Highlights

• Congress has eliminated a longstanding exemption that enabled directors and officers of any U.S. listed company qualifying as a “foreign private issuer” (FPI) to avoid  disclosing their holdings of and trading in the company’s securities.
• On Dec. 18, 2025, President Donald Trump signed into law the Holding Foreign Insiders Accountable Act (HFIAA), which was included as Section 8103 of the National Defense Authorization Act for fiscal 2026.
• The HFIAA provides that FPI directors and officers will be subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934 (the Exchange Act) beginning on March 18, 2026. FPIs and their management will need to prepare quickly for the new reporting environment. 

Section 16 in a Nutshell

Section 16 of the Exchange Act applies to directors, officers, and 10% beneficial owners of the voting equity (together, insiders) of any issuer with a class of voting equity securities registered under Section 12 of the Exchange Act — essentially meaning any U.S. listed issuer. Section 16 has three main components. 

1. Section 16(a) requires insiders to file certain public disclosures with the Securities and Exchange Commission (SEC). An insider generally must file a Form 3 within 10 calendar days of obtaining insider status. The filing indicates the type and quantity of the issuer’s equity securities (and certain derivative securities, e.g., options and warrants) in which the insider has a “pecuniary interest,” meaning the ability to profit, directly or indirectly, from a transaction in the securities. Thereafter, the insider must file a Form 4 within two business days of certain transactions in the issuer’s equity securities (or applicable derivatives), including purchases, sales, and the receipt of certain equity compensation. Form 4 details the transaction in question, including the type and number of securities acquired or disposed of and the price of transaction. An insider also may need to file a year-end Form 5 to report certain transactions eligible for deferred reporting.
    
2. Section 16(b) relates to so-called “short-swing” trading. It generally makes an insider liable to disgorge to the issuer any profits the insider realizes on opposite-way transactions (i.e., a purchase and sale or a sale and purchase) in a class of the issuer’s equity or related derivative securities within the same six-month period. 
    
3. Section 16(c) generally prohibits an insider from selling the issuer’s equity securities short.

Foreign Private Issuers 

The term “foreign private issuer” is defined in Rule 3b-4 under the Exchange Act. An FPI is  any issuer organized under the laws of a foreign jurisdiction, unless, on the last business day of the issuer’s most recently completed second fiscal quarter: (a) more than 50% of the issuer’s outstanding voting securities are held of record directly or indirectly by U.S. residents; and (b) any of the following is true: (i) a majority of the issuer’s executive officers or directors are U.S. citizens or residents; (ii) more than 50% of the issuer’s assets are located in the United States; or (iii) the issuer’s business is administered principally in the United States. 

According to the SEC, in 2023 there were more than 1,100 FPIs with equity securities listed in the United States.

FPI Insiders Historically Exempt from Section 16

Historically, Rule 3a12-3(b) under the Exchange Act has exempted FPI insiders from all of the requirements of Section 16 described above. The same provision also exempts FPIs themselves from certain other aspects of U.S. federal securities regulation, including most notably the SEC’s proxy rules.  

Rule 3a12-3(b) originated as a policy accommodation to encourage FPIs to list in the United States and thus afford U.S. investors easier access to their securities. When the SEC adopted the regulatory framework governing FPIs, it was with the understanding that FPIs and their insiders would be subject to meaningful home country disclosure regimes and that FPI securities would have substantial  home country trading markets. 

Over time, those policy assumptions have been called into question, as described in the SEC’s concept release on FPIs issued in June 2025. Congress’s decision to remove the exemption from Section 16(a) reporting for FPI directors and officers is in keeping with this new focus on the regulatory treatment of FPIs. In particular, passage of the HFIAA reflects mounting concern that FPI insiders in some cases have veiled transactions in their companies’ securities to the detriment of U.S. investors.    

The Holding Foreign Insiders Accountable Act 

The HFIAA amends Section 16(a) to bring FPI directors and officers specifically within its scope. Those persons become subject to Section 16(a) reporting 90 days after enactment of the HFIAA, meaning March 18, 2026. 

SEC Rulemaking and Exemptive Authority 

The HFIAA directs the SEC to issue final regulations or amend existing regulations by March 18 in order to carry out the Section 16(a) amendment noted above. The SEC is also authorized to engage in such additional rulemaking as may be necessary “to implement the intent” of the HFIAA. 

Significantly, the HFIAA also empowers the SEC to exempt, conditionally or unconditionally, persons, securities, or transactions from Section 16(a) reporting if the SEC determines that a relevant foreign jurisdiction (such as an FPI’s jurisdiction of incorporation) applies “substantially similar requirements” as Section 16(a). 

HFIAA Leaves Intact Other Section 16 Exemptions for FPI Insiders 

The HFIAA does not rescind all of the Section 16 exemptions historically enjoyed by FPI insiders. Unless the SEC intervenes with rulemaking to the contrary, the new obligation to report holdings and transactions pursuant to Section 16(a) will not apply to an FPI’s 10% beneficial owners — the third category of Section 16 insiders — such as hedge fund managers and other institutional investors (unless the investor is also a “director by deputization” as discussed below). 

In addition, and again barring rulemaking by the SEC, all FPI insiders will remain exempt from the short-swing profit disgorgement provisions of Section 16(b) and the Section 16(c) prohibition on short selling. (FPI insiders of course remain subject, as they always have been, to general U.S. anti-fraud rules and prohibitions on illegal insider trading.) 

What FPIs Should Do Now

Given the brief time window between now and March 18, FPIs should begin taking the following steps:

• Designate the FPI’s Section 16 “officers.” Rule 16a-1(f) under the Exchange Act defines “officer” to include any “president, principal financial officer, principal accounting officer (or, if there is no such accounting officer, the controller), any vice-president of the issuer in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for the issuer.” It may be that the individuals already designated as officers in the FPI’s Form 20-F are the only people who meet the Rule 16a-1(f) definition. It is worth checking that  point, however, including considering whether there are individuals not identified as officers in the Form 20-F who do fall within the scope of Rule 16a-1(f), such as the principal accounting officer.  
   
• Obtain EDGAR access and coordinate filing permissions. All individual Section 16(a) reporting persons are required to maintain access to EDGAR (the SEC’s Electronic Data Gathering, Analysis, and Retrieval system). Any FPI director or officer who does not already have an active EDGAR account will need to apply for one by submitting a Form ID to the SEC. The SEC urges EDGAR account applicants to submit Form ID well in advance of anticipated filing deadlines; the SEC staff currently is taking an average of eight to 10 business days to process Form ID submissions. An FPI planning to assist its directors and officers with the preparation and filing of Section 16(a) reports (see below) also must coordinate with those individuals to obtain filing permissions in respect of their respective EDGAR accounts. U.S. outside counsel can explain the details of the EDGAR enrollment and permissioning processes.
   
• Get ready to file Forms 3. Each existing FPI director and officer will need to file a Form 3 by March 18, 2026. Persons who become directors or officers of an FPI after that date must file a Form 3 within the 10-calendar-day period described above. Preparing Form 3 disclosure requires each FPI director and officer to catalogue his or her pecuniary interests in the FPI’s equity securities and any related derivatives. This is potentially a somewhat complex exercise, especially if the director or officer has indirect equity interests through trusts, partnerships, limited liability companies, or the like.  
   
• Plan for internal reporting responsibilities and mechanics. The legal obligation to file Section 16(a) reports rests with each director and officer. As a matter of convenience, however, it is common for issuers to handle the preparation and submission of these filings. An FPI planning to take this approach will need to coordinate internal responsibilities for the relevant work; obtain powers of attorney from its directors and officers to permit the signature of filings on their behalf; and determine whether and how it wishes to get assistance from external counsel, compliance consultants, and/or filing services. The FPI also should ensure that its pre-trade clearance procedures for directors and officers enable Forms 4 to be prepared and filed within the 2-business-day deadline following a reportable transaction. For the same reason, FPIs should plan ahead with their directors’ and officers’ brokers to ensure efficient and accurate communication about future reportable transactions.

• Provide training. An FPI will want to provide training for its directors and officers to make sure they understand the key concepts and practical operation of Section 16(a). Experienced U.S. outside counsel can be of assistance here.   
   
• Monitor SEC rulemaking. FPIs should stay abreast of SEC rulemaking under the HFIAA. As noted above, it is possible that the SEC’s implementing rules could move beyond the text of the legislation to subject an FPI’s directors and officers to the profit-disgorgement requirements of Section 16(b) or the short selling prohibition of Section 16(c).
   
• Be alert to the SEC’s potential exercise of exemptive authority. Finally, FPIs should watch for any exercise by the SEC (which may occur after March 18)  of its authority to exempt from Section 16(a) the directors and officers of FPIs organized in jurisdictions which the SEC deems to impose requirements substantially similar to Section 16(a). It is difficult to predict whether and when the SEC might act on this front, and which jurisdictions the SEC might consider to meet that standard. At this point, therefore, all FPIs should proceed on the assumption that their directors and officers will become subject to Section 16(a) reporting on March 18. 

FPI Equity Investors Should Also Pay Attention

Enactment of the HFIAA also raises possible issues for an FPI’s institutional equity investors.

• SEC rulemaking potentially could subject 10% beneficial owners to Section 16(a). As noted above, the HFIAA does not by its terms visit any new obligations on the 10% beneficial owners of a Section 12-registered class of an FPI’s voting equity securities. Investors in this category of FPI insider nonetheless should keep an eye on any SEC rulemaking under the HFIAA. It is conceivable that the SEC could decide to subject 10% beneficial owners to Section 16(a) reporting in the same way the HFIAA itself brings FPI directors and officers into the Section 16(a) regime, or decide to remove the Section 16(b) and/or Section 16(c) exemptions for all FPI insiders.
   
• The HFIAA applies to “directors by deputization.” An investor functioning as a “director by deputization” is treated as a director of the issuer for all purposes of Section 16. In other words, the HFIAA’s extension of Section 16(a) reporting obligations to FPI directors means directors by deputization are covered as well. While a full discussion of the concept is beyond the scope of this alert, the basic idea is that an investor may be deemed a director by deputization if (i) the investor has placed an individual on the issuer’s board and (ii) that individual carries out his or her director activities in a manner that serves the investor’s specific interests, such that the individual director may be seen as the investor’s “deputy” on the board. An FPI investor with board representation thus should evaluate the possibility that it is a director by deputization of the FPI. This analysis is often highly fact-specific; an FPI investor with concerns on this point should engage with U.S. securities counsel.