The SEC Wants to Let Companies Report Twice a Year

Here’s Why Microcap Investors Should Care.

The SEC is moving forward with a proposal to let public companies opt into semi-annual reporting instead of the current quarterly requirement. The target date for a formal proposal is April 2026.

As you’re reading this, I’d like you to keep five things in mind.

First, it’s possible that my upcoming rant may be all for naught, as companies that understand semiannual reporting might suppress their valuations and limit their ability to raise money, and therefore may think twice about adopting it.

Second, there’s a chance that the best quality microcap companies that don’t have to raise money and don’t care about the near-term price of their stock may choose to adopt semiannual reporting.

Third, why is it the responsibility of regulators and exchanges to control investor behavior around short-term versus long-term investing? And, even if their motives were noble, their position on trying to control short-termism is bullshit and counter to actions they’ve allowed to occur in the financial markets. Just like the Rule 15c2-11 amendment, it’s just another hidden part of their agenda to demote microcap investing. The NASDAQ is also potentially facing a crisis as OTC Markets continues to steal market share.

Fourth, maybe bigger information discrepancies will occur and create bigger opportunities using information arbitrage. We just might have to wait a little longer for them to surface.

Finally, the article is a lot longer than intended, but I just couldn’t stop.

The Investor Advisory Committee actually just held a panel on March 12, 2026, with Chairman Atkins pushing for semiannual reporting. Nasdaq is backing it, as well as The Long-Term Stock Exchange (LTSE).

Wait a second? Who the heck is the LTSE? I never even heard of this exchange until researching this topic. You know why? Because they only have listed like 3 companies, despite being founded in 2012 (although trading commenced in September 2020). For what it’s worth, I do kind of like the concept. Companies can list on the LTSE (or dual-list), but they must adopt long-term governance principles, such as:

• Long-term incentive structures for executives
• Transparent long-term strategy disclosures
• Focus on stakeholders beyond just quarterly EPS
• Encouraging investors who hold shares longer

Anyways, the arguments in favor of the new proposal are straightforward. Proponents will say that quarterly reporting is expensive, especially for smaller companies. Some will also say it encourages short-term thinking, leading CEOs to manage to the quarter instead of building for the long term. The UK and EU already moved to semi-annual reporting over a decade ago. And honestly? A lot of the information in a 10-Q is redundant and boilerplate.

To some extent, I get all of that.

However, I spend my days in the microcap trenches, and from where I sit, this proposal has serious problems that nobody in Washington seems to be thinking about. Or maybe they just don’t care.

Don’t blame the 10-Q for short-termism

Let’s talk about the claim that quarterly reporting causes short-term thinking. It’s one of the weakest arguments in the entire debate.

The average holding period for U.S. stocks has collapsed from roughly six years in the 1960s to about six months today. Most of that entire decline happened while quarterly reporting requirements were in place and unchanged. If you wanted to run a simple regression analysis on what’s driving short-termism, you’d have to hold the 10-Q constant, because it hasn’t changed. The variable that moved is investor behavior, not reporting frequency.

Short-termism is an investor psychology problem driven by a multitude of other forces, such as the rise of algorithmic and high-frequency trading, the explosion of options and derivatives, the 24/7 news cycle, social media creating herd momentum, the shift from active to passive investing compressing everyone’s attention span, and compensation structures at institutional funds that reward quarterly performance. And then throw long and short activism somewhere in this mix.

None of that goes away because a company files twice a year instead of four times.

And here’s an irony that nobody seems to want to talk about. The same exchanges and regulators backing semi-annual reporting because it would supposedly reduce short-termism are simultaneously pushing for 24-hour trading. Think about that. Nasdaq and NYSE are actively working to let investors trade stocks around the clock, seven days a week, the ultimate infrastructure for short-term thinking, while arguing with a straight face that filing a 10-Q four times a year is what’s contributing to people thinking short-term. You can’t champion 24/7 access to the sell button and then blame a quarterly filing for short-termism. Pick a fucking lane.

