Overview

On December 18, 2025, the Holding Foreign Insiders Accountable Act (HFIAA) was signed into law as part of the National Defense Authorization Act for Fiscal Year 2026. Effective March 18, 2026, the HFIAA requires directors and officers of foreign private issuers (FPIs) to report their equity ownership and transactions to the U.S. Securities and Exchange Commission (SEC) under Section 16(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act), on Forms 3, 4, and 5.

Background: The Section 16 Framework

Section 16 of the Exchange Act imposes reporting and liability requirements on “insiders” of companies with equity securities registered under Section 12 of the Exchange Act (typically companies listed on exchanges such as the New York Stock Exchange or the Nasdaq Stock Market). Under Section 16, “insiders” include directors, officers, and beneficial owners of more than 10% of any class of an issuer’s registered equity securities. The statutory framework consists of three principal components:

• Section 16(a) requires insiders to file reports disclosing their ownership and transactions in the issuer’s securities;
• Section 16(b) mandates disgorgement of “short-swing” profits from any purchase and sale (or sale and purchase) of the issuer's equity securities within a six-month period; and
• Section 16(c) prohibits insiders from engaging in short sales of the issuer's equity securities.

Until the HFIAA’s enactment, FPIs were expressly exempt from these requirements under Exchange Act Rule 3a12-3(b).

Key Requirements of the HFIAA

The HFIAA amends Section 16(a) to eliminate the exemption for FPI directors and officers. Importantly, the HFIAA does not extend Section 16(b) short-swing profit liability or Section 16(c) short sale prohibitions to FPI insiders. Additionally, 10% beneficial owners of FPIs remain entirely exempt from all Section 16 requirements.

1. Covered Persons

The reporting requirements apply only to directors and officers of FPIs. “Officers” are defined in Rule 16a-1(f) and generally include the president, principal financial officer, principal accounting officer (or controller), any vice president in charge of a principal business unit, division or function, and any other person who performs similar policy-making functions.

2. Reporting Obligations

Directors and officers of FPIs will now be required to file the following reports with the SEC:

• Form 3 (Initial Statement of Beneficial Ownership): Typically, an initial ownership report on Form 3 must be filed (i) at the time of an issuer's Section 12 registration, or (ii) within 10 days after becoming a director or officer. Existing FPI directors and officers as of the HFIAA's effective date on March 18, 2026, must file a Form 3 by 10 p.m. Eastern Time on that date. This form discloