If U.S. securities authorities change the long-established financial reporting requirements for companies, it could bring the due diligence process for public companies closer to private firms, says Level Chan, a partner at Stewart McKelvey.

Last month, U.S. President Donald Trump weighed in on the need for companies to report financials on a quarterly basis and instead showed support for companies reporting every six months.

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“Did you ever hear the statement that, “China has a 50 to 100 year view on management of a company, whereas we run our companies on a quarterly basis???” Not good!!!” Trump said on social media.

Chan says asset managers would have to rely on alternative research methods as part of the due diligence process but a change to semi-annual reporting wouldn’t spell the end of the world for them.

“Different asset managers would lose a few inputs in terms of those earnings reports and maybe the [investor] calls and other follow ups, . . . then would have to rely on other means of research to do their due diligence and assessment of investments.”

This change in how investors consider public equities would more closely mirror the work already required in the private sector, he adds.

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Institutional investors rely on partnerships with investment managers to provide investment solutions backed by responsible due diligence and research. “They shouldn’t just be relying on what’s being publicly reported anyway.”

A potential regulatory requirement change wouldn’t entirely eliminate quarterly updates, he adds, noting companies may choose to voluntarily provide disclosure updates to investors consistent with good governance terms.

If the U.S. moves ahead with the reporting changes suggested by Trump, he expects Canadian companies to push for parity with the neighbour market.

“There would certainly be a push from many companies that [are], for instance, doing business in the U.S. and Canada and the desire to be consistent — it may be raised as an issue of competitive advantage here.”

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