And here’s the part that really bothers me. When a CEO makes a suboptimal decision to “make a quarter,” that’s not a reporting problem, that’s a management problem. They’re not doing it because the SEC requires a 10-Q. They’re doing it because they’re afraid of how the market will react. That pressure comes from investors and analysts, not from a filing requirement. Six-month reporting won’t change anything . If your management team is making bad long-term decisions to placate short-term shareholders, the answer is better management and better shareholders, not less information.

If anything, reducing reporting frequency could make short-termism worse. Investors already don’t want to hold stocks for the long term. Give them fewer data points and longer stretches of uncertainty, and you give them more reasons to sell at the first sign of trouble rather than stick around. You’re not encouraging patience, you’re removing the confirmation points that patient investors need to stay patient.

What’s really hypocritical is that part of the reason the SEC claims to exist is to protect the everyday investor. The move to allow companies to abandon quarterly filing duties does exactly the opposite. However, it’s probably even worse than you think, in that not only does it complicate risk analysis, but it may end up suppressing alpha.

We’ve been here before, and it didn’t go well

Here’s what most people covering this story seem to forget: the U.S. used to have semi-annual reporting. The SEC didn’t invent quarterly filings on a whim. The shift from semi-annual to quarterly was a gradual process. Stock exchanges began requiring annual and semi-annual reports in the early 1900s, and regulators spent decades tightening disclosure requirements before the 10-Q became mandatory in 1970. Along the way, they repeatedly found that less frequent reporting left gaps that companies could exploit and that left investors exposed.

How much longer would it have taken an Enron-like fraud to get exposed?

The international data tells an uncomfortable story

Proponents love to point out that the UK and EU already do semi-annual reporting. What they don’t mention is how those markets are doing.

The UK had mandatory quarterly reporting only briefly, from 2007 to 2014, before dropping it. Since then, London has been hemorrhaging listings and struggling to attract new IPOs. By late 2025, London had fallen out of the world’s top 20 IPO markets, dropping to 23rd place behind Mexico, Singapore, and even Oman. If quarterly reporting were such a burden holding companies back, you’d expect the London market to have at least stabilized after removing it. Instead, the opposite happened. As one Wall Street Journal columnist put it:

“if quarterly reporting were such a huge barrier to companies, it’s odd that the U.S. market is thriving, while London is struggling to attract new listings or even hold on to existing ones.” – James Mackintosh

Now, to be fair, academic research on London’s decline points to multiple causes; Brexit uncertainty, persistent valuation discounts, and reduced domestic institutional demand all played major roles. You can’t pin London’s problems squarely on reporting frequency. But the trajectory is hard to square with the claim that less reporting makes markets more attractive.

The EU dropped quarterly requirements in 2013, and European equity markets have consistently lagged the U.S. in terms of both valuation multiples and capital formation.

Meanwhile, look at who still requires quarterly reporting. The U.S., India, and China are three of the most dynamic equity markets in the world. India’s securities regulator SEBI actually tightened its quarterly requirements in recent years, adding mandatory KPI disclosures and quarterly compliance certifications.

China requires quarterly. Even Japan, which recently consolidated its Q1 and Q3 statutory securities reports into exchange-based earnings reports, kept quarterly financial disclosure through the stock exchange’s timely disclosure rules. It was an efficiency reform to eliminate duplication, not a move away from quarterly transparency

Germany’s Frankfurt Prime Standard, which is required for inclusion in the DAX and all major German indices, still requires quarterly financial releases despite the broader EU shift away from them.

It certainly appears that the quarterly reporters have the strongest markets, while the semi-annual reporters have the weakest. Correlation isn’t causation, but it’s a data point worth taking seriously.

A 2020 study by Arif and De George in The Accounting Review drove this home. The researchers found that semi-annual reporters’ stock returns were almost twice as sensitive to the earnings announcements of U.S. industry peers during non-reporting periods compared to reporting periods. These heightened responses were followed by return reversals when the semi-annual reports finally dropped, indicating that investors periodically overreacted to peer-firm earnings news in the absence of own-firm disclosures, then corrected when the actual numbers came in. They also found elevated price volatility and trading volume during these gaps. Their conclusion: investors are unable to successfully offset the information loss from low reporting frequency, impairing their ability to value firms and adversely affecting market quality.

