U.S. Securities and Exchange Commission is facing growing criticism over a proposal that would allow publicly traded companies to reduce the frequency of mandatory financial disclosures. Among the responses submitted during the public comment period, one of the most detailed objections came from the Reddit investing community WallStreetBets, which argued that quarterly financial reports remain one of the few tools retail investors have to compete with institutional firms.
The SEC last week formally proposed changes that would weaken quarterly reporting requirements for public companies.
Under the current system, companies file one annual report and three quarterly reports, commonly known as 10-Q filings. The proposed rule would allow companies each year to choose between maintaining that structure or instead filing one annual report and one semi-annual report.
The SEC said the proposal is intended to reduce compliance costs and administrative burdens tied to quarterly reporting requirements. The regulator also argued that fewer filings could encourage companies to focus more on long-term business growth rather than short-term quarterly expectations from Wall Street analysts.
WallStreetBets Criticizes Reduced Transparency
In an unsigned letter submitted to the SEC, WallStreetBets described quarterly filings as “the single most important leveling mechanism between retail and institutional investors in U.S. equity markets.”
The community, which described itself as representing “approximately 18 million retail investors on Reddit,” argued that institutional investors already possess significant informational advantages through expert networks, private meetings, alternative datasets, and market research tools unavailable to most retail traders.
“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 letter stated.
The group argued that reducing mandatory disclosures from four reports per year to two would widen the information gap between large institutional investors and retail shareholders.
“The answer is not zero,” the letter said regarding the cost to retail investors of reduced disclosure frequency. “The answer is the spread between what insiders know and what we know, multiplied by every share we own during the gap.”
Criticism Extends Beyond Reddit Investors
The proposed rule has attracted criticism from a broad range of commenters during the first week of the SEC’s 60-day public comment period.
According to the article, more than 120 people submitted responses opposing the proposal, including retail investors, hedge fund managers, certified financial planners, and a former SEC attorney.
Some criticism also crossed political lines.
One anonymous financial planner wrote that they did not expect “a Republican-led Commission” to support a proposal they believed reduced transparency and disadvantaged retail investors.
Even some commenters supporting the proposal included conditions or additional recommendations, such as requiring companies to release simplified monthly financial statements in place of detailed quarterly filings.
Law professor Ann Lipton, who highlighted the WallStreetBets letter on Bluesky, noted that large institutional investment firms had not yet publicly commented on the proposal.
Retail Investors Defend Quarterly Filings
WallStreetBets also challenged the SEC’s claim that quarterly filings place excessive burdens on companies.
The group cited major public companies including Apple and Nvidia as examples of firms that continue to file quarterly reports while maintaining strong financial performance.
“Apple files a 10-Q every quarter and has nine hundred billion dollars in cash equivalents,” the letter stated. “Nvidia files a 10-Q every quarter and is worth more than the GDP of most G20 countries.”
The community also referenced its history dating back to the 2021 GameStop short squeeze trading surge, arguing that many retail investors learned how to read corporate filings through experience in the stock market.
“Many of us learned what a 10-Q was the hard way,” the letter said, referring to investors reading filings after sudden stock declines tied to earnings reports.
The SEC’s public comment period on the proposal remains open until early July.
Featured image credits: Flickr
For more stories like it, click the +Follow button at the top of this page to follow us.