Thousands wrote to the SEC about quarterly reporting. A detailed letter came from Exxon’s CFO

Among thousands of public comments to the SEC, a small group of CFOs offered competing views on reporting frequency and disclosure burdens.

Good morning. Earnings season is about to kick off, just as the U.S. Securities and Exchange Commission weighs whether companies should keep reporting quarterly or have the option to shift to semiannual disclosures.

In May, the SEC announced a proposed rule and form amendments that would allow semiannual reports to satisfy interim reporting obligations under federal securities laws. The comment period closed Monday. The SEC declined to comment on the number of letters received.

I had a conversation with Ohio State University accounting professor Tzachi Zach, who used AI to create a database that indexes public comment letters the SEC receives on the proposal, including the sentiment of comments. As of Tuesday evening, the database reflected 8,080 comment letters. Regarding sentiment, 7,994 opposed, 34 supported, and 52 were conditional.

Of that dataset, there were 33 public comment letters, of which Zach classified them as submitted by an individual in an active corporate role, such as CFO, audit chair, financial reporting manager, COO, or CTO. Of that group, 25 opposed, two supported the proposal and six of the comments were classified as conditional.

But Zach mentioned he expects that many more letters will continue to flow into his database. “The deadline was yesterday to submit, but there is a lag between the time the person submits until the time that the SEC puts it in the docket,” he told me.

What public-company CFOs told the SEC

In the dataset, there were comments from four current public CFOs. One of the most extensive submissions came from energy giant ExxonMobil, one of the world’s largest public companies. Neil Hansen, senior vice president and CFO, filed an 11-page comment letter dated June 24 supporting the SEC’s proposal to allow companies to choose semiannual reporting instead of quarterly SEC filings.

ExxonMobil’s position is not that quarterly disclosure should end, but that companies should have flexibility over whether to provide those disclosures through quarterly Form 10-Q filings. Hansen argued that the information ecosystem has changed while SEC reporting rules have not. In his view, disclosure requirements should be more flexible, principles-based and focused on material information rather than repetitive compliance.

He wrote that investors increasingly rely on a broader mix of communications, including earnings releases, Forms 8-K, investor presentations, webcasts and company websites, rather than Form 10-Q filings alone.

“We observe that substantially more emphasis is placed on these timelier communications and broader avenues of information,” Hansen wrote.

Hansen also said semiannual reporting would not materially affect ExxonMobil’s insider trading policies or blackout periods, which are tied to quarterly earnings releases rather than Form 10-Q filings. “If we elect semiannual reporting,” he wrote, the company would expect to continue providing quarterly financial disclosures through earnings releases furnished on Form 8-K.

A key recommendation in the letter is that semiannual reporting should remain optional. He wrote that companies differ in their industries, investor bases, capital needs and complexity, and should be able to decide whether quarterly Form 10-Q filings provide enough value to justify their cost. ExxonMobil also proposed allowing companies to file abbreviated quarterly financial statements through a new Form 8-K item rather than requiring a full Form 10-Q.

More perspectives from public-company finance chiefs:

—Lora Jones, EVP and CFO, National Bankshares (Nasdaq: NKSH): “We are in favor of the proposed rule. The rule will give companies the ability to choose the option appropriate to their shareholders’ preferences and provide greater ability to manage reporting resources.”

—Douglas K. Howell, CFO, Arthur J. Gallagher & Co. (NYSE: AJG):  “We fully support the Commission’s proposal to reduce reporting frequency; however, the public debate surrounding this issue appears to be limited to only two options: quarterly and semiannual. While many long-term investors support a move to semiannual reporting, we have seen press reports of certain investors expressing reservations, and many investors expressed concern when the Commission solicited comment on this idea in 2018. We believe there is a third alternative that also merits consideration, which may prove satisfactory to investors concerned about a move to semiannual reporting—a ‘triannual’ reporting framework.”

—Creighton Early, CFO, Willdan Group Inc. (Nasdaq: WLDN): “Relief from the burdens of periodic reporting would be welcome, but the burden is less about frequency and more about the disclosure and reporting requirements. A reduction in the quantity of reporting on footnotes, acquisitions, taxes, financings, etc, would make a significant difference. Reporting quarterly is good for investors and good for the company. The depth of disclosure, especially regarding arcane and misleading accounting pronouncements, is what takes time and money, not quarterly filing.”

Now that the comment period has ended, SEC staff will review the submissions and recommend whether to adopt, revise, repropose or withdraw the rule. If the Commission moves forward, commissioners would vote on a final rule, including an effective date and any transition period.

I’d love to hear your thoughts on the topic. Send me an email.

Sheryl Estrada
sheryl.estrada@fortune.com

This story was originally featured on Fortune.com