On December 18, 2025, President Trump enacted the National Defense Authorization Act for Fiscal Year 2026 (the NDAA), which includes significant changes for Foreign Private Issuers (FPIs). The legislation introduces the Holding Foreign Insiders Accountable Act (HFIAA), marking the first time that directors and officers of FPIs will be subject to reporting obligations under Section 16 of the U.S. Securities Exchange Act of 1934.
Historically, efforts to impose these reporting requirements on FPIs have faced challenges. Initial proposals emerged in May 2022 when Senator John Kennedy introduced a version of the HFIAA. He reintroduced the act in April 2023 following concerns that investors in foreign companies listed on U.S. exchanges had engaged in stock trading that took advantage of market knowledge. Despite attempts by Senators Kennedy and Chris Van Hollen to revive this act in March 2025, it was only through the NDAA that the HFIAA secured legal status.
Understanding Section 16 Reporting Obligations
Under Section 16(a) of the Securities Act of 1934, insiders—including directors, officers, and those owning more than 10 percent of a company’s equity securities—must file public reports with the U.S. Securities and Exchange Commission (SEC). This includes disclosures of their ownership and transactions involving the company’s equity securities. The required filings consist of three forms:
– **Form 3**: This initial statement must be filed within 10 calendar days of a person becoming an insider or when a company’s registration statement becomes effective.
– **Form 4**: Required by the end of the second business day following a transaction that changes an insider’s ownership, this form details activities like buying or selling securities.
– **Form 5**: This form is due by the 45th day after a company’s fiscal year-end and is used when an insider has transactions that were not reported earlier or should have been filed on Forms 3 or 4.
The HFIAA mandates that FPIs with registered securities under Section 12 of the Exchange Act begin making Section 16 filings from March 18, 2026, which is 90 days post-enactment of the NDAA.
Implications for Foreign Private Issuers
While the HFIAA imposes Section 16 reporting requirements, it does not apply all provisions of Section 16 to FPIs. Notably, directors and officers of FPIs will not face the short-swing profit disgorgement provision outlined in Section 16(b), which requires repayment of profits from trades made within a six-month period. Additionally, the HFIAA does not extend reporting obligations to beneficial owners of more than 10 percent of any registered class of an FPI’s securities.
FPIs will also remain exempt from SEC rules regarding proxy statements, which include disclosures related to Section 16 filing delinquencies. Nonetheless, failure to comply with Section 16 reporting could lead to SEC enforcement actions and fines for the responsible parties.
The HFIAA grants the SEC discretionary authority to exempt certain individuals or transactions from its requirements if it is determined that similar regulations are already in place in the relevant foreign jurisdiction. While this could provide future relief, the extent to which the current SEC will utilize this authority is uncertain.
The enactment of the HFIAA aligns with ongoing SEC efforts to reassess the accommodations provided to FPIs under U.S. securities laws. This is further illustrated by the SEC’s June 2025 concept release, which sought public input on the definition of a Foreign Private Issuer. The implications of the HFIAA, coupled with potential future regulatory changes, may introduce significant and complex reporting obligations for FPIs and their directors and officers.
As the effective date approaches, FPIs will need to prepare for these new requirements, ensuring compliance with unfamiliar and potentially intricate reporting obligations outlined in the HFIAA.