The cost savings argument sounds great until you think about who actually uses it

I highly doubt that Microsoft, Apple or JPMorgan are switching to semi-annual reporting. Their institutional shareholders and analyst coverage expect quarterly numbers, and the compliance cost is a rounding error on their income statement.

When the UK dropped its quarterly requirement, fewer than 10% of companies actually stopped reporting quarterly. The big ones kept doing it voluntarily because the market expected it. But the trend accelerated; by 2017, close to 40% of FTSE 100 companies (London) and roughly 60% of FTSE 250 companies had abandoned quarterly reports.

My instincts tell me that the companies most likely to opt in are smaller ones, the ones where compliance costs are relatively higher. Which means this immediate change lands squarely in the microcap space. The exact part of the market where information is already the scarcest, and arguably where most of the fraud exists.

So we’re reducing mandatory disclosure in the one corner of the market that probably needs it the most.

Follow the money; the exchanges have their own reasons for backing this

Ask yourself: why is Nasdaq lobbying for less reporting? Their whole pitch to companies is “list with us for access to capital markets and credibility.” Why would they want less transparency from their listed companies?

Because they’re getting squeezed from both ends.

In the mid-1990s, there were nearly 8,000 public companies listed in the U.S. Today, there are roughly half that. The number of U.S.-domiciled exchange-listed companies dropped from about 4,461 in 2004 to 3,929 in 2024. On the high end, companies are staying private longer. Why deal with SEC reporting when you can raise billions from private equity and venture capital? On the low end, smaller companies are getting pushed to OTC markets.

As of mid-2024, there were 430 Nasdaq-listed stocks trading below $1.00, up from just 72 in 2021. Today, that number stands at around 393, according to Finviz.

Here’s some telling stats:

• Average daily trades on OTC Markets platforms nearly doubled from roughly 38,000 in 2024 to 62,000 in 2025, as the number of listings continue to grow.
• OTC Markets Group’s revenue hit $125 million last year, up 13%.

And it’s not just involuntary delistings. Banks and other small companies are voluntarily moving from Nasdaq to OTC markets like OTCQX because the cost-to-benefit math doesn’t work anymore. OTC Markets reported that they doubled the number of banks joining OTCQX in 2025 compared to the prior year. The Texas Stock Exchange is launching in 2026, specifically targeting companies that want lower listing burdens.

Meanwhile, Nasdaq is actually tightening its own listing standards, raising the minimum market value of unrestricted publicly held shares for new listings under the net income standard from $5 million to $15 million as of January 17, 2026. So they’re making it harder to stay listed (well, if you want to believe that), while simultaneously lobbying to reduce reporting requirements. They want to keep the companies that generate fees while reducing the compliance burden, which is making those companies consider leaving.

Backing semi-annual reporting is Nasdaq protecting its revenue base, it has nothing to do with a holier-than-thou stance of protecting investors or reducing short-term thinking.

Or forget Nasdaq entirely, maybe this is just the next Rule 15c2-11

Here’s another way to think about it. Forget the exchange angle for a second. What if this is just the SEC continuing a longer pattern of quietly making it harder to invest in microcaps?

Think about the Rule 15c2-11 amendment. When the SEC tightened requirements for broker-dealers to publish quotes on OTC securities, it effectively killed liquidity for hundreds of smaller companies overnight. A stated goal was investor protection, but the practical effect was to push retail investors out of a market where they could have a huge edge. It also made investing in microcaps more challenging, as brokerage firms used the opportunity to put more limitations on investing in the space. Ironically, it also gave legitimate companies that didn’t want to really be public anymore a legal excuse to go dark.

Semi-annual reporting could do something similar. Not by banning anyone from investing in microcaps, but by degrading the information environment so much that rational investors, particularly retail investors who don’t have the resources to do deep primary research, simply can’t make informed decisions anymore. The information gap becomes too wide. And when retail pulls out, liquidity dries up, valuations compress, and the microcap ecosystem gets a little smaller.

Nobody has to pass a law saying “don’t invest in microcaps.” You just make it progressively harder to do it well.

What “optional” really means and who actually opts in

There’s an important nuance some people are glossing over. The SEC isn’t mandating semi-annual reporting. It’s just giving companies the option. That sounds reasonable until you think about how it actually plays out.

