Why Morningstar's CEO Supports the SEC's Shift to Semiannual Reporting, With Conditions

On May 5, 2026, the U.S. Securities and Exchange Commission formally proposed a rule change that would allow public companies to move from quarterly to semiannual financial reporting. The proposal would replace the long-standing Form 10-Q with a new semiannual Form 10-S, marking the most significant change to the cadence of corporate disclosure in more than 50 years.

Morningstar CEO Kunal Kapoor weighed in on the proposal in a Fortune commentary, expressing conditional support. His position is nuanced: semiannual reporting can work, but only if regulators pair it with continuous disclosure obligations, clear materiality thresholds, and targeted quarterly requirements for companies with elevated operational or financial risk.

This is a meaningful moment for investors, companies, and the broader capital markets ecosystem. Below, we unpack what the SEC's proposal entails, why Kapoor believes it has merit, and what safeguards need to be in place to protect market integrity.

Since 1970, public companies in the United States have filed quarterly financial reports, known as Form 10-Q, with the SEC. These filings provide unaudited financial statements and operational updates for each of the first three fiscal quarters, with the annual Form 10-K rounding out the year. The quarterly cadence has been a cornerstone of the American disclosure regime, giving investors a regular stream of financial data.

The SEC's new proposal would allow companies to file financial reports semiannually rather than quarterly, replacing the 10-Q with a new Form 10-S. The proposal brings the SEC closer to a structural change that has been discussed at various levels of government and industry for years, including by President Donald Trump, who argued that the quarterly cadence encourages a short-term mindset among corporate executives.

The proposal is now open for public comment before any final rule is adopted.

The debate around quarterly reporting has long centered on a concept that investors and corporate leaders alike know well: short-termism. The argument is that the relentless quarterly cycle pressures management teams to hit near-term earnings targets at the expense of long-term strategic investment. Companies may defer capital spending, cut research and development budgets, or make operational decisions designed to produce favorable quarterly numbers rather than build durable competitive advantages.

At Morningstar, we have long emphasized a long-term, owner-oriented approach to stock investing. Our Equity Research Group believes that a company's intrinsic worth results from the future cash flows it can generate, not from any single quarter's results. Our methodology is designed to prioritize the long term. While other research firms focus on what will happen in the next quarter, we look at a company's economic moat, fair value, and the uncertainty around that estimate to arrive at an investment rating.

This philosophical alignment is precisely why Kapoor's conditional support for the SEC's proposal resonates. When corporate leaders feel less pressure to optimize every 90-day window, they may allocate resources more thoughtfully toward research and development, strategic acquisitions, workforce development, and other initiatives that compound value over years, not quarters.

Short-termism is not a new concern in Morningstar's research lens. Our analysts have observed that the market continues to be overly focused on the short term and, as a result, structurally underappreciates companies with long reinvestment runways. A shift toward semiannual reporting, if designed well, could help redirect the conversation toward the fundamentals that truly drive long-term value.

One of the most practical arguments in favor of the SEC's proposal centers on the outsized burden that quarterly reporting places on smaller public companies. The process of preparing 10-Q filings, coordinating auditor reviews, maintaining Sarbanes-Oxley compliance, and hosting quarterly earnings calls consumes significant management bandwidth and financial resources.

Kapoor highlighted this point in his Fortune commentary. For smaller firms, the resources required to meet these obligations can divert attention and capital away from core business activities. A semiannual reporting cadence, combined with continued annual audit requirements and real-time event-based disclosures, could free up bandwidth for these companies to focus on growth and operations.

This matters for the health of public markets more broadly. The number of publicly traded U.S. companies has declined over the past several decades. Some industry observers have pointed to the regulatory burden of being a public company as one factor discouraging IPOs and encouraging privatization. If semiannual reporting can meaningfully reduce compliance costs for smaller issuers, it may help reverse this trend and encourage more companies to enter the public markets, which would expand the universe of investment opportunities for everyday investors.

Kapoor did not simply endorse the idea of less frequent reporting in the abstract. He pointed to a specific, functioning model: Australia's disclosure framework. In Australia, listed companies report financials twice a year but operate under continuous disclosure obligations. They must immediately release price-sensitive information as it occurs. Certain early-stage or exploration-type issuers in industries such as biotech, mining, and oil and gas are still required to file quarterly cash-flow reports.

In Kapoor's words, published in Fortune: "Australia offers a model that works. Australian-listed companies report financials twice a year but operate under continuous-disclosure obligations. They must immediately release price-sensitive information as it occurs. Certain early-stage or exploration-type issuers in industries such as biotech, mining, oil and gas are still required to file quarterly cash-flow reports. That's an elegant, risk-based framework that acknowledges semiannual disclosure is too infrequent for some business models."

