By Anirban Sen
NEW YORK, April 15 (Reuters) – Two Sigma Investments and D.E. Shaw are among several Wall Street investment firms and hedge funds that are fighting a proposal to allow companies to opt out of quarterly reporting, according to people familiar with the matter, on concerns it would reduce the flow of key financial information for investors in public companies.
The funds’ opposition adds to a cohort of institutional investors and hedge funds that includes billionaire Ken Griffin’s Citadel. They are working behind the scenes to express their views ahead of an expected U.S. Securities and Exchange Commission proposal and comment period on the topic, the sources said. These firms have recently held discussions with industry lobby and trade group the Managed Funds Association (MFA) to highlight their concerns, the sources said.
The Wall Street firms are hoping they can convince the regulators to moderate the drive to abolish quarterly reporting of financials, if not scrap the effort entirely, the sources said. They added that the lobbying efforts are at an early stage and that a formal, organized initiative is not yet under way.
Citadel and asset manager Fidelity also raised concerns at the SEC’s investor advisory committee meeting on March 12, the sources said. At the meeting, which included SEC Chair Paul Atkins, the companies warned that scrapping quarterly reporting would lead to heightened market volatility, bigger swings in stock prices and a jump in companies’ costs to raise capital. They also said that regular quarterly reporting promotes accurate market valuations, the sources said.
The MFA has argued that eliminating quarterly reporting would deter private investment by creating lengthy periods during which material information is not disclosed to the public.
“Optional quarterly reporting in the U.S. could lead to inconsistent disclosure practices: some will continue reporting quarterly, others will report some quarters but not others, while still others will stop reporting quarterly altogether,” the MFA said in a comment letter posted on Monday in response to the SEC’s proposal to trim nonfinancial disclosures under Regulation S-K.
The MFA declined to comment on its conversations with individual member firms. Two Sigma and D.E. Shaw declined to comment.
Others in the finance industry, such as Wall Street bank JPMorgan, have been supportive of the proposal.
FORMAL PROCESS EXPECTED
The SEC in coming weeks is expected to formally seek feedback and comments from market participants for the proposal to remove the quarterly earnings reporting requirement, according to the people familiar with the matter, reviving an effort launched during President Donald Trump’s first term.