company and, as with existing reporting companies, can change its interim reporting frequency in accordance with the proposed amendments to Rules 13a-13 and 15d-13. 75 17 CFR 240.13a-13(a); 17 CFR 240.15d-13(a). 76 Proposed Rules 13a-13(b)(1) and 15d-13(b)(1). 27 until the next Form 10-K annual report is filed. 77 Companies would then be required to file interim reports based on the chosen frequency, beginning with the report for the first interim period (semiannual or quarterly) of the fiscal year in which the Form 10-K with the election was filed. 78 • For example, an Exchange Act reporting company reporting quarterly with a December 31 fiscal year-end wants to file semiannual reports on Form 10-S for the next fiscal year. The company would file its Form 10-K for fiscal year 2026 in March 2027. Under the proposal, the company would have to make its election to switch to semiannual reporting for fiscal year 2027 by checking the box for semiannual reporting on the cover page of its Form 10-K for fiscal year 2026. With this election made in fiscal year 2027 (i.e., when the Form 10-K for fiscal year 2026 was filed), the company would be required to report semiannually and would begin semiannual reporting by filing in August 2027 its Form 10-S for the first six-month period (ended June 30, 2027) of fiscal year 2027. 79 77 Companies that leave an unmarked box on Form 10-K would be deemed to have opted for quarterly reporting and therefore be required to file quarterly reports on Form 10-Q for the next fiscal year (i.e., the fiscal year for which the election is being made which, for the avoidance of doubt, is the fiscal year that follows the fiscal year covered by that Form 10-K). This means that semiannual filers that wish to continue to file on a semiannual basis in future fiscal years must make the election again each year on their Form 10-K. Otherwise, if these companies do not make the election on Form 10-K, they would be required to resume filing quarterly reports beginning with the first quarter of the fiscal year in which the Form 10-K with the election is filed. 78 Proposed Rules 13a-13(b)(2) and (3); proposed Rules 15d-13(b)(2) and (3). 79 In this example, in its Form 10-S for fiscal year 2027, the reporting company would be required to present statements of comprehensive income, cash flows, and changes in stockholders’ equity for the first six months of the preceding fiscal year (2026)—in addition to these statements for the first six months of 2027. The company would have previously filed a first quarter Form 10-Q covering January to March 2026 and a second quarter Form 10-Q covering April to June 2026. In the second quarter 2026 Form 10-Q, the company would have been required to file year-to-date (i.e., January to June 2026) statements of comprehensive income, cash flows, and changes in stockholders’ equity. Therefore, a reporting company would not need to take extra steps to prepare those preceding year financial statements (covering January to June 2026) when changing its reporting frequency from quarterly reporting to semiannual reporting (in contrast to the situation discussed below where a company changes from semiannual reporting to quarterly reporting, where extra steps may be required). 28 • Similarly, for example, an Exchange Act reporting company with a December 31 fiscal year-end that previously chose to file semiannual reports on Form 10-S as indicated in its Form 10-K for the fiscal year ended December 31, 2026 wishes to switch to quarterly reporting. The company will file its Form 10-K for fiscal year 2027 in March 2028. The reporting company would change its interim reporting frequency by leaving the box unchecked for semiannual reporting on the cover page of its Form 10-K for fiscal year 2027. With this election made in fiscal year 2028 (i.e., when the Form 10-K for 2027 was filed), the company would be required to report quarterly and would begin quarterly reporting by filing in May 2028 its Form 10-Q for the first quarter (ended March 31, 2028) of fiscal year 2028. In its Form 10-Q for the first quarter of fiscal year 2028, the company would be required to present statements of comprehensive income, cash flows, and changes in stockholders’ equity for the first quarter of the preceding fiscal year (2027). 80 These first quarter 2027 financial statements would have been subsumed within (but would not have been required to be separately presented in) the semiannual financial statements included in the previously filed Form 10-S covering January to June 2027. Therefore, in changing the election by leaving the box unchecked (thereby choosing to file quarterly reports on Form 10-Q for fiscal year 2028), the reporting company may need to take additional steps to prepare the financial statements for the comparable 2027 quarterly periods, including ensuring that an independent public accountant has reviewed the comparable quarterly periods for fiscal year 2027. 81 80 Proposed Rules 8-03(a)(2), 8-03(a)(5),10-01(a)(7), and 10-01(c) of Regulation S-X. 81 Registrants must provide MD&A disclosure pursuant to Part I, Item 2 of Form 10-Q. With respect to results of operations, 17 CFR 229.303(c)(2)(ii) requires registrants to compare the most recent quarter to either: (1) the corresponding quarter for the preceding fiscal year or (2) the immediately preceding sequential quarter. That regulation also requires, where the comparison is made to the preceding sequential quarter, that financial 29 Once an Exchange Act reporting company has elected its interim reporting frequency, it would be committed to that reporting frequency for the remainder of that fiscal year. This proposed approach would avoid potential investor confusion that could result if Exchange Act reporting companies were permitted to switch interim reporting frequency in the midst of a fiscal year, such as confusion over when the companies would file interim reports. We recognize the possibility that a company may mistakenly leave the check box unmarked or incorrectly mark the check box (for example, a company mistakenly checking the box for semiannual reporting when it intended to be a quarterly filer or a company mistakenly leaving the check box unmarked when it intended to be a semiannual filer). We therefore propose to amend Rule 13a-13(b) and Rule 15d-13(b) to permit companies to amend their Form 10-K to correct any such inadvertent mistakes. Such corrective amendments would be required to be filed as soon as practicable after discovery of the mistake but no later than the due date by which the company’s first Form 10-Q report would be required to be filed for the fiscal year in which the initial Form 10-K with the erroneous election was filed. 