Buried in the National Defense Authorization Act for Fiscal Year 2026, is a rule change that will subject foreign private issuers registered under the Securities Exchange Act of 1934 (Exchange Act) to certain aspects of Section 16 of the Exchange Act – namely, requiring directors and officers of those companies to file Forms 3, 4 and 5 to report their holdings, trading and other activities in the securities of each company for whom they serve as a director or officer. The changes will go into effect on March 18, 2026, though the SEC may make further revisions.
Absent further changes by the SEC, the rule change will mean that upon effectiveness, all directors and officers (as such term is defined by SEC rules) of foreign private issuers will need to file a Form 3 disclosing their current holdings in each company for whom the serve as a director or officer, and subsequently file a Form 4 within two business days of most transactions, equity grants or other changes. While many companies assist their insiders with these filings, they are individual responsibilities, not company filings, so each person will need their own EDGAR Next codes to make filings and should therefore prepare accordingly.
Notably, unlike the Section 16 rules for domestic issuers, the legislation does not cover 10% shareholders of foreign private issuers (though 5% beneficial shareholders continue to have separate reporting obligations under Section 13 of the Exchange Act). In addition, the rule change does not subject directors and officers of foreign private issuers to the so-called “short-swing” profits strict liability provisions under Section 16 that require disgorgement of profits with respect to certain transactions within a six-month period, or Section 16’s prohibition on short-sales by those individuals. Of course, insiders should always be mindful of other existing rules prohibiting insider trading and other forms of market manipulation.
