Canadian securities regulators are planning to launch a pilot project to allow smaller public companies to disclose financial results semi-annually, testing a potential shift away from quarterly reporting that is also drawing interest in the United States.
The multiyear experiment, led by the Canadian Securities Administrators (CSA), would let certain junior issuers voluntarily skip their first- and third-quarter financial reports, instead releasing earnings twice each year.
The plan follows years of consultations, and stock-market executives have been expecting regulators to test semi-annual reporting, at least for some smaller entities. Toronto Stock Exchange chief executive officer Loui Anastasopoulos said in September that he expected a plan would be implemented within two years.
The launch of the pilot comes one month after the chair of the U.S. Securities and Exchange Commission (SEC), Paul Atkins, said the market watchdog will propose allowing public companies to report earnings twice a year, rather than the current quarterly requirement.
The SEC expressed interest in easing reporting rules days after U.S. President Donald Trump called for semi-annual reporting, reviving a previous push he made in 2018 during his first term. At that time, the SEC studied the issue but decided against making changes.
Opinion: Semi-annual earnings reports make a lot of sense
Mr. Trump has argued pulling back to semi-annual reporting would cut costs and discourage corporate executives from being short-sighted. But critics of such proposals have argued that the change would reduce transparency and could backfire by undermining investor confidence in capital markets.
The CSA’s pilot project would provide an exemption to some junior issuers listed on the TSX Venture Exchange or the Canadian Securities Exchange. The CSA is inviting comment for the next 60 days on a draft order that would provide the necessary exemptions, until Dec. 22.
“The semi-annual financial reporting pilot is the result of work and consultations by the CSA that go back several years, as well as our ongoing efforts to support the competitiveness of Canadian capital markets by making financial reporting more efficient and cost-effective for eligible issuers,” CSA chair Stan Magidson, who is also chief executive officer of the Alberta Securities Commission, said in a statement.
The CSA also said Thursday that it “intends to engage in a broader rule-making project related to voluntary semi-annual reporting.”
The CSA works with provincial regulators to co-ordinate and harmonize securities regulation in Canada.