During the ABA Business Law Section’s “Dialogue with the Director” last Friday, Corp Fin Director Jim Moloney gave an update on the semi-annual reporting proposal that the SEC is expected to issue. As you might recall, mandatory quarterly reporting has been on the hit list since it somehow attracted the attention of the President last fall. Around the same time, the Long-Term Stock Exchange announced a rulemaking petition on the topic.

The prospect of moving to semi-annual reporting seems to have a lot of buzz, even though most securities lawyers might scratch their heads over whether eliminating Form 10-Q filing requirements would change much in practice. So, here are six things to know if your clients ask what this proposal could mean for them:

1. Like all proposals, it will be subject to notice & comment and actual adoption isn’t guaranteed. Accounting firms are adamantly opposed, so you can expect to see some criticism.

2. The proposal will likely permit – not require – companies to move to semi-annual reporting.

3. There are plenty of reasons why established public companies, which already have well-honed quarterly reporting processes, may continue to release results on a quarterly basis – to open trading windows, raise capital, facilitate an active trading market, etc. But while the earnings release would remain, the formality of a “Form 10-Q” could disappear (depending on what the proposal and a final rule, if any, say). It isn’t unheard of to release numbers “off cycle” – i.e., not driven by a ’34 Act reporting obligation. For example, a company might release “flash numbers” if conducting an offering before issuing its regularly scheduled quarterly disclosures.

4. Newer and smaller public companies would be the most likely to benefit from the rule change, as it would give them more time to ease into quarterly reporting procedures. Think life sciences and small regional banks. It could help “Make IPOs Great Again” in this way.

5. For companies that take advantage of the semi-annual reporting regime, they would need to give notice before moving to a quarterly reporting cadence. Companies would likely move to a quarterly cadence eventually, for the reasons noted above.

6. US regulators aren’t alone in rethinking quarterly reports: Canada also recently launched a pilot project that would exempt certain issuers from filing first- and third-quarter disclosures. However, as Meredith blogged, companies that want to maintain the option of raising capital may not be able to participate in it.

The skuttlebutt is that this proposal is near the top of the pile in terms of near-term release dates, out of an exciting 22 “blockbuster” proposals that Jim flagged as being in the queue at Corp Fin. But the SEC has to carefully comply with all of the procedural steps before any rulemaking goes out the door.

– Liz Dunshee