Just like Rule 211 gave legitimate microcaps a convenient legal off-ramp from being public, optional semi-annual reporting gives management teams a quiet way to reduce their accountability to shareholders without having to justify it as anything other than a cost-saving measure.

But who actually opts in? That’s where it gets interesting.

Microcaps that are actively raising capital or expect to need financing probably can’t afford to. Investors want current data before they write checks, and institutional allocators aren’t going to relax their due diligence standards just because the SEC relaxed the filing calendar. So, a lot of the companies that stay quarterly may end up being the ones that need money, higher-risk names.

Meanwhile, the microcaps most likely to go semi-annual might be the self-funding, cash-generating businesses. In other words, some of the best companies.

And here’s a question worth asking: if the higher-quality companies go semi-annual, do their valuations compress, and do they even care? These companies might happily accept a modest valuation discount in exchange for less regulatory overhead and less quarterly noise. That’s admirable in theory, but in practice it means the best microcap stories become harder for investors to find and harder to underwrite.

Now, there is also a potential positive outcome to think about. If Nasdaq reduces reporting requirements, it narrows the gap between what it takes to be listed on an exchange versus trading on the OTC. That could actually pull companies up from OTC to Nasdaq. Yes, more listings, more fees, more volume for the NASDAQ. And that would explain the exchanges’ enthusiasm for this change even more than the retention argument does. But, you could then argue that some quality OTC companies find an easier path to Nasdaq, leading to enhanced valuations. That’s worth watching.

Quarterly filings are the only thing keeping some companies honest

For a lot of microcaps, there is no analyst or institutional coverage.

Some companies will keep issuing press releases and 8-Ks, but without the quarterly filing to anchor them, those voluntary disclosures carry less weight and have fewer regulatory teeth. And other companies? They’ll go completely silent. No press releases. Just six months of absolute darkness between filings.

If you’ve been in microcaps long enough, you know exactly how both scenarios play out. The promotional management teams will run the stock up on press releases and promises, and by the time the actual financials hit, the story has already changed, and you’re holding the bag.

Six months is a long time to run a pump without anyone checking the math.

The alpha problem

Let’s say you own a microcap and they report a bad quarter. Under the current system, you have a decision to make, but you also know you’re getting another data point in 90 days. You can assess whether it was a one-off or the start of something worse. You can watch the next quarter for signs of recovery. That resolution cycle is where a lot of alpha gets generated, buying the dip on a fixable problem before the market realizes it’s been fixed.

Furthermore, lots of alpha is created when earnings are reported. It’s just logical to assume that with less earnings touch points you’ll have less opportunity to generate returns during the year. This is also related to something that’s very dear to my heart, which is information arbitrage, or taking advantage of the time it takes the market to price in differences between stuff in earnings call transcripts and related press releases. It’s a huge source of alpha for microcap investors.

By the way, I use information arbitrage tear sheets to help me find this alpha at the InfoArb Substack.

Under semi-annual reporting? You’re potentially tying up bad money longer than you have to do as opposed to recycling into something better.

And it gets worse. The market isn’t stupid. If participants know the resolution window has just doubled, they’re going to punish bad prints even harder on the way down. Why? Because there’s no near-term catalyst to recover sentiment. A stock that might drop 15% on a bad quarter under the current system could drop 25% under semi-annual, because the path to recovery just got twice as long and twice as uncertain.

That dead time between filings is where alpha goes to die. With all that being said, I don’t think the microcap edge is going to disappear. Maybe bigger information discrepancies will occur and create bigger opportunities using information arbitrage. We just might have to wait a little longer for them to surface.

To be clear, I couldn’t find any academic research directly linking reporting frequency to valuation multiples. But the research that does exist points to less efficient pricing, wider information asymmetry, reduced analyst coverage, and lower liquidity for semi-annual reporters. Every one of those factors is something the market typically discounts. It’s hard to imagine a scenario where investors assign the same multiple to a company they hear from twice a year as they do to one they hear from four times.

This creates a two-tier market, and retail loses

Here’s what I think actually happens if this passes. You’re going to see a new class of sophisticated investors, fund managers, deep-dive research shops, people with big egos and bigger Rolodexes, who actually love this change. Why? Because they have the resources to fill the information gap themselves. They can pick up the phone and call management. They can visit facilities. They can run channel checks and talk to customers and suppliers. The six-month reporting gap becomes their hunting ground. They’ll generate alpha precisely because the information playing field has become more uneven.

