On December 18, 2025, President Trump signed into law the Holding Foreign Insiders Accountable Act (“HFIAA”), subjecting directors and officers of ‘foreign private issuers’ to the beneficial ownership reporting requirements under Section 16(a) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). The new reporting requirements are set to go in effect on March 18, 2026.
Background
A ‘foreign private issuer’ (“FPI”) refers to a company that is a non-U.S. issuer (other than a foreign government) that either:
- Has 50% or less of its outstanding voting securities directly or indirectly held of record by residents of the U.S.; or
- Has more than 50% of its outstanding voting securities held of record directly or indirectly by U.S. residents and none of the following apply:
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- the majority of the company’s executive officers or directors are U.S. citizens or residents;
- more than 50% of the company’s assets are located in the U.S.; or
- the company’s business is principally administered in the U.S.;
and that is traded on a U.S. national securities exchange or otherwise subject to the Exchange Act reporting requirements. Generally, FPIs are subject to scaled-back disclosure requirements that defer in many cases to their home country disclosure requirements, including being exempted from the requirements of Section 16. FPIs have typically only reported the beneficial ownership of their directors and officers in their Form 20-F annual reports, and have not had to report changes in beneficial ownership on an ongoing basis.
HFIAA reverses this decades-long exemption afforded to directors and officers of FPIs from Section 16(a)’s reporting requirements.
Section 16(a) Overview
Section 16(a) of the Exchange Act requires directors, officers and 10% or greater shareholders (“Insiders”) of a company with securities registered under Section 12 of the Exchange Act to file with the Securities and Exchange Commission (the “SEC”) to report beneficial ownership in that company’s securities. Beneficial ownership is defined as the direct or indirect opportunity to profit, or share in any profit, from a transaction in a company’s securities. As such, transactions in “derivative securities” such as options, warrants, convertible securities, stock appreciation rights and similar instruments, including those granted pursuant to a share incentive plan, are reportable under Section 16(a), in addition to transactions in the company’s stock.
There are three Section 16 beneficial ownership reporting forms: Form 3, Form 4 and Form 5 (“Section 16 Reports”).
- Form 3, an initial statement of beneficial ownership, is due within 10 calendar days after becoming an Insider. Existing officers and directors of FPIs will need to file their Form 3 by March 18, 2026.
- Form 4, the statement showing changes in beneficial ownership, is due within two business days following each transaction in the company’s securities by an Insider. Such transactions may include the grant, vesting, exercise or settlement of share awards.
- Form 5 reports transactions that were exempt from Form 4 reporting and is due within 45 days after the completion of the company’s fiscal year.
Scope of HFIAA
HFIAA only extended Section 16(a) reporting to directors and officers and not to 10% or greater shareholders of FPIs who are not officers and directors.
It is also worth noting that HFIAA did not extend the applicability of Section 16(b) or 16(c) to FPIs. Section 16(b) of the Exchange Act imposes short-swing liability on company Insiders. For example, under Section 16(b), if an Insider has profited from an opposite-way purchase and sale within six months, the Insider is required to disgorge the profits back to the company. Section 16(c) provides restrictions on short sale transactions.
HFIAA has delegated authority to the SEC to provide exemptions from the Section 16(a) reporting requirements on FPIs where foreign law imposes ‘substantially similar’ obligations. However, it is unclear at this time whether the SEC will propose any exemptions.
Considerations for FPIs
- Determination of directors and officers. For purposes of Section 16, an ‘officer’ is a company’s president, principal financial officer, principal accounting officer (or, if there is no such accounting officer, the controller), any vice-president 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 company. Generally, any individual that an FPI identifies as an executive officer in its Form 20-F reports would be presumed to be an officer for purposes of Section 16(a) reporting. Directors include any person serving on the company’s board of directors or any person performing similar functions. For Section 16(a) purposes, a director also includes an individual who has been deputized as a director (e.g., a shareholder deputizes another person to serve as their representative on the company’s board of directors).
- Filing preparation. Directors and officers of FPIs will first need to obtain codes to file their Section 16 Reports on the SEC’s Electronic Data Gathering, Analysis and Retrieval system (“EDGAR”). In order to obtain EDGAR filing codes, individuals must submit a notarized Form ID application through EDGAR. While Section 16(a) reporting is the responsibility of the director or officer, many companies assume the responsibility of ensuring that their directors’ and officers’ Section 16 Reports are timely filed. Accordingly, FPIs will need to determine the individual or entity that will file the Section 16 Reports on EDGAR. This often is a third-party filing agent or a company’s outside counsel.
- Late filings. Failure to timely comply with Section 16(a) reporting obligations may subject an insider to enforcement action by the SEC, including civil penalties. Domestic SEC-reporting companies are required to disclose late or missed Section 16 Reports in either their annual reports on Form 10-K or proxy statements. It is unclear at this time whether the SEC will implement a corresponding disclosure rule for FPIs.
Complying with the reporting requirements of Section 16(a) is a time-consuming effort and is highly technical with short reporting windows. In particular, directors and officers that have share incentive plan awards will need to develop plans and procedures for accurately reporting transactions such as the grant, vesting or exercise of equity awards, and it is recommended that they coordinate their reporting with the company’s U.S. counsel. While the reporting obligations are those of the individual officers and directors, FPIs should take care to coordinate with their U.S. counsel to ensure compliance by the time the new reporting rules become effective on March 18, 2026.