This risk-based approach is a critical element. Not all companies carry the same level of operational or financial complexity. A large, stable consumer staples company with predictable cash flows and a decades-long track record presents a very different disclosure profile than a pre-revenue biotech firm conducting clinical trials. A well-designed semiannual framework would recognize these differences and maintain more frequent reporting requirements where they are most needed.

Kapoor's support comes with clear conditions, and these conditions deserve close attention. Simply reducing reporting frequency without strengthening other disclosure mechanisms would represent a net loss for investors. The conditions Kapoor outlined in his Fortune commentary focus on three areas.

First, continuous disclosure must be real and enforceable. Companies should keep investors promptly informed between formal reporting periods. This means releasing operational metrics, material business developments, and plainspoken updates as events occur, not waiting for the next filing window.

Second, materiality thresholds must be clear. Companies need well-defined guidance on what constitutes material information that triggers an interim disclosure, along with safe harbors that allow them to share operational updates without fear of litigation. This balance is essential for encouraging transparency rather than penalizing it.

Third, enforcement must be meaningful. As Kapoor put it in Fortune: "Enforce it or don't bother. Meaningful consequences and consistent supervisory follow-through are essential to ensuring continuous disclosure is more than a box-checking exercise."

Without these safeguards, the risks are real. Reduced reporting frequency could lead to lower analyst coverage, diminished liquidity, weaker transparency, and wider information asymmetry between institutional and retail investors. Global markets have demonstrated that less frequent reporting can harm investors when standards are poorly implemented or enforcement is lax.

For individual investors, this proposal raises practical questions about the flow of information. Quarterly earnings reports have long served as regular checkpoints for evaluating portfolio holdings. Analyst models depend on quarterly data points to calibrate forecasts. Earnings calls provide a structured forum for management to communicate directly with shareholders.

Under a semiannual regime, these touchpoints would become less frequent. But the quality and timeliness of information between reports could improve if continuous disclosure obligations are robust. Investors would need to pay closer attention to interim disclosures, material announcements, and operational updates rather than anchoring exclusively on periodic financial statements.

This shift aligns with how Morningstar already approaches investment analysis. Our analysts focus on a company's economic moat, its long-term cash flow potential, and the durability of its competitive advantages. Quarterly earnings serve as data points in that broader assessment, but they rarely change our long-term thesis on a company. A well-executed semiannual framework, paired with strong continuous disclosure, would still provide the information investors need to make informed decisions.

At the same time, we should be clear-eyed about the risks. Analysts would have less official data to build models. Price discovery between reporting periods could become more volatile. Smaller companies, paradoxically, could suffer from reduced visibility even as they benefit from lower compliance costs. The SEC will need to think carefully about how to balance these tradeoffs.

This proposal arrives at a time when the structure of public markets is under scrutiny from multiple angles. The growth of private markets, the decline in the number of publicly traded companies, and ongoing debates about the appropriate level of regulation for public issuers all intersect with the question of reporting frequency.

If the SEC can design a semiannual framework that genuinely reduces friction for issuers while maintaining or improving the quality of information available to investors, the reform could help strengthen public markets. More companies might choose to go public or remain public. Management teams could redirect resources toward building better businesses. And investors, armed with timely continuous disclosures and robust annual audits, could still evaluate their holdings with confidence.

But the key word is "if." The success of this reform hinges entirely on the quality of its implementation. Vague interim disclosure requirements, weak enforcement, and a one-size-fits-all approach would undermine the goals the SEC is trying to achieve. Kapoor's conditional endorsement reflects a sophisticated understanding of these dynamics: the idea has real merit, but the execution has to match the ambition.

The SEC's proposal is now in the public comment period, and the final rule could look quite different from what has been put forward. Industry participants, investor advocates, and market structure experts will all weigh in on the details.

From Morningstar's perspective, we will continue to prioritize investor protection and transparency in any regulatory evolution. Our research and analytical framework are designed for the long term, and we believe that companies and investors alike benefit from a disclosure regime that encourages thoughtful, forward-looking decision-making rather than a quarter-by-quarter sprint.

Kapoor's intervention in this debate reflects a broader principle at the heart of Morningstar's mission: empowering investor success. That mission does not depend on the frequency of financial reports. It depends on the quality, timeliness, and accessibility of the information that flows between companies and the people who invest in them.

The SEC has an opportunity to modernize corporate disclosure in a way that serves both issuers and investors. Whether it seizes that opportunity well will depend on the details still to come.