WEBVTT - Trump Asks SEC to Review Quarterly Earnings Reports

0:00:03.480 --> 0:00:07.560
<v Speaker 1>Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

0:00:07.640 --> 0:00:10.440
<v Speaker 1>day we bring you insight and analysis into the most

0:00:10.480 --> 0:00:13.399
<v Speaker 1>important legal news of the day. You can find more

0:00:13.480 --> 0:00:18.040
<v Speaker 1>episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud

0:00:18.320 --> 0:00:22.680
<v Speaker 1>and on Bloomberg dot com slash podcasts. Earlier today, President

0:00:22.720 --> 0:00:26.160
<v Speaker 1>Trump tweeted that he's asked the SEC to study ending

0:00:26.280 --> 0:00:30.680
<v Speaker 1>quarterly reporting for US businesses to quote allow greater flexibility

0:00:30.840 --> 0:00:34.880
<v Speaker 1>and save money. Morgan Stanley CEO James Gorman voice support

0:00:34.960 --> 0:00:39.000
<v Speaker 1>for the idea on Bloomberg Today. I think quotally reporting,

0:00:39.280 --> 0:00:41.080
<v Speaker 1>and to Budda bluntly, I think it's s and I

0:00:41.840 --> 0:00:43.640
<v Speaker 1>every third in weeks and by the way, quote has

0:00:43.640 --> 0:00:47.239
<v Speaker 1>come around with alarming frequency. Right, They've been trying to

0:00:47.280 --> 0:00:49.440
<v Speaker 1>get this thing to stop. But at least you know

0:00:49.520 --> 0:00:53.000
<v Speaker 1>this is one thing the Brits definitely have figured out

0:00:53.040 --> 0:00:56.160
<v Speaker 1>what the six months reporting. Joining me is Peggy Collins,

0:00:56.160 --> 0:01:00.000
<v Speaker 1>Bloomberg News US Investing team leader. So, Peggy, it seems

0:01:00.080 --> 0:01:03.800
<v Speaker 1>natural that corporations would welcome getting rid of two reports

0:01:03.840 --> 0:01:06.520
<v Speaker 1>a year. But what are the dangers? Well, A couple

0:01:06.520 --> 0:01:10.640
<v Speaker 1>of the dangers are that investors have less transparency, right,

0:01:10.720 --> 0:01:13.360
<v Speaker 1>So We've seen this in the news of late with

0:01:13.720 --> 0:01:16.600
<v Speaker 1>Elon Musk saying he might take Tesla private. And one

0:01:16.600 --> 0:01:19.959
<v Speaker 1>of the reactions that we've had from shareholders or shareholder

0:01:20.000 --> 0:01:23.559
<v Speaker 1>activists is that, well, you're not getting as much information

0:01:23.600 --> 0:01:26.319
<v Speaker 1>then in terms of what the company's earnings might be,

0:01:26.520 --> 0:01:30.720
<v Speaker 1>what their executive pay is to influence whether you buy yourself.

0:01:31.080 --> 0:01:33.560
<v Speaker 1>The other potential is that when companies are in the

0:01:33.640 --> 0:01:38.600
<v Speaker 1>dark more, there's more potential for them to do nefarious

0:01:38.640 --> 0:01:41.400
<v Speaker 1>things such as insider trading, for example, and for it

0:01:41.440 --> 0:01:45.200
<v Speaker 1>to be harder for people to spot, or for companies

0:01:45.200 --> 0:01:47.440
<v Speaker 1>to be more worried about doing it in the first place,

0:01:47.520 --> 0:01:51.680
<v Speaker 1>and because they might get caught. So what are some

0:01:51.840 --> 0:01:56.480
<v Speaker 1>of the less obvious advantages to corporations besides just not

0:01:56.560 --> 0:01:59.000
<v Speaker 1>the extra work. Well, I think, as you said, the

0:01:59.080 --> 0:02:02.320
<v Speaker 1>extra work and all so costs for smaller companies. A

0:02:02.400 --> 0:02:04.240
<v Speaker 1>number of the plates that we've heard is that with

0:02:04.280 --> 0:02:08.240
<v Speaker 1>all the regulation today and the requirements from the SEC

0:02:08.400 --> 0:02:11.120
<v Speaker 1>of reporting, that if you're a smaller company, that's a

0:02:11.160 --> 0:02:14.359
<v Speaker 1>big burden. And therefore there's more and more smaller companies

0:02:14.400 --> 0:02:16.280
<v Speaker 1>that say I'm not going to go public, I'm going

0:02:16.320 --> 0:02:18.120
<v Speaker 1>to stay private because I don't want to have to

0:02:18.160 --> 0:02:20.639
<v Speaker 1>do all those things. So that's one of the things

0:02:20.880 --> 0:02:23.280
<v Speaker 1>I think. Another point is that we've talked to some

0:02:23.320 --> 0:02:26.560
<v Speaker 1>people today. You said it could make financial analysts more

0:02:26.600 --> 0:02:30.400
<v Speaker 1>popular or valuable because they are supposed to be talking

0:02:30.400 --> 0:02:33.800
<v Speaker 1>to companies regularly, and so if the public has information

0:02:33.800 --> 0:02:37.280
<v Speaker 1>on a less frequent basis, they the financial analysts who

0:02:37.360 --> 0:02:40.640
<v Speaker 1>put out reports could be become more important. So, Peggy,

0:02:40.680 --> 0:02:44.480
<v Speaker 1>this was released by the White House to clarify President

0:02:44.600 --> 0:02:47.920
<v Speaker 1>Trump's tweet. It says the President is interested in examining

0:02:47.919 --> 0:02:51.200
<v Speaker 1>this issue on whether short term earnings reporting requirements for

0:02:51.280 --> 0:02:55.079
<v Speaker 1>public companies reduce incentives for them to engage in long

0:02:55.200 --> 0:02:58.519
<v Speaker 1>term investing in the United States, a part of the

0:02:58.520 --> 0:03:03.040
<v Speaker 1>administration's ongoing regulatory form efforts. So put in that context,

0:03:03.080 --> 0:03:06.080
<v Speaker 1>does that give you more insight into what he's looking for.

0:03:06.280 --> 0:03:08.440
<v Speaker 1>So that's something definitely that I've been hearing over the

0:03:08.520 --> 0:03:11.799
<v Speaker 1>last few years, covering a variety of investors and family

0:03:11.880 --> 0:03:15.480
<v Speaker 1>offices that invest in companies in the US that aren't public,

0:03:15.520 --> 0:03:18.280
<v Speaker 1>a lot of family owned businesses across the country, And

0:03:18.320 --> 0:03:20.960
<v Speaker 1>one of the things that we've heard repeatedly is that

0:03:21.440 --> 0:03:23.720
<v Speaker 1>companies are saying, you know, what if we're under this

0:03:23.840 --> 0:03:27.120
<v Speaker 1>pressure every quarter to hit certain numbers in order for

0:03:27.200 --> 0:03:29.560
<v Speaker 1>our shareholders and the stock price to be in the

0:03:29.600 --> 0:03:33.079
<v Speaker 1>limelight in a good way. That prevents us from sometimes

0:03:33.080 --> 0:03:36.720
<v Speaker 1>putting money into research and development efforts that would actually

0:03:36.760 --> 0:03:39.280
<v Speaker 1>benefit the company over the longer term. So I'm not

0:03:39.280 --> 0:03:41.120
<v Speaker 1>going to go public. I'm going to take some private

0:03:41.160 --> 0:03:44.160
<v Speaker 1>investment money so that way I can spend some more

0:03:44.200 --> 0:03:47.600
<v Speaker 1>money in the shorter term on the long term value

0:03:47.760 --> 0:03:51.720
<v Speaker 1>of building another plant or or doing some research on technology,

0:03:51.760 --> 0:03:55.720
<v Speaker 1>for example. The SEC has been reticent to make changes.

