WallStreetBets bashes SEC's idea to scrap quarterly earnings reports

Retail traders on WallStreetBets are not on board with the Securities and Exchange Commission's plan to dial back reporting requirement for public companies. In addition to bashing the idea in discussions on the popular investing forum, a public comment submitted to the SEC by users of the subreddit on Wednesday hit back at the proposal for firms to report financial results just twice per year: "We are against it," the comment reads."The proposal rests on the theory that quarterly reporting causes short-termism among corporate managers," the comment stated. "Whatever the merits of that argument as applied to the C-suite, it has the relationship to retail investors exactly backwards."The authors, who did not reveal their names in the letter, repeatedly highlighted the importance of 10-Qs, not just as a means of transparency and information, but as a tool that helps bridge the gap between retail and institutional investors.The Reddit community is well known for its slogan: "Like 4chan found a Bloomberg Terminal," in reference to the edgy internet forum known for its memes. But as the letter noted, most retail traders don't actually have access to a pricey Bloomberg terminal , which provides institutional investors with troves of information for thousands of dollars per year. By contrast, retail traders on WallStreetBets and elsewhere often depend on public info such as quarterly 10-Qs to understand market developments."Institutional investors have expert networks, channel checks, alternative data, satellite imagery of retailer parking lots, credit card panel data, and direct management access through conferences and one-on-one meetings that cost more than most of our portfolios. We have the 10-Q."The comment goes on to say that many WallStreetBets members learned about investing by buying stocks, watching them fall, and turning to the next earnings report to learn why."That is a stupid order of operations and we acknowledge it," the author added. "But it is also the entire mechanism by which a generation of retail investors taught itself to read financial statements, and the Commission is now proposing to cut that mechanism in half."The letter noted that if the SEC's proposal moves forward and quarterly 10-Q requirements are eliminated, retail investors will be at a significant disadvantage relative to Wall Street.While the authors acknowledged the SEC's argument that companies will face less financial pressure if they are required to post fewer earnings disclosures. Kunal Kapoor, CEO of market research firm Morningstar, recently told Business Insider that he shares this view.However, the Wall Street Bets forum members behind the letter maintain that any savings would not pose a significant impact on the companies they are concerned with."The entire S&P 500 files a 10-Q every quarter, and the S&P 500 is at an all-time high. If quarterly reporting is crushing American capitalism, American capitalism is hiding it well."The SEC has received dozens of comments, many of them coming out strongly against the agency's idea."Doubling the time between disclosures is a gift-wrapped invitation for corporate malfeasance, fraud, and the kind of accounting shell games that wiped out shareholders at Enron and WorldCom," one anonymous comment reads."It ain't broke, so don't try to fix it. This lack of reporting would create a gulf between the information the institutional investor would have vis-a-vis the retail investor. Please reject this solution," another comment submitted by an advisor at Geneos Wealth Management said.WallStreetBets moderator Noor Al told Business Insider that in his view, the letter's message is consistent with what the community stands for."In an age of unprecedented technology, markets should trend to lower information asymmetry. We should see more frequent, not less, corporate updates," he said. "Yes, the administrative costs are a burden, but it is worth the price to remain the greatest place in the world to invest."The WallStreetBets comment goes on to note that the proposed reporting changes would severely undermine the 1934 Securities Exchange Act, created to help level the playing field for investors following the stock market crash of 1929."The Commission has spent 90 years making it easier for people like us to participate in public markets on something approaching fair terms," the letter stated. "We are asking the Commission not to spend this rulemaking making it harder."

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