And that’s great for them. But it’s terrible for the everyday investor who doesn’t have those resources and who’s already at a big disadvantage. At least, the microcap universe is one place they could still have an advantage over the Wall Street. Under the current system, that investor has a fighting chance because the same information is available to everyone at the same time, every 90 days. Semi-annual reporting tilts the field toward the people with the most access, and away from the people who need the transparency the most.

To be fair, there are legitimate arguments on the other side

There are parts of the pro-semi-annual case that have some merit, even though I’ve already made the case that short-termism isn’t a reporting frequency problem.

Academic research is mixed on this. Some studies have found that quarterly reporting requirements are associated with increased earnings management and reduced long-term investment. But a CFA Institute study of the UK experience, which is the closest real-world test case we have, found no statistically significant difference in corporate investment levels between companies that reported quarterly and those that didn’t. The short-termism problem may be real, but it’s not clear that reporting frequency is actually the mechanism driving it.

If semi-annual reporting lets a CEO spend less time prepping for quarterly calls and more time actually running the business, that has real value. Especially in microcaps, where the management team is often three people wearing ten hats.

And the cost savings, while often overstated, aren’t nothing for a company doing $20 million in revenue.

There’s a better path, and the SEC is missing it

Here’s what frustrates me most about this debate. It’s framed as a binary, quarterly or semi-annual. As if those are the only two options. They’re not.

If the SEC is serious about reducing compliance burden without gutting transparency, there’s a middle path that actually protects investors.

Instead of eliminating two 10-Qs per year, why not streamline what goes into them? Require standardized quarterly press releases with real granularity. Not the 80-page legal document a 10-Q has become, but something meaningful that gives the market a quarterly pulse check without burying a small company’s CFO for six weeks.

At a minimum, require quarterly filings that flag what has materially changed from the prior quarter, especially when it comes to risk factors and balance sheet liquidity. I’d even go as far as to say to require a template or a type of investor change log table that says “here’s what’s different since last quarter.”

This is a unique opportunity for the SEC to do what it’s supposed to do… protect investors by improving the quality and accessibility of disclosures, not reducing them.

Make the information that matters easy to find instead of buried in footnotes and legalese. Put it in plain sight so investors don’t have to go fishing through 8-Ks and press releases hoping to piece together what’s happening between annual reports.

Where I Stand on this

The pro-semi-annual arguments are real, but they mostly benefit the companies that won’t use the option anyway. The risks, more room for fraud, wider information gaps, degraded signals, reduced liquidity, and lower valuations, are most concerning in the microcap space.

And the historical precedent is hard to ignore. The SEC created quarterly reporting because semi-annual reporting wasn’t working. The proposal to go back to what failed before, doesn’t make much sense.

If this goes through, I think a few things will happen.

Companies that voluntarily maintain quarterly reporting will wear it as a badge of credibility. It becomes a trust signal, “we have nothing to hide” and “we value investor communication.” For the kinds of well-run microcaps I look for, that’s actually a differentiator.

Insider transaction data becomes even more important. With fewer mandatory filings, Form 4s become one of the only real-time windows into what management sees. Investors who know how to read that signal gain an edge.

The gap between well-connected and under-resourced investors gets wider. Sophisticated players with management access will thrive. Retail investors relying on public filings will be at a growing disadvantage.

I’m not saying the SEC shouldn’t modernize disclosure rules. But reducing the frequency of mandatory reporting in the part of the market with the least transparency and the most potential for abuse? That’s solving the wrong problem for the wrong companies.

The people who benefit most from quarterly reporting aren’t the Fortune 500. It’s us, the microcap investors, who depend on those filings to separate the real opportunities from the noise and sniff out information arbitrage.

The SEC built this system because they learned the hard way what happens without it. I’d hate to watch them learn that lesson again.

What’s your take? Does semi-annual reporting help or hurt the microcap space? Reply and let me know. I want to hear from people actually doing this work.

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The post The SEC Wants to Let Companies Report Twice a Year appeared first on GeoInvesting.