For more than five decades, a significant advantage of “Foreign Private Issuer” (FPI) status was the exemption from the beneficial ownership reporting requirements and short-swing profit rules of Section 16 of the Securities Exchange Act of 1934 (Exchange Act). That era has now ended.
On December 18, 2025, the Holding Foreign Insiders Accountable Act (HFIAA) was enacted as part of the National Defense Authorization Act for Fiscal Year 2026. The HFIAA mandates directors and officers of FPIs to file Section 16(a) reports (Forms 3, 4, and 5) with the United States Securities and Exchange Commission (SEC) to report beneficial ownership interests in companies.
These requirements will become effective on March 18, 2026.
Below, we summarize the new compliance requirements for FPIs and discuss key components of the HFIAA.
Summary of Section 16 required compliance for FPIs
The HFIAA eliminates the long-standing exemption from Section 16(a) reporting under Exchange Act Rule 3a12-3(b). As a result, officers and directors of FPIs are now subject to the public reporting requirements under Section 16(a) of the Exchange Act. FPIs continue to benefit from other accommodations under the federal securities laws, in addition to the rules and regulations of US securities exchanges. Notably, the HFIAA does not impose compliance with Section 16(b), requiring disgorgement of short-swing profits (applying to opposite way transactions within six months), nor Section 16(c), prohibiting short sales for officers and directors of FPIs. Additionally, the elimination of the exemption for Section 16(a) reporting applies to directors and officers of FPIs, but not to ten-percent owners of FPIs, who remain exempt from reporting obligations.
Key components of the new legislation
Scope of the reporting obligation
The HFIAA specifically amends Section 16(a)(1) to include officers and directors of FPIs. FPIs are encouraged to note the following observations:
- Under SEC Rule 16a-1(f), officers include the issuer’s president, principal financial officer, principal accounting officer, any vice-president in charge of a principal business unit, and any other officer or person who performs a policy-making function. FPIs are encouraged to carefully re-evaluate their internal “executive officer” designations to ensure they align with Section 16 standards.
- The HFIAA does not currently expand the reporting obligations to holders of more than ten percent of securities of FPIs, which is currently required for US public companies.
- Even if only American Depositary Shares (ADS) are listed on a US stock exchange, transactions in the underlying equity securities that trade on a non-US exchange will have to be reported.
The tight compliance window
The new reporting obligations are expected to go into effect on March 18, 2026, and existing officers and directors will be required to file an initial Form 3 on such date. Thereafter, insiders will be required to file Form 4 within two business days of any change in beneficial ownership. This is a notable change since previously FPI insiders only disclosed trades annually (if at all) via the FPI’s Form 20-F.
In addition:
- Under Section 16 of the Exchange Act, a Form 4 must be filed within two business days of the transaction that results in the beneficial ownership change, and
- Transactions subject to Section 16(a) include not just open-market purchases and sales, but also equity award grants, vesting of certain equity awards, and gifts.
SEC exemptive authority
The HFIAA grants the SEC the power to exempt any individual, security, or transaction (or any classes of the foregoing), if a foreign jurisdiction applies “substantially similar” requirements. We believe that the SEC exemptions will be limited to ensure a “level playing field” between domestic and foreign issuers.
Important implications for FPIs
Increased liability and scrutiny
While the HFIAA does not explicitly trigger Section 16(b) “short-swing” profit disgorgement (where insiders must return profits from buying and selling within a six-month window), the transparency of Form 4 filings will make it significantly easier for the SEC and the “plaintiffs’ bar” to monitor for potential insider trading. Late filings of required Forms 3, 4, or 5 can give rise to potential SEC enforcement action, particularly if the SEC identifies certain patterns of non-compliance during their examination sweeps.
Administrative burden: The “EDGAR” factor and time constraints
Section 16(a) filings must be made on SEC’s EDGAR Next electronic filing system. In order to gain access to EDGAR Next, an insider must have individual login credentials; however, they can appoint an account administrator, including company personnel and external filing agents, to manage their EDGAR Next account and make filings (or appoint others to make filings) on their behalf.
Access to EDGAR Next requires the completion and electronic submission of Form ID by an “authorized individual” who can legally bind the insider. The signature on Form ID must be notarized, however, electronic or remote online notarization may be used, provided it is recognized by any US state, territory, or the District of Columbia.
Although Section 16(a) filing obligations belong to the insider, many public companies make such filings on behalf of their officers and directors. In addition, when using an account administrator to manage access to EDGAR Next, an insider may authorize an individual at the company, such an in-house lawyer, to prepare and coordinate the filing of the Section 16 form on the insider’s behalf through the use of a power of attorney. Careful coordination between the company, the account administrator, and the insider will be required to ensure that Section 16 filings are made on a timely basis.
Section 16(a) filing obligations may be particularly burdensome for FPIs with directors residing in time zones far from the US eastern time zone, as the two-business-day clock may be difficult to manage. It is important to note that the new obligations apply regardless of where the insider resides or where the trade occurs. Thus, for example, a trade on a local foreign exchange (e.g., TSX, LSE, or HKEX) is reportable to the SEC if the issuer is an FPI.
Key takeaways for foreign private issuers
To prepare for the effective date of March 18, 2026, FPIs are encouraged to take the following steps:
- Identify covered insiders and monitor SEC guidance: Review the company’s organizational chart and determine who meets the “Section 16 officer” definition. It may not be the same list used for home-country reporting. FPIs are also urged to monitor any SEC regulations and guidance addressing implementation, exemptive relief, and interpretive developments related to the HFIAA.
- Track what must be reported: Section 16 applies to the reporting of beneficial ownership of all equity securities, including:
- Ordinary shares/American Depositary Receipts held directly or indirectly (e.g., through a spouse or trust)
- Equity awards such as restricted stock units (RSUs) and performance share units
- Stock options (vested and unvested), and
- Other derivative securities (e.g., warrants or convertible notes).
- Track equity awards: Coordinate with the company’s human resources department and stock plan administrators. Many Section 16 reports are triggered by automated events like RSU vesting or tax withholding, which must now be reported within two business days.
- EDGAR Next onboarding: FPIs should coordinate with their insiders to ensure that they have access to EDGAR Next, whether directly or through any account administrator. For insiders who do not have EDGAR Next access, completing the Form ID and the related SEC review process can take several days. Given the recent reduction in SEC staff, which may result in longer review periods, FPIs are urged to prioritize this aspect of the new requirements.
- Update insider trading policies: FPIs are encouraged to review and, depending on certain circumstances, require “pre-clearance” of all trades. We also believe that FPIs should require all insiders to notify the company immediately (ideally on the same day) of any transaction to comply with the two-day Form 4 filing deadline.
Conclusion
These changes are part of a regulatory shift that the SEC staff has been telegraphing since the beginning of this year. A central theme in this regulatory shift is a “leveling of the playing field” concept, whereby FPIs are expected to adhere to the same transparency standards as US domestic firms. As additional changes may be proposed in the coming year, DLA Piper will continue to monitor new developments.
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