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Reminder: Effective March 18, 2026, directors and officers of foreign private issuers ("FPIs") will become subject to reporting of their beneficial ownership and subsequent changes in beneficial ownership on Forms 3, 4, and 5 under Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act"). As we discussed in an earlier alert, these reports must be filed electronically, which will require reporting individuals to obtain personal filing credentials by submitting a Form ID application in compliance with the EDGAR Next rules before they can file these reports. Form ID applications are subject to a variety of requirements that may be unfamiliar to directors and officers of FPIs. Form ID applications are also subject to review and approval by Securities and Exchange Commission ("SEC") staff, which can take as little as several business days and as much as a week or more. We encourage directors and officers of FPIs to contact their affiliated FPIs and to apply as early as possible to avoid untimely Form 3 and 4 filings.
Section 16(a) requires directors, officers, and persons who beneficially own more than 10 percent of any class of equity securities registered under Section 12 of the Exchange Act (10% holders) to disclose their holdings of, and transactions in, the issuer's equity securities through filings with the SEC known as Section 16 reports. Directors and officers of FPIs have historically been exempt from Section 16 pursuant to Exchange Act Rule 3a12-3(b).
On December 18, 2025, President Trump signed the Holding Foreign Insiders Accountable Act ("HFIAA"), which subjects the directors and officers of FPIs to the SEC's insider transaction reporting regime. Note that 10% holders of FPIs are not subject to HFIAA.
On February 27, 2026, the SEC announced the adoption of final rule and form amendments to reflect the requirements of the HFIAA. The rules will become effective on March 18, 2026.
The Fact Sheet accompanying the release highlights the key amendments:
- Securities Exchange Act Rule 3a12-3(b) has been amended to be consistent with the HFIAA by removing the previous exemptions for directors and officers of FPIs from the provisions of Section 16 in their entirety and replacing it to only reflect exemptions from the Section 16(b) short-swing profits rules and Section 16(c) short selling prohibition.
- Securities Exchange Act Rule 16a-2, which identifies persons and transactions subject to Section 16, has been amended to exclude 10% holders from the requirements of Section 16(a) and related rules to be consistent with the HFIAA.
- The instructions to Section 16 Forms 3, 4, and 5 have been amended to include directors and officers of FPIs as required filers while continuing to exclude 10% holders from the requirement to file the form.
- The SEC also adopted technical amendments to each of the Section 16 reports to include an optional field for a foreign trading symbol and a country code as part of the address of the reporting person and to update certain SEC contact information.
The SEC notes in the adopting release that determinations of whether a person is a director of an FPI must be based on the definition in Section 3(a)(7) of the Exchange Act, rather than the definition in Form 20-F. This is a factual determination based on Section 3(a)(7), which defines a director as "any director of a corporation or any person performing similar functions with respect to any organization, whether incorporated or unincorporated."
In the adopting release, the SEC notes: "The final amendments are expected to provide greater transparency to investors in FPIs. . . . Specifically, the amendments are expected to decrease information asymmetries between Section 16 reporting persons and investors about director and officer trading, as well as directors' and officers' beneficial ownership positions, enabling potentially more informed investment and voting decisions. Through increased transparency due to directors and officers of FPIs being subject to Section 16(a) reporting and the ensuing potential for market and regulatory scrutiny of their trades and other transactions in the issuer's securities, the final amendments also may deter trading based on material nonpublic information by such directors and officers, resulting in potential benefits to investors and improvement in incentives of the FPI directors and officers."
The amendments do not eliminate the exemptions from Section 16 reporting that are available to 10% holders. In a statement on the adoption of the final rules, SEC Commissioner Mark Uyeda stated: "Notably, the HFIAA Rules do not apply to persons who beneficially own more than 10 percent of any class of equity securities registered under Section 12 of the Exchange Act. . . . This outcome is consistent with a plain reading of statutory amendments enacted by the HFIA Act. As the Commission's release for HFIAA Rules notes, the text and the legislative history of the HFIA Act indicate that its scope is limited to directors and officers."
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