82 For example, a quarterly filer with a December 31 fiscal year-end wants to continue filing quarterly reports on Form 10-Q. The company filed its Form 10-K for fiscal year 2026 in March 2027. It mistakenly marked the check box on the cover page of its Form 10-K for fiscal year 2026, thereby electing to switch to information for such sequential quarter be presented in summary form or identified in prior EDGAR filings. In this example, if the company chose to compare results of operations for the first quarter of fiscal year 2028 to the results for the fourth quarter of fiscal year 2027, then the company would need to take further additional steps to include information for the fourth quarter of fiscal year 2027 in summary form in its Form 10-Q for the first quarter of fiscal year 2028. 82 Proposed Rules 13a-13(b)(4) and 15d-13(b)(4). If a company were to amend Form 10-K for the sole purpose of correcting a check box error under the proposal, we would not expect the company to refile the certifications required under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (discussed supra note 32). See also 17 CFR 240.12b-15. Where such an error was made and is being timely corrected, a company would file a Form 10-K/A indicating the number of the amendment and provide the amended cover page, an explanatory note, the exhibit list, and signatures. Electing to file semiannual reports in compliance with this rule and the filing of this corrective amendment would not impact the company’s timeliness for the purposes of determining eligibility to file short form registration statements (e.g. Form S-3). 30 semiannual reporting for fiscal year 2027. The company would be able to correct this error by amending its Form 10-K no later than the due date for its Form 10-Q for the first quarter of fiscal year 2027. 83 Proposed Form 10-S would require the same information as currently required by Form 10-Q but for the covered six-month period instead of a quarter. 84 Required disclosures would include, among other things, MD&A, legal proceedings, material changes in risk factors, unregistered equity security sales and use of proceeds, defaults on senior securities, director nomination procedures, disclosure of director or officer adoptions or terminations of certain plans for the purchase or sale of registrant securities, and exhibits required under Item 601 of Regulation S-K. The financial statements for the covered semiannual period would be required to be prepared in accordance with U.S. GAAP 85 and reviewed by an auditor (but not required to be audited). 86 They would also be required to be data tagged using Inline XBRL. The current disclosure and certifications requirements for disclosure controls and procedures, as well as for internal control over financial reporting, would apply to proposed Form 10-S. 87 Non-GAAP 83 The filing of Form 12b-25 in accordance with 17 CFR 240.12b-25 to provide notification of an inability to timely file a Form 10-Q would not affect a company’s error correction deadline, which would remain the original due date for the company’s Form 10-Q. 84 Form 10-S is not proposed to be substantively different from Form 10-Q (other than the reporting period covered). Scaled disclosure would be available to smaller reporting companies on proposed Form 10-S as with Form 10-Q. See, e.g., proposed Form 10-S, Item 1 (permitting smaller reporting companies to provide financial information required by 17 CFR 210.8-03); Item 3 (which requires quantitative and qualitative disclosures of market risk pursuant to 17 CFR 229.305, which provides that smaller reporting companies are not required to provide the information otherwise required). 85 But see supra note 19 regarding a foreign private issuer’s election to voluntarily file on domestic forms and ability to apply accounting standards other than U.S. GAAP in its financial statements. 86 A semiannual filer would not be precluded from voluntarily providing quarterly financial information in a Form 10-S in addition to the required semiannual financial information. If the quarterly financial information is presented in the financial statements, the quarterly financial information would be subject to review by an auditor. 87 See 17 CFR 229.307 (Regulation S-K Item 307); 17 CFR 229.308(c) (Regulation S-K Item 308(c)). 31 financial measures presented in proposed Form 10-S would be subject to the current requirements of Regulation G and Item 10(e) of Regulation S-K. Request for Comment 1. The proposed amendments would allow Exchange Act reporting companies to elect to file interim reports on a semiannual basis in lieu of quarterly reports on Form 10-Q. Should companies have this option, or should all companies continue to be required to file Form 10-Q? What types of companies are likely to elect the option to file semiannual reports? Are companies in certain industries more likely than those in other industries to elect to file semiannual reports? 2. We are proposing amendments that would permit, but not require, all Exchange Act reporting companies that file Form 10-Q today to file semiannual reports. Should we instead require all companies to file semiannual reports? What would be the benefits and costs of such a mandatory approach? Would mandatory semiannual reporting, with the option to file quarterly reports, lead to more companies electing to forgo quarterly reporting? 3. Our proposal would permit semiannual reports for all Exchange Act reporting companies that file Form 10-Q today, regardless of filer status, revenues, market capitalization, or other criteria. Should the option for semiannual reporting be available only for Exchange Act reporting companies that satisfy certain criteria? If so, what criteria should be imposed and why? For example, should only emerging growth companies or smaller reporting companies be allowed to report semiannually? 88 Should only companies below alternative 88 See definition of “emerging growth company” supra note 50 (containing a total annual gross revenue threshold of $1.235 billion) and definition of “smaller reporting company” supra note 51 (containing a public float threshold of less than $250 million under one prong of the definition and a public float threshold of less than $700 million under the second prong of the definition). 32 quantitative or monetary thresholds be allowed to report semiannually? Should the Commission consider a pilot program to permit optional semiannual reporting for a subset of reporting companies and, if so, what would be the benefits of such a pilot program? What types of companies should be included in the pilot program? 4. Under the proposal, reporting companies currently required to file Form 10-Q would have the option instead to file semiannual reports on Form 10-S. Should any types of companies that currently file Form 10-Q be excluded from the option of electing semiannual reporting, such as business development companies? 5. We are proposing that the filing deadlines for semiannual reports on Form 10-S be the same as for quarterly reports on Form 10-Q. Should the filing deadline for semiannual reports on Form 10-S be longer or shorter than proposed? If so, what would be an appropriate filing deadline? Do companies need more time to prepare semiannual reports than quarterly reports and if so, why? Should smaller public companies, newly public companies, or emerging growth companies be afforded a longer filing deadline for Form 10-S to allow for additional time to consult with their accountants and advisers? 6. If adopted, would semiannual reporting have an impact on investors’ ability to compare same-company performance over time? Why or why not? 7. What effect would our proposal have on investors’ ability to compare the relative peer company financial performance of a quarterly filer to a semiannual filer? For example, can an investor reasonably compare a quarterly filer to a semiannual filer where the companies have the same fiscal year and the comparison is sought to be made in the second quarter (when first quarter information that would be subsumed in the semiannual filer’s semiannual report on Form 10-S is not yet available) or made in the fourth quarter (when 33 third quarter information that would be subsumed in the semiannual filer’s annual report on Form 10-K is not yet available)? 8. Should the check box that indicates a company has elected semiannual reporting be added to registration statements on Forms 10, S-1, S-3, S-4, and S-11 and annual reports on Form 10-K as proposed? Should we add a similar check box to any other forms, including Forms 1-A or 8-A? If so, why? 9. Under our proposal, companies that want to file semiannual reports instead of quarterly reports would make their election by checking a box on the cover page of their annual report on Form 10-K for the most recently completed fiscal year. For investors and other market participants, this would mean that the first indication that a company will file only semiannual reports going forward will be when the company files its most recent Form 10K. For example, under our proposal, a December 31 fiscal year-end company that files its Form 10-K for fiscal year 2026 in March 2027 would be able to cease filing quarterly reports immediately, with its next interim report being its first Form 10-S for the first six months of fiscal year 2027. Would investors and other market participants benefit from earlier notice of a company’s intent to file semiannual reports instead of quarterly reports? If so, how would investors and others benefit and what would be the magnitude of any benefit? If so, what should the mechanism be for a company to provide earlier notice of intent to file semiannual reports? 10. Our proposal would require Exchange Act reporting companies that elect to file semiannual reports to continue with that interim reporting frequency for the rest of the fiscal year in which the election was made. Therefore, companies would not be allowed to file a semiannual report on Form 10-S for the first six months of a fiscal year and then file a 34 quarterly report for the third quarter for that fiscal year. Likewise, companies would not be allowed to file a quarterly report on Form 10-Q for the first quarter of a fiscal year, file a semiannual report on Form 10-S for the first six months for that fiscal year, and not file a quarterly report on Form 10-Q for the third fiscal quarter. Would this proposed approach help avoid potential confusion that could be caused by changes in interim reporting frequency during a fiscal year? Is it necessary to add any language to the proposed rules to make more explicit the requirement to maintain the selected frequency for the full fiscal year? Rather than the proposed approach, should we allow: (1) semiannual filers and quarterly filers to make a change in interim reporting frequency during the fiscal year, or (2) only semiannual filers to switch to filing quarterly reports during the fiscal year? Should issuers that elect semiannual reporting be required to commit to that disclosure frequency for a certain period of time? Why or why not? 11. Do companies that have newly become a public company (e.g., through an initial public offering, de-SPAC transaction, or direct listing) need to have greater flexibility for switching interim reporting frequency within a fiscal year? For example, a private company that elected semiannual reporting in a Form S-1 for an initial public offering could subsequently decide that quarterly reporting is preferable (e.g., to promote greater trading liquidity by increasing the frequency of its interim reporting) and wish to switch to quarterly reporting for the rest of the fiscal year. Should we allow such newly public companies to switch the interim reporting frequency within a fiscal year? 12. Should correction of errors with respect to the Form 10-K check box related to semiannual reporting be permitted as we propose? Are the proposed time limits on when an error correction may be made appropriate? In addition to allowing error correction in an 35 amended Form 10-K—or in lieu thereof—should we allow check box error correction through a Form 8-K filing? 13. We are proposing a new Form 10-S for companies that elect to file semiannual reports. Is the proposed new form needed? Should there be one form for all interim reports, regardless of whether they are for a fiscal quarter or a semiannual period? If so, why? 14. Proposed Form 10-S would mandate the same narrative and financial information as Form 10-Q, albeit for semiannual periods rather than quarterly periods. Should Form 10-S require narrative or financial information that differs from what is required in Form 10-Q? If so, please specify what information should be different and why this information is or is not needed in Form 10-S. Are there any disclosure items, such as mine safety violations, in proposed Form 10-S that should be required instead to be disclosed in other forms, such as Form 10-K, Form 8-K, or Form SD? 15. As an alternative to the proposal for optional semiannual reporting, should we instead revise the disclosure requirements of Form 10-Q to reduce the burden on reporting companies of filing this form, such as amending the current rules for the required interim financial statement review by an independent public accountant, XBRL data tagging, MD&A, information about unregistered sales of registrant securities pursuant to 17 CFR 229.701 (Item 701 of Regulation S-K), or year-to-date comparisons involving financial statements and MD&A? How should these requirements, or any other requirements of Form 10-Q, be revised? What aspects of Form 10-Q’s current reporting framework are most burdensome for reporting companies? 16. What impact would the flexibility to file semiannual reports on Form 10-S, instead of quarterly reports on Form 10-Q, have on a private company’s decision to become an 36 Exchange Act reporting company? Would more companies choose to go public under the proposed flexible approach to interim reporting? What impact would the proposed flexible approach have on existing Exchange Act reporting companies’ desire to remain public companies? 17. What impact would the proposed option to file semiannual reports on Form 10-S have on Exchange Act reporting companies’ ability to focus on: (1) business operations, (2) growth, or (3) long-term business strategies? Please provide any data on the amount of employee and director time spent on preparing a quarterly report on Form 10-Q. 18. What is the likelihood that companies that elect semiannual reporting will continue to issue quarterly earnings releases (to the extent they did so previously when they reported quarterly)? Why would semiannual filers still issue earnings releases on a quarterly basis? Would this practice create any new or heightened investor protection concerns? For example, would there be any new investor protection concerns if an Exchange Act reporting company with a December 31 year-end elects to file semiannual reports and issues an earnings release for the first quarter of the fiscal year, with the semiannual report for the first six months of the fiscal year (which includes that first quarter) not due until months later (e.g., in August of that fiscal year)? Would companies that currently issue quarterly earnings releases but elect to become semiannual filers change their earnings release practices either: (1) to issue earnings releases semiannually, or (2) to cease issuing earnings releases? Please provide any data or analysis regarding any experience with earnings releases in foreign jurisdictions where issuers report semiannually. 19. Our proposal generally would not change the current Item 2.02 Form 8-K furnishing requirement for earnings releases (but we are proposing technical amendments to include 37 references to semiannual periods). Should we change these requirements generally for semiannual filers? For example, should we amend the Form 8-K requirements so that Item 2.02 Form 8-K submissions are “filed,” not “furnished,” for semiannual filers thereby subjecting the earnings release to additional liability provisions, such as Exchange Act Section 18 (and Securities Act Section 11 if incorporated into a Securities Act registration statement), given that investors could rely more heavily on earnings releases by semiannual filers due to the less frequent interim reporting by such filers as compared to quarterly filers? If we require the filing (not furnishing) of earnings releases for semiannual filers, should we require the incorporation by reference of earnings releases into Securities Act registration statements of those semiannual filers? Would requirements for semiannual filers to file (not furnish) earnings releases discourage semiannual filers from issuing earnings releases? Would requirements for semiannual filers to file (not furnish) earnings releases have an impact on companies’ decisions about whether to elect quarterly or semiannual reporting? Are there particular reasons or need for the information provided in an Item 2.02 Form 8-K submission by a semiannual filer to be treated differently than a similar Item 2.02 Form 8-K submission by a quarterly filer? 20. In connection with any adoption of the proposal, should there be a new requirement for semiannual filers that announce or release earnings for the first or third quarters of their fiscal year (i.e., the periods that would later be subsumed in Forms 10-S and 10-K but for which there would be no quarterly report filed with the Commission)—that financial information in any first or third quarter earnings releases be reviewed by an independent public accountant? If so, would any changes to current auditing standards (e.g., governing reviews) be required? 38 21. For companies that issue earnings releases, would the proposed flexible approach to interim reporting have any effect on how quickly these releases would be issued after the end of the reporting period? 22. Would the option for semiannual reporting result in an overall reduction in material information for investors? Or would other regulatory requirements, such as Form 8-K filing requirements and Regulation FD, elicit sufficient information to offset the less-frequent interim reports and address any investor protection concerns? Would market forces or demands on a company’s business—such as contractual obligations, investor expectations, and potential for shareholder activism—encourage semiannual filers to: (1) voluntarily disclose more information than required, (2) disclose information more frequently than is required, or (3) opt not to become semiannual filers at all? 23. With semiannual reporting, would there be an impact on investors or other market participants as a result of less frequent certifications by management relating to internal control over financial reporting and disclosure controls and procedures, as well as less frequent disclosures of changes in such controls? 89 24. Would the nature and extent of procedures that an independent public accountant performs during a review change depending upon whether the independent public accountant is performing a review over a fiscal semiannual period or a fiscal quarterly period? Would independent public accountants conducting reviews do the same amount of work for a fiscal semiannual period as they currently do for two quarterly fiscal periods on a combined basis? Would an independent public accountant experience any impact on efficiency or 89 See 17 CFR 229.308(c) (requiring disclosure of any change in the registrant’s internal control over financial reporting during the period that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting). 39 economies of scale when conducting reviews and annual audits under semiannual reporting versus under quarterly reporting for the same company? Would any changes to independent public accountants’ review or audit procedures or any impact on efficiency or economies of scale result in changes in costs to companies? If so, describe the impact and whether the impact could vary depending upon the size of the registrant subject to the review. 25. Would companies that elect semiannual reporting retain their independent public accountant to perform a review of their financial statements at the end of each quarter either to: (1) support financial information that is used for purposes of a quarterly earnings release (notwithstanding that, as noted above, there is no Commission requirement for a quarterly earnings release to be reviewed by an independent public accountant), or (2) guard against the possible need for a quarterly review to be performed should the company decide to change back to quarterly reporting in a future period (where that period would require comparative quarterly data for the prior year)? 26. For semiannual filers, what impact would a shift to semiannual reporting have on: (1) companies’ disclosure controls and procedures, (2) companies’ internal control over financial reporting, and (3) independent public accountants’ strategy and approach for the annual audit of companies’ internal control over financial reporting or financial statements? With semiannual reporting, is there a potential for a material increase in the risk that material misstatements (either due to error or fraud) or control deficiencies are not timely detected by or communicated to the independent public accountant thereby limiting potential remediation of these issues by the issuer? Please provide any data related to these questions. 40 27. Would there be reduced securities analyst coverage of Exchange Act reporting companies that elect the semiannual reporting option as compared to quarterly filers? Would underwriters’ requests for independent public accountants to provide “comfort letters” 90 in securities offerings (to support potential due diligence defenses) 91 lead semiannual filers to continue to retain independent public accountants to conduct quarterly financial statement reviews? If so, are changes needed to PCAOB Auditing Standards (regarding reviews by independent public accountants)? 92 For example, to comport with semiannual reporting, are changes needed to PCAOB Auditing Standard 6101, Letters for Underwriters and Certain Other Requesting Parties, to permit independent public accountants to provide comfort letters expressing negative assurance on changes subsequent to the date and period of the latest financial statements included (or incorporated by reference) in the registration 90 “Comfort letters” (which provide negative assurance) commonly state that: (1) the auditor’s review of unaudited financial statements found nothing indicating information is not presented fairly in all material respects in accordance with U.S. GAAP, (2) certain specified auditor procedures found nothing in the information derived from the financial statements (e.g., MD&A) indicating the information is not in agreement in all material respects with the financial statements, and (3) certain auditor procedures found nothing indicating certain financial items changed (e.g., increases in net sales, increases in long-term debt) from the end of the last audited or reviewed period to an established cut-off date in a manner that is inconsistent with the disclosure in the registration statement (i.e., “subsequent change” comfort). 91 Underwriters may seek to defend against potential registration statement-based Securities Act Section 11 liability claims by: (1) with respect to the unexpertized portions of the registration statement, relying on the comfort letter to show they conducted a reasonable investigation to form a reasonable belief the unexpertized portions are not inaccurate or misleading, and (2) with respect to the expertized portions of the registration statement, that they relied on the expert (e.g., an auditor) and had no reasonable grounds to believe the expertized portions were inaccurate or misleading. Underwriters may also seek to defend against potential prospectus-based Securities Act Section 12(a)(2) liability by relying on the comfort letter to show they did not know and, in the exercise of reasonable care, could not have known of any misstatement or omission. The degree to which comfort letters help to establish these defenses depends on the particular facts and circumstances. 92 See PCAOB Auditing Standard 4105, Reviews of Interim Financial Information; PCAOB Auditing Standard 6101, Letters for Underwriters and Certain Other Requesting Parties, ¶ .37 (providing that, when accountants have not conducted a review in accordance with AS 4105, they may not comment in the form of negative assurance and are, therefore, limited to reporting the procedures performed and findings obtained). See also PCAOB Auditing Standard 4101, Responsibilities Regarding Filings Under Federal Securities Statutes. For additional discussion of PCAOB Auditing Standards, see the discussion of baseline conditions in the economic analysis in this release, infra notes 188 through 191 and accompanying text. 41 statement? 93 If semiannual filers would continue to prepare quarterly financial information or to retain independent public accountants to conduct quarterly reviews, should the Commission make any rule changes or take any other steps to address this issue? 28. Would our proposal have any impact on a semiannual filer’s application of relevant accounting standards to prepare financial statements in accordance with U.S. GAAP, IFRS, or home-country GAAP? How? Are any changes to accounting standards, including U.S. GAAP or IFRS, necessary or appropriate to effectuate semiannual reporting (e.g., changes to the guidance on annual impairment testing, lag reporting, earnings per share, or other topics of authoritative guidance)? 29. Are any changes to rules of securities exchanges necessary or appropriate to effectuate semiannual reporting? 30. Should we require the second semiannual period financial information (for semiannual filers) or the fourth quarter financial information (for quarterly filers) to be included in Form 10-K so investors do not need to back out this information if companies do not voluntarily provide it? Would having a longer period (six months for semiannual reports versus three months for quarterly reports) make it more difficult for investors to back out this information? Relatedly, should we require semiannual filers to break out financial statement information for the six-month period covered by Form 10-S into two three-month periods and provide similarly broken-out three-month information for the fiscal year covered by Form 10-K? 93 See PCAOB Auditing Standard 6101, Letters for Underwriters and Certain Other Requesting Parties, ¶ .46 (permitting negative assurance as to subsequent changes in specified financial statement items as of a date less than 135 days from the end of the most recent period for which the accountants have performed an audit or a review). 42 31. Many public companies have standalone insider trading policies or insider trading policies that are part of the company’s code of ethics, 94 and these policies may provide for trading windows. 95 What impact would optional semiannual reporting have on company insider trading policies, including trading windows? For example, would companies impose longer trading blackout periods at the beginning of a semiannual period or towards the end of a semiannual period than they would impose if reporting quarterly? Even if these periods are longer, would the total number of blackout days be fewer each fiscal year for semiannual filers compared to quarterly filers given that semiannual filers would report less frequently? To the extent that there are longer blackout periods or fewer total blackout period days each year, what effects would these changes have on semiannual filers? Under our proposal, semiannual filers are allowed to voluntarily issue quarterly earnings releases. How would this affect current trading windows practices, if at all? Where a company elects to be a semiannual filer, would this be likely to have an effect on trading plans that may be adopted by companies or insiders (e.g., company directors, officers, or employees) for purposes of 17 CFR 240.10b5-1 (Exchange Act Rule 10b5-1)? If so, what are the effects? 94 The regulations found at 17 CFR 229.406 and 17 CFR 229.408(b) require registrants to disclose whether they have adopted a code of ethics and whether they have adopted an insider trading policy, respectively, and are both incorporated into Form 10-K. See Item 10 of Form 10-K. For foreign private issuers, similar requirements are incorporated into Form 20-F. See Items 16B and 16J of Form 20-F. The rules of securities exchanges require listed companies to adopt a code of ethics. See, e.g., NYSE Listed Company Manual § 303A.10 (Code of Business Conduct and Ethics); Nasdaq Stock Market Rule 5610. 95 Generally, trading windows are periods under company insider trading policies when there are no blackout periods in effect and covered persons (such as company directors, employees, and consultants) are permitted to transact in the securities of the company if they do not possess material non-public information. Company policies often use fixed blackout periods to reduce the risk that covered persons may trade while in possession of material non-public information at times when it is more likely that a covered person may possess it. Many company policies impose these fixed blackout periods that prohibit trading around the close of a fiscal quarter until after earnings for a fiscal quarter or year are released. Collectively, these fixed blackout periods can mean that at many public companies, trading windows each fiscal quarter are only open for two or three weeks around the middle of that fiscal quarter. In addition to these fixed blackout periods, companies also may impose eventspecific blackout periods, such as around product developments or major company transactions. 43 32. Would there be an increased risk of insider trading at companies that elect to report on a semiannual basis? If so, please provide the basis for this view, as well as data. Could companies enhance their insider trading policies or improve their self-enforcement of these policies to help address this concern? What other actions could companies or the Commission take to mitigate any increase in the risk of insider trading? 33. How would the proposed flexible approach to semiannual reporting affect the competitiveness of U.S. reporting companies vis-a-vis foreign competitors? For Exchange Act reporting foreign companies that would not be foreign private issuers (which report semiannually as discussed above) and that would report quarterly under the current system, would the proposed option to report semiannually make these foreign companies more likely to list on a U.S. exchange? What would be the competitive implications of the proposed optional semiannual reporting approach between U.S. reporting companies (which report quarterly under the current system) and foreign private issuers (which report semiannually under the current system as a practical matter)? Should there be different periodic reporting for foreign private issuers compared to domestic issuers? Why or why not? 34. If the proposal is adopted, what should be the compliance date for the proposed amendments? If the proposal is adopted, is there a need for a transition period and, if so, what should be the length of the period? B. Proposed Amendments to Regulation S-X We are proposing amendments to various rules in Regulation S-X that would incorporate semiannual reporting and simplify the rules with respect to the age of financial statements. Specifically, the proposed amendments would: 44 • simplify Rule 3-01 and Rule 8-08 by reorganizing each and consolidating the requirements of Rule 3-12 regarding the age of financial statements in a registration or proxy statement into the balance sheet requirements of Rule 3-01; • revise the age requirements to incorporate semiannual reporting through the introduction of a revised model for determining the age of interim financial statements; and • revise other rules in Regulation S-X to incorporate semiannual reporting. 1. Streamlining Age of Financial Statements Requirements To simplify our rules and effectuate our proposed optional semiannual reporting approach, we are proposing amendments to Rules 3-01 and 8-08 of Regulation S-X so that each amended rule clearly sets forth the requirements for annual financial statements and interim financial statements. The proposed amendments would consolidate the requirements of Rule 312 into Rule 3-01 and eliminate Rule 3-12. Currently, Rule 3-01 governs the date of audited and interim balance sheets required to be included in filings as of the filing date. 96 The requirements for statements of comprehensive income, cash flows, and changes in stockholders’ equity—set out in current 17 CFR 210.3-02 (Rule 3-02 of Regulation S-X) and 17 CFR 210.3-04 (Rule 3-04 of Regulation S-X)—are derived from dates of annual and interim balance sheets required by Rule 3-01. 97 While current 96 Registered management investment companies apply the requirements of Rule 3-18 of Regulation S-X instead of Rule 3-01. Foreign private issuers are not necessarily subject to Rule 3-01. Rather, they may apply the requirements in Form 20-F. See current Rules 3-01(g) and (h), which we are proposing to reorder as paragraphs (h) and (i). 97 Rule 3-02 requires that the filing include audited statements of comprehensive income and cash flows for two or three fiscal years preceding the date of the most recent audited balance sheet being filed as well as interim statements for the period between the latest audited balance sheet and the date of the most recent interim balance sheet and for the corresponding period of the preceding fiscal year. Rule 3-04 requires that the filing include an analysis of changes in stockholders’ equity and noncontrolling interests in the form of a 45 Rule 3-01 addresses the dates of the balance sheets as of the filing date, current Rule 3-12 addresses the age of financial statements as of the effective date of a registration statement or mailing of a proxy statement. 98 Notwithstanding this difference, application of the two rules currently results in age requirements that are aligned: if a registrant were to apply current Rule 301’s filing date age requirements to a registration statement at the date of effectiveness (or a proxy statement at the mailing date), the resulting financial statement requirements would be no different than if Rule 3-12 were applied. Our proposed consolidation of Rules 3-01 and 3-12 would streamline Regulation S-X, making the age of financial statement requirements easier to apply. To clarify the dual purpose of Rule 3-01 as proposed to be revised, we are proposing new Rule 3-01(a), which would provide that the date of the most recent balance sheet included in a registration or proxy statement must be updated to comply with that section’s requirements as if the effective date of the registration statement, or proposed mailing date in the case of a proxy statement, were the filing date. Further, we are proposing several amendments to streamline and reorganize Rule 3-01 as well as integrate Rule 3-12 into Rule 3-01. • We are proposing to place the rules regarding annual balance sheets in Rule 3-01(b). We do not propose any substantive amendments to the rules regarding annual balance sheets. Proposed Rule 3-01(b) would require audited balance sheets as of the end of the two most recently completed fiscal years, which would be the same as current Rule 3-01(a). reconciliation of the beginning balance to the ending balance for each period for which a statement of comprehensive income is required to be filed. 98 The Commission, in connection with the adoption of Rule 3-12, stated that the rule ensures “that interim data provided in registration statements under the Securities Act is at least as current as the data already filed under the Exchange Act.” See Uniform Instructions as to Financial Statements – Regulation S-X, Release No. 33-6234 (Sept. 2, 1980) [45 FR 63682, 63684 (Sept. 25, 1980)] (“1980 Regulation S-X Adopting Release”). 