Directors and officers of issuers that qualify as foreign private issuers (FPIs) and that have a class of equity securities registered under the Securities Exchange Act of 1934 (the Exchange Act) will be required to publicly file beneficial ownership reports under Section 16(a) of the Exchange Act beginning on March 18, 2026. These reports are the same as those long required for officers and directors of domestic issuers. This new requirement is mandated by the Holding Foreign Insiders Accountable Act (the HFIAA), a small section of the much larger and wide-ranging National Defense Authorization Act for Fiscal Year 2026.
Who is covered (and who is not)
The HFIAA extends Section 16(a) reporting obligations to directors and officers (as defined below) of FPIs that have a class of equity securities registered under Section 12 of the Exchange Act. The HFIAA, however, does not extend Section 16(a) reporting requirements to 10% beneficial owners of FPIs. In addition, the HFIAA does not subject directors and officers of FPIs to the Section 16(b) short-swing profit disgorgement rules or the Section 16(c) short-sale restrictions.
What are the current Section 16(a) reporting requirements
Section 16(a) of the Exchange Act requires directors, officers, and 10% shareholders (collectively, insiders) of US public companies with equity securities registered with the Securities and Exchange Commission (SEC) to publicly disclose transactions in such securities or derivatives of such securities. Insiders must report their initial ownership on Form 3 on or before the date the registration statement becomes effective in the case of an IPO, or, for already public companies, within ten calendar days of becoming a reporting person under Section 16. Subsequent transactions in the public company’s equity securities (e.g., purchases and sales, gifts, and compensation-related transactions, including equity compensation grants and other transactions in connection with such equity compensation grants) must be reported on Form 4 within two business days of the relevant transaction, and certain other holdings or transactions that were not reported on either Forms 3 or 4, may be reported on Form 5 within 45 days of the public company’s fiscal year end.
Late or missing filings of Section 16 reports constitute a violation of the securities laws by the individual responsible for making the filing and can draw SEC scrutiny to the FPI, particularly in cases where there are multiple or frequent violations. The SEC has recently focused on untimely filings of Section 16 reports, announcing last year several enforcement actions against individuals and the affiliated public companies that had undertaken to file on their behalf for failure to timely file Section 16 reports. The SEC ultimately has broad authority to enforce the securities laws and can seek “any equitable relief that may be appropriate or necessary for the benefit of investors.”
Historically, insiders of FPIs were exempt from the Section 16(a) reporting requirements, the Section 16(b) short-swing disgorgement rules, and the Section 16(c) short-sale restrictions, each of which applies to insiders of US domestic public companies. Instead, FPIs only had to comply with share ownership disclosure requirements in annual reports on Form 20-F, as well as any home jurisdiction insider reporting requirements, and insiders of FPIs had to report their beneficial ownership on Schedule 13D or 13G if their individual ownership exceeded 5% of the FPI’s registered voting equity securities.
As a result of the HFIAA, directors and officers of FPIs will soon be required to publicly report their individual beneficial ownership and changes in their beneficial ownership, including transactions relating to equity compensation awards pursuant to Section 16(a).
New application of Section 16(a) to directors and officers of FPIs
The amendments to Section 16(a) will require directors and officers (but not 10% shareholders) of FPIs to file reports on Forms 3, 4, and 5 on EDGAR to disclose their beneficial ownership of the issuer’s equity securities (both derivative and non-derivative), as well as any subsequent changes in ownership, for so long as they serve as a director or officer. These reports must be made in English and will apply to all holdings and transactions in the issuer’s equity securities (other than those already exempt under Section 16(a)), whether or not conducted in the United States or involving United States persons.
Upcoming reporting obligations
As of the March 18, 2026, effective date, directors and officers of FPIs will be required to comply with the following Section 16(a) reporting obligations:
- Obtain and maintain EDGAR Next access credentials in order to make required filings, including completing any necessary onboarding or authorization steps in advance.
- File an initial ownership report on Form 3 if serving as a director or officer of an FPI as of March 18, 2026.
- File a Form 3 within ten calendar days of appointment if becoming a director or officer of an FPI after March 18, 2026.
- Ensure timely initial ownership filings in connection with an FPI initial public offering after March 18, 2026, including filing Form 3 promptly following the effectiveness of the registration statement.
- Report most changes in beneficial ownership on Form 4 within two business days of the transaction, including purchases, sales, grants, or other reportable equity transactions (e.g., equity compensation grants and sales to cover exercise price payments and tax-withholding obligations).
- File an annual Form 5, if applicable, within 45 days after the end of the FPI’s fiscal year to report (i) transactions eligible for deferred reporting or (ii) holdings that should have been reported earlier but were not timely reported.
Potential exemptive relief
The HFIAA includes a provision that gives the SEC the authority to exempt any person, security, or transaction from Section 16 reporting obligations if the SEC determines that the laws of a foreign jurisdiction apply “substantially similar requirements” to such person, security, or transaction. However, it is not clear what “substantially similar” means or how likely it is that the SEC will grant such an exemption. This relief may only be available in limited circumstances.
Next steps for FPIs
As the March 18, 2026, effective date approaches, FPIs should begin preparing now to ensure a smooth transition to Section 16(a) compliance. FPIs should take several key steps to prepare for these new reporting obligations:
Identify Section 16 officers
Officers subject to Section 16 are defined in Rule 16a-1(f) under the Exchange Act and include the issuer’s president, principal financial officer, principal accounting officer (or, if there is no such accounting officer, the controller), and any vice president in charge of a principal business unit, division, or function (such as sales, administration, or finance), as well as any other officer who performs a policy-making function and any other person who performs similar policy-making functions for the issuer. FPIs should identify which of their officers qualify as officers for Section 16 purposes. In many cases, an FPI’s Section 16 officers will be the same as the officers reported in its annual report on Form 20-F. However, in certain circumstances, differences may exist between an FPI’s Section 16 officers and the officers reported on Form 20-F. The board of directors of the FPI should identify the specific officers deemed Section 16 officers in a board resolution. This list should be updated annually.
Educate directors and officers
Directors and officers should also be informed of these obligations, including that all Section 16 reports are publicly available on EDGAR. For many directors and officers of FPIs, the need to publicly disclose personal holdings and transactions will be new and potentially sensitive. Individuals may need time to prepare for these disclosures, which could influence the timing of their transactions.
Enroll in EDGAR Next
In order to file Forms 3, 4, and 5, directors and officers must be enrolled in the EDGAR Next reporting system. Companies should, therefore, identify which officers and directors require enrollment and coordinate with them to complete the process prior to the commencement of Section 16 reporting obligations on March 18, 2026.
Establish a filing process
Directors and officers typically grant internal counsel a power of attorney to execute Section 16 reports on their behalf. The filings are then prepared by internal counsel (or, in some cases, by external counsel, especially for initial or complex filings). FPIs should determine who will be granted the power of attorney and whether internal or external counsel will draft the filings. If internal counsel will draft filings, FPIs should ensure their teams have received appropriate training and have access to the necessary systems or service providers to make filings with the SEC.
Review insider trading policies
FPIs whose officers and directors will be subject to Section 16(a) should consider revisiting their insider trading policies or adopting new policies to require that directors and officers report trades internally to ensure compliance with new Section 16(a) reporting requirements, including potentially subjecting directors’ and executive officers’ trading to pre-clearance to facilitate timely reporting of transactions.
Initial Form 3
Each director and officer of an FPI must file an initial beneficial ownership report on Form 3 on March 18, 2026, disclosing all equity securities of the FPI beneficially owned as of that date.