0:03:55.800 --> 0:03:59.720
<v Speaker 1>Where does it stand well? The Trump tweet this morning

0:03:59.720 --> 0:04:03.200
<v Speaker 1>would surprising for a lot of us, including me, um

0:04:03.400 --> 0:04:06.119
<v Speaker 1>and so people have asked, you know, how quickly could

0:04:06.120 --> 0:04:09.200
<v Speaker 1>they do something like this? My opinion is not very fast.

0:04:09.320 --> 0:04:13.000
<v Speaker 1>Most regulatory items, and certainly something that would be such

0:04:13.040 --> 0:04:15.480
<v Speaker 1>a sea change like this one take a long time

0:04:15.520 --> 0:04:18.159
<v Speaker 1>to go through. There's a lot of public comments and

0:04:18.240 --> 0:04:21.679
<v Speaker 1>studies and um and this might have to go through Congress,

0:04:21.680 --> 0:04:23.479
<v Speaker 1>so I think it would take a while to have

0:04:23.560 --> 0:04:25.800
<v Speaker 1>to happen. The SEC also has a lot on its

0:04:25.800 --> 0:04:29.240
<v Speaker 1>plate between Elon Musk and Tesla and all sorts of things.

0:04:29.360 --> 0:04:32.360
<v Speaker 1>The SEC is always busy, but it would it be

0:04:32.480 --> 0:04:38.039
<v Speaker 1>likely to initiate this kind of a fundamental change. I

0:04:38.080 --> 0:04:41.360
<v Speaker 1>think it's possible. We've seen this happened in other places

0:04:41.440 --> 0:04:43.800
<v Speaker 1>around the world. You played that clip from James Gorman,

0:04:43.839 --> 0:04:47.359
<v Speaker 1>and essentially what happened in the UK of late in

0:04:47.400 --> 0:04:49.800
<v Speaker 1>the last decade or so is that they switched to

0:04:49.960 --> 0:04:53.320
<v Speaker 1>a more six month model of reporting. There's mixed results

0:04:53.320 --> 0:04:56.040
<v Speaker 1>on what that has actually mean. In some cases companies

0:04:56.080 --> 0:04:59.040
<v Speaker 1>have actually continued to put out the same types of

0:04:59.080 --> 0:05:02.880
<v Speaker 1>information on a more regular basis than six months anyway,

0:05:02.920 --> 0:05:05.200
<v Speaker 1>But it is one of those things that it's possible.

0:05:05.240 --> 0:05:09.120
<v Speaker 1>There's precedence for it. There's certainly a lot of corporate

0:05:09.920 --> 0:05:14.080
<v Speaker 1>uh excitement around it, and we've seen President Trump say

0:05:14.120 --> 0:05:16.479
<v Speaker 1>things and actually get them done in some cases faster

0:05:16.520 --> 0:05:19.520
<v Speaker 1>than people expected and with less and less regulations. Who

0:05:19.520 --> 0:05:21.359
<v Speaker 1>knows what will happen. So just we have about a

0:05:21.400 --> 0:05:25.160
<v Speaker 1>minute here. What's your what's your opinion of it? It's

0:05:25.160 --> 0:05:27.840
<v Speaker 1>a good question. I think the first thing that came

0:05:27.880 --> 0:05:31.120
<v Speaker 1>to my mind being a journalist is that more information

0:05:31.200 --> 0:05:33.960
<v Speaker 1>is usually better than less. Um So I think you know,

0:05:34.040 --> 0:05:36.280
<v Speaker 1>I was a personal finance reporter for many years here

0:05:36.279 --> 0:05:39.800
<v Speaker 1>at Bloomberg before leading our investing coverage, and that was

0:05:39.839 --> 0:05:41.520
<v Speaker 1>the first thing that came to my mind that I

0:05:41.520 --> 0:05:43.800
<v Speaker 1>I usually deferred to the fact that if you have

0:05:43.920 --> 0:05:46.839
<v Speaker 1>more information and shareholders have more information on what a

0:05:46.839 --> 0:05:49.120
<v Speaker 1>company is doing, that it keeps them more accountable to

0:05:49.160 --> 0:05:52.560
<v Speaker 1>what It also helps you make a more informed decision

0:05:52.560 --> 0:05:55.080
<v Speaker 1>on whether to buy yourself. I think you'll have quite

0:05:55.080 --> 0:05:57.680
<v Speaker 1>a while before we actually get to that point if

0:05:57.720 --> 0:05:59.880
<v Speaker 1>we do. Thanks so much, Peggy. That's Peggy Collins for

0:06:00.120 --> 0:06:08.120
<v Speaker 1>burg News US Investing team leader. At a cabinet meeting yesterday,

0:06:08.200 --> 0:06:11.720
<v Speaker 1>President Trump addressed the continuing fight against opioid addiction in

0:06:11.760 --> 0:06:15.720
<v Speaker 1>the US, asking Attorney General Jeff Sessions to take legal action.

0:06:16.760 --> 0:06:20.440
<v Speaker 1>I'd also like to ask you to bring a major

0:06:20.520 --> 0:06:24.039
<v Speaker 1>lawsuit against the drug companies on opioid. Some states have

0:06:24.120 --> 0:06:26.960
<v Speaker 1>done it, but I'd like a lawsuit to be brought

0:06:27.400 --> 0:06:32.800
<v Speaker 1>against these companies that are really sending opioids at a

0:06:32.880 --> 0:06:36.919
<v Speaker 1>level that it shouldn't be happening. Joining me is Richard

0:06:36.960 --> 0:06:40.000
<v Speaker 1>Austin is a professor at the University of Kentucky Law School.

0:06:40.520 --> 0:06:44.360
<v Speaker 1>Richard drug makers are also already facing more than nine

0:06:44.400 --> 0:06:48.480
<v Speaker 1>hundred lawsuits by more than twenty five cities, states, counties,

0:06:48.920 --> 0:06:52.400
<v Speaker 1>and others over opioid addiction, most of those in federal court,

0:06:52.960 --> 0:06:55.719
<v Speaker 1>and the Trump administration has filed a request to join

0:06:55.839 --> 0:06:59.680
<v Speaker 1>settlement talks in the multi district litigation in Ohio. So

0:07:00.040 --> 0:07:04.560
<v Speaker 1>I have the Justice Department bring a separate suit. Well,

0:07:04.640 --> 0:07:09.160
<v Speaker 1>I think the theories that they would use are somewhat

0:07:09.240 --> 0:07:12.880
<v Speaker 1>different from, UH, the theories that the other plantiffs have

0:07:13.000 --> 0:07:15.680
<v Speaker 1>been bringing in in the litigation that you spoke of.

0:07:16.400 --> 0:07:19.840
<v Speaker 1>In particular, they are a variety of federal statutes that

0:07:20.280 --> 0:07:23.160
<v Speaker 1>the drug companies and when I say drug companies, I

0:07:23.200 --> 0:07:28.400
<v Speaker 1>mean manufacturers, distributors, and large scale retail sellers UH that

0:07:28.520 --> 0:07:31.880
<v Speaker 1>they may have violated some of these federal statutes UH

0:07:31.880 --> 0:07:37.200
<v Speaker 1>and so UH. And indeed, the federal government has brought

0:07:37.360 --> 0:07:42.280
<v Speaker 1>suits against most of these UH pharmaceutical companies and has

0:07:42.320 --> 0:07:46.520
<v Speaker 1>either one or has reached settlements that were very favorable

0:07:46.560 --> 0:07:50.520
<v Speaker 1>to them. So I'm guessing that they don't want to

0:07:50.560 --> 0:07:53.960
<v Speaker 1>get caught up in a settlement process that the global

0:07:54.000 --> 0:07:56.840
<v Speaker 1>settlement process, which is which is what would come out

0:07:56.880 --> 0:08:01.160
<v Speaker 1>of the multidistrict litigation. So if they're so, if there's

