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U.S. President Donald Trump said Friday that he wanted the Securities and Exchange Commission (SEC) to explore doing away with quarterly corporate reports, replacing them with filings every six months.

In a tweet, he argued a longer time frame would “allow greater flexibility & save money.” But any such policy change from the SEC would likely face a long and uncertain path to becoming reality.

CAN TRUMP FORCE THE SEC TO CHANGE THE RULES?

No. The SEC is independent of the administration and sets its own agenda. The president cannot directly order it to pursue specific changes.

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While Trump nominated SEC Chairman Jay Clayton as the agency’s head, as well as two of its three commissioners (one additional Trump nominee is pending before the U.S. Senate), he does not oversee its work.

Trump tweeted, “I have asked the SEC to study!”, but it officially can only be a request, not an order.

WILL THE SEC STUDY THE IDEA?

While Trump cannot force Clayton to make changes, as a matter of courtesy the SEC chairman may promise to study the issue. Staff would likely perform its own research, examine existing academic literature and take on board industry feedback to begin to build the foundation for potential rule-changes.

Regulators can conduct studies of their own volition, or will do so at the request of Congress, the president, or the public. But there is no guarantee a study will lead to policymaking or regulatory changes.

WHAT IS THE PROCESS FOR CHANGING THE RULES?

The Administrative Procedure Act outlines a robust process for changing regulations which requires an analysis of the costs and benefits that would have to justify the changes.

In addition to this federal requirement, Clayton would have to subject any changes to the SEC’s own formal rule-making process, which would require the support of the majority of the SEC’s sitting commissioners.

He would need to draft a proposed rule-change which would then be put to an industry consultation during which investors, companies, exchanges, pension funds and public interest groups would likely bombard the SEC with information.

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Ultimately, the SEC would need the majority of its sitting commissioners (there are currently four) to vote for the final changes. SEC rulemaking, particularly on contentious issues, can drag on for months if not years.

WOULD SUCH A BIG CHANGE NEED CONGRESSIONAL APPROVAL?

No. While the Securities Exchange Act of 1934 requires companies to report periodically, the SEC has the discretion to draw up or change the specific rules on how frequently this happens. But Congress could effectively overrule any SEC decision by passing a law requiring quarterly reporting, although lawmakers may be reluctant to do so.

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