46 • The current exceptions to current Rule 3-01(a) applicable to filings other than on Form 10-K would be included in proposed Rules 3-01(b)(1) and (b)(2). o Proposed Rule 3-01(b)(1), which would be the same as current Rules 3-01(b) and 3-12(b), would permit that if the filing is made no more than 45 days after the end of the registrant’s fiscal year, the audited balance sheets may be as of the end of the two fiscal years preceding the most recently completed fiscal year and must include an additional balance sheet as of an interim date specified in proposed paragraph (c)(1), as described further below. o Proposed Rule 3-01(b)(2), which would be the same as current Rules 3-01(c) and 3-12(b), would permit that—if the filing is made more than 45 days but no more than 59 days (for large accelerated filers, as defined in § 240.12b-2 of this chapter), 74 days (for accelerated filers, as defined in § 240.12b-2 of this chapter), or 89 days (for all other registrants) after the end of the registrant’s most recently completed fiscal year—so long as three conditions are met, the registrant may apply proposed paragraph (b)(1), which means that, in this situation, the audited balance sheets may also be as of the end of the two fiscal years preceding the most recently completed fiscal year and the filing must include an additional balance sheet as of an interim date specified in proposed paragraph (c)(1). 99 We do not propose any changes to the three conditions. 99 The three conditions would be set out in proposed Rules 3-01(b)(2)(i) through (iii) and continue to provide: (i) the registrant is subject to Exchange Act reporting and has filed all required reports; (ii) for the most recently completed fiscal year for which audited financial statements are not yet available, the registrant reasonably and in good faith expects to report income attributable to the registrant after income taxes; and (iii) for at least one of the two fiscal years immediately preceding the most recently completed fiscal year, the registrant reported income attributable to the registrant after income taxes. 47 • Proposed Rule 3-01(b)(3), which would be similar to the second sentence of current Rule 3-01(a), would require the filing of an audited balance sheet dated as of a date not more than 134 days before the date of the filing if the registrant was not in existence as of the end of its fiscal year. • Proposed Rule 3-01(b)(4), which would be the same as Rules 3-01(b) and 3-12(c), 100 would require that, notwithstanding the requirements of this section, the filing must be updated with audited financial statements for the most recently completed fiscal year if they become available prior to the filing date. The proposed amendments to Rules 3-01 and 8-08 reflect the replacement of references to filing dates from the current text of “within” a certain number of days after a milestone (e.g., filing date or end of the fiscal year or quarter) to “more than” or “no more than” a certain number of days. 101 We believe this change will clarify the filing requirements and ensure alignment of financial statement updating dates with the Forms 10-K, 10-Q, and 10-S filing deadlines. A registration or proxy statement filed on the same date a periodic report is due would be required to include the financial statements required in that periodic report. We are making similar clarifying amendments to Exchange Act Rules 13a-13 and 15d-13. We are proposing to place the rules regarding an interim balance sheet in Rule 3-01(c). • Proposed Rule 3-01(c)(1) would require that, when an audited balance sheet for the most recently completed fiscal year is not included in the filing, the interim balance sheet must 100 While current Rule 3-01(b) does not explicitly state this requirement as Rule 3-12(c) does and as proposed Rule 3-01(b)(4) would do, this requirement is implicit in current Rule 3-01(b). We believe it is clearer to registrants to set this requirement out explicitly. 101 See proposed Rule 3-01(b)(1), (2), and (3) and Rule 8-08(a)(1) and (2). For example, current Rule 3-01(c)(1) references filings “made after 45 days but within the number of days of the end of the registrant's fiscal year specified in paragraph (i) of this section.” Instead, proposed rule 3-01(b)(2) references filings “made more than 45 days but no more than 59 days (for large accelerated filers, as defined in § 240.12b-2 of this chapter), 74 days (for accelerated filers, as defined in § 240.12b-2 of this chapter), or 89 days (for all other registrants).” 48 be as of the end of the third fiscal quarter of the most recently completed fiscal year for quarterly filers or as of the end of the first fiscal semiannual period of the most recently completed fiscal year for semiannual filers. This proposed rule would be similar to current Rule 3-01(b) and Rule 3-12(b), except that it would require a semiannual filer to file an interim balance sheet as of the end of its semiannual period. • Proposed Rule 3-01(c)(2) would set forth requirements for an interim balance sheet when an audited balance sheet for the most recently completed fiscal year is included in the filing. We discuss proposed Rule 3-01(c)(2)’s requirements for an interim balance sheet for the current fiscal year in detail in Section III.B.2 below on determining the age of interim financial statements. • Proposed Rule 3-01(c)(3) would be substantively unchanged from current requirements in Rules 3-01(f) and 3-12(a) and would provide that an interim balance sheet provided in accordance with proposed Rule 3-01(c) need not be audited and need not be presented in greater detail than is required by § 210.10-01. We are proposing to renumber current Rule 3-01(g), regarding registered management investment companies, as Rule 3-01(d). Likewise, we are proposing to renumber current Rule 301(h), regarding foreign private issuers, as Rule 3-01(e)(1). We are proposing to incorporate current Rule 3-12(f) regarding financial statements of a foreign business into proposed Rule 301(e)(2). We are proposing to delete current Rule 3-01(d), which requires—when filings are made after 45 days but within a number of days of the end of the registrant’s fiscal year based on its filer status and the three conditions in Rule 3-01(c) are not met—that balance sheets for the two most recently completed fiscal years must be included. We believe current Rule 3-01(d) is 49 redundant with current Rule 3-01(a) and is unnecessary to include in Rule 3-01 as proposed to be revised, because we believe it is clear i [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Asec%3A33d750a5d693fb02. Public record. Not legal advice.