0:08:01.160 --> 0:08:03.800
<v Speaker 1>a global settlement process going on in the multi district

0:08:03.840 --> 0:08:07.200
<v Speaker 1>litigation and there's a federal separate federal lawsuit, would that

0:08:07.240 --> 0:08:14.440
<v Speaker 1>affect the settlement process? Well, not directly, of course. Um, realistically,

0:08:14.560 --> 0:08:17.400
<v Speaker 1>there's only so much money the drug companies have, so

0:08:17.800 --> 0:08:21.200
<v Speaker 1>to the extent that they pay some of that to

0:08:21.280 --> 0:08:24.440
<v Speaker 1>the federal government, there will be less left for the

0:08:24.480 --> 0:08:29.080
<v Speaker 1>other plaintiffs, assuming that there is a settlement. Now, what

0:08:29.240 --> 0:08:34.840
<v Speaker 1>about criminal proceedings by the Justice Department. Well, that's a

0:08:34.920 --> 0:08:38.480
<v Speaker 1>very real possibility because many of these federal statutes I

0:08:38.559 --> 0:08:42.720
<v Speaker 1>spoke of our criminal as well as civil UH and

0:08:42.880 --> 0:08:46.199
<v Speaker 1>UH and therefore there's the prospect there's some pretty substantial

0:08:46.559 --> 0:08:50.600
<v Speaker 1>criminal liability, even jail time theoretically, although of course you

0:08:50.600 --> 0:08:52.880
<v Speaker 1>can't put a corporation in jail, but you can put

0:08:52.920 --> 0:08:57.640
<v Speaker 1>their officers in jail. And that almost happened about ten

0:08:57.720 --> 0:09:02.199
<v Speaker 1>years ago with Perdue Farm and Oxyconton. They were charged

0:09:02.320 --> 0:09:07.640
<v Speaker 1>with uh mislabeling, which in that case meant that their

0:09:08.440 --> 0:09:13.760
<v Speaker 1>sales reps were telling doctors that making statements to doctors

0:09:13.760 --> 0:09:18.240
<v Speaker 1>that were um contradictory to what the labeling on the

0:09:18.280 --> 0:09:21.679
<v Speaker 1>product approved by the FDA set And they were ultimately

0:09:21.760 --> 0:09:25.400
<v Speaker 1>find about six d million dollars and there was serious

0:09:25.400 --> 0:09:29.680
<v Speaker 1>talk about the sending some of the top executives to jail,

0:09:29.760 --> 0:09:33.520
<v Speaker 1>and instead they were find very substantial amounts of money

0:09:33.559 --> 0:09:37.800
<v Speaker 1>as well on these criminal charges. What do you see

0:09:38.040 --> 0:09:41.480
<v Speaker 1>and what has history shown us about the effectiveness of

0:09:41.600 --> 0:09:47.320
<v Speaker 1>litigation as a tactic to fight drug abuse. Well, I

0:09:47.400 --> 0:09:49.840
<v Speaker 1>don't think the track record is very good, at least

0:09:49.840 --> 0:09:53.400
<v Speaker 1>not so far. Of course, they were the only things

0:09:53.480 --> 0:09:56.800
<v Speaker 1>we have to to compare this with is the tobacco

0:09:56.880 --> 0:10:00.920
<v Speaker 1>litigation of some fifteen years ago, if twenty years ago,

0:10:01.520 --> 0:10:04.520
<v Speaker 1>and that certainly resulted in a very large settlement that

0:10:04.600 --> 0:10:07.440
<v Speaker 1>went to the States, But I'm not sure people gave

0:10:07.520 --> 0:10:11.040
<v Speaker 1>up smoking UM. And indeed it was almost the devil's

0:10:11.080 --> 0:10:15.560
<v Speaker 1>bargain because now the states, at least that were parties

0:10:15.600 --> 0:10:19.319
<v Speaker 1>to that settlement, UM had a strong incentive not to

0:10:19.400 --> 0:10:22.840
<v Speaker 1>put the tobacco companies out of business, because that would

0:10:22.960 --> 0:10:26.280
<v Speaker 1>kill the goose that was laying the golden egg. UM.

0:10:26.320 --> 0:10:32.960
<v Speaker 1>As far as the present UM litigation is concerned, I'm

0:10:31.600 --> 0:10:36.960
<v Speaker 1>uh skeptical that it will have much of an effect.

0:10:37.440 --> 0:10:40.880
<v Speaker 1>It might, of course, drug companies might change their conduct

0:10:40.880 --> 0:10:46.479
<v Speaker 1>in response to the prospect of even more UM damage awards.

0:10:46.520 --> 0:10:50.160
<v Speaker 1>But in the past they've pretty much just taken it

0:10:50.240 --> 0:10:52.880
<v Speaker 1>as a cost of doing business, then moved on. Even

0:10:52.920 --> 0:10:56.559
<v Speaker 1>that very substantial uh fine that I've spoke of earlier,

0:10:56.600 --> 0:11:00.680
<v Speaker 1>six million dollars perdue, just blew it off. They paid

0:11:00.720 --> 0:11:02.760
<v Speaker 1>the money, and they went back to pretty much doing

0:11:02.760 --> 0:11:06.440
<v Speaker 1>what they've been doing before. So I don't know that

0:11:06.559 --> 0:11:11.840
<v Speaker 1>it would uh really address the problem very very much.

0:11:12.160 --> 0:11:15.160
<v Speaker 1>Only only a minute here on a topic that certainly

0:11:15.200 --> 0:11:19.400
<v Speaker 1>deserves a lot of consideration. But so is the answer

0:11:19.440 --> 0:11:23.040
<v Speaker 1>then in legislation, what's the best answer? Well, I think

0:11:23.080 --> 0:11:26.520
<v Speaker 1>that's certainly part of it. I think in addition, um

0:11:26.600 --> 0:11:29.199
<v Speaker 1>the federal government in particular is going to have to

0:11:29.640 --> 0:11:34.360
<v Speaker 1>um uh finance some programs to try to deal with

0:11:34.400 --> 0:11:37.880
<v Speaker 1>the addiction problem. Uh. You know, you've got perhaps as

0:11:37.920 --> 0:11:40.760
<v Speaker 1>many as two million people who are addicted, and they're

0:11:40.800 --> 0:11:43.800
<v Speaker 1>going to stay addicted, perhaps for the rest of their lives,

0:11:43.800 --> 0:11:47.400
<v Speaker 1>and so you can't just leave them out there. You

0:11:47.440 --> 0:11:49.920
<v Speaker 1>have to do something to help them, and there isn't

0:11:50.000 --> 0:11:54.440
<v Speaker 1>much available at the present time. And of course, giving

0:11:54.440 --> 0:11:56.160
<v Speaker 1>the states a lot of money doesn't mean they're going

0:11:56.200 --> 0:11:59.319
<v Speaker 1>to spend it on these kinds of programs. It's it's

0:11:59.400 --> 0:12:03.400
<v Speaker 1>it's it's a really serious problem. Almost seventy thousand Americans

0:12:03.440 --> 0:12:06.880
<v Speaker 1>died from opioid overdoses last year alone. Thanks so much

0:12:06.920 --> 0:12:10.560
<v Speaker 1>for joining us this conversation. Richard. That's Richard Austinus, professor

0:12:10.559 --> 0:12:13.839
<v Speaker 1>at the University of Kentucky Law School. Thanks for listening

0:12:13.880 --> 0:12:17.160
<v Speaker 1>to the Bloomberg Law Podcast. You can subscribe and listen

0:12:17.200 --> 0:12:20.760
<v Speaker 1>to the show on Apple podcast, SoundCloud, and on Bloomberg

0:12:20.840 --> 0:12:25.560
<v Speaker 1>dot com slash podcast. I'm June Brosso. This is Bloomberg