On December 18, 2025, the Holding Foreign Insiders Accountable Act (“HFIAA”) was enacted as part of the FY 2026 National Defense Authorization Act. This new law amends Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), 15 U.S.C. § 78p(a), by extending insider reporting requirements to directors and officers of foreign private issuers (as such term is defined under the Exchange Act[1]) (“FPIs”), ending the exemption for directors and officers of FPIs from Section 16(a) reporting requirements. As a result, these individuals will now be required to disclose publicly their ownership of, and transactions in, securities of FPIs on Forms 3, 4 and 5, thus mirroring the obligations that insiders of domestic companies have under the Exchange Act.
Overview of Section 16(a) of the Exchange Act
Section 16(a) requires directors and officers of publicly traded companies, as well as stockholders who beneficially own[2] more than 10% of any class of a publicly traded company’s securities, to file reports on Forms 3, 4 and 5 with the United States Securities and Exchange Commission (“SEC”) in order to disclose to potential investors beneficial ownership of a publicly traded company’s equity securities, as well as subsequent transactions or changes in beneficial ownership of securities.
When a person initially becomes an insider of a publicly traded company, such person is required to file a Form 3 with the SEC to disclose beneficial ownership of such company’s securities. The initial Form 3 is due within ten calendar days of such person becoming an insider of a reporting company. For companies completing an initial public offering, initial Form 3s for insiders are due on the date the registration statement relating to the initial public offering is declared effective by the SEC. A Form 3 filing marks the beginning of Section 16 reporting obligations for directors, officers and certain stockholders.
When an insider executes a transaction[3] in a company’s securities after its initial Form 3 filing, it has two business days after the occurrence of such transaction to file a Form 4 with the SEC.
Finally, a Form 5 is due no later than 45 days after a company’s fiscal year end. A Form 5 is used to report any transactions that occurred during the company’s fiscal year which the insider did not report as a result of an exemption from reporting or otherwise failed to report during the year.
Unlike most Exchange Act filings which must be submitted to the SEC by 5:30 pm Eastern Time, Section 16 filings (Forms 3, 4 and 5) may be filed up until 10:00 pm Eastern Time.
Application of Section 16(a) to Officers and Directors of Foreign Private Issuers
Historically, Rule 3a12-3(b) promulgated under the Exchange Act, 17 C.F.R. § 240.3a12-3(b), exempted insiders (i.e., officers, directors and 10% or greater stockholders) of FPIs from reporting obligations under Section 16(a). Notwithstanding the foregoing, FPIs were still required to disclose beneficial ownership of certain insiders in their Annual Reports on Form 20-F. In addition, insiders of FPIs became subject to beneficial ownership reporting requirements under Section 13 of the Exchange Act, 15 U.S.C. § 78m, if their ownership exceeded 5% of a company’s voting securities registered pursuant to Section 12 of the Exchange Act, 15 U.S.C. § 78l.[4] The HFIAA changed these exemptions for FPIs.
Section 16 Exemptions for FPIs
Section 16(a) Not Applicable to Certain Stockholders
Although Section 16(a) will apply to officers and directors of FPIs effective as of March 18, 2026, the reporting obligations under Section 16(a) will not extend to individuals holding 10% or more of an FPI’s securities.
Section 16(b) (Short-Swing Liability) and Section 16(c) (Short Sale Prohibition) Not Applicable to FPIs
Section 16(b) of the Exchange Act, 15 U.S.C. § 78p(b), is a strict liability provision aimed at curbing insider trading. It requires insiders to forfeit any profits gained from buying and selling a company’s securities within a period of less than six months. Notably, under Section 16(b), insiders must disgorge profits regardless of their intent, fault or whether inside information was used. Although Section 16(a) will now apply to officers and directors of FPIs, these insiders will remain exempt from both short-swing liability under Section 16(b) and the short sale prohibition under Section 16(c) of the Exchange Act, 15 U.S.C. § 78p(c).
SEC Discretionary Exemption
The HFIAA authorizes the SEC to exempt certain persons, securities, or transactions from Section 16(a) requirements if the SEC determines that the laws of a foreign jurisdiction impose “substantially similar requirements.”
What’s Next?
The new Section 16(a) reporting requirements under the Exchange Act are expected to take effect on March 18, 2026. In light of the new rule, FPIs should review and update their internal processes to prepare for compliance by the March 18, 2026 effective date.
Key considerations include:
- Determining Insiders Subject to Section 16(a) Reporting Obligations. Officers (as such term is defined in Rule 16a-1 promulgated under the Exchange Act, 17 C.F.R. § 240.16a-1, as well as directors (as such term is defined in Section 3(a)(7) of the Exchange Act, 15 U.S.C. § 78c(a)(7)) will be subject to reporting obligations under Section 16(a) of the Exchange Act. In addition to individuals serving on a company’s board, “directors by deputization” may also be subject to Section 16(a) reporting obligations.
- EDGAR Next Enrollment. Officers and directors of FPIs that will be subject to the new reporting obligations will need to obtain EDGAR Next filing credentials in advance of March 18, 2026 to ensure they are prepared for timely submission of required reports. Obtaining SEC EDGAR codes requires SEC approval and may take up to ten days.
- Limited Power of Attorney. Given tight filing deadlines, particularly for Form 4s, officers and directors of FPIs may wish to consider granting a limited power of attorney to a designated FPI officer to help ensure Section 16 filings are timely made. See “Obligations Under Section 16(a) and Consequences for Failure to Timely File” below for consequences for failure to timely file Section 16 reports.
- Insider Trading Policies. FPIs, together with their legal counsel, should review and update their insider trading policy, as necessary, to address the new Section 16(a) reporting requirements for directors and officers.
Obligations Under Section 16(a) and Consequences for Failure to Timely File. Although individual directors and officers are ultimately responsible for their individual Section 16 filings, FPIs may assume the responsibility for making Section 16 filings on behalf of their directors and officers. To the extent an FPI assumes such responsibility, the FPI should ensure it has robust reporting systems in place to avoid late filings. In 2024, the SEC announced settled enforcement actions against almost two dozen public companies and investors stemming from late filings of beneficial ownership reports under Sections 16 and 13 of the Exchange Act.[5] Penalties ranged from $10,000 to $750,000.[6]
FOOTNOTES
[1] The SEC is currently considering changes to the definition of foreign private issuers as indicated in its recent June 2025 concept release.
[2] See Rule 13d-3 promulgated under the Exchange Act, 17 C.F.R. § 240.13d-3, for the definition of beneficial owner.
[3] “Transactions” may include, but are not limited to, purchases or sales of securities, certain transfers of securities, the granting of equity awards, and the conversion and/or exercise of derivative securities such as options, warrants, convertible preferred stock and/or convertible notes.
[4] For additional information regarding rules governing Section 13 beneficial ownership reporting that went into effect in 2024, please see “Revised Schedule 13g Filing Deadlines Effective as of September 30, 2024 – What You Need to Know.”
[5] https://www.sec.gov/newsroom/press-releases/2024-148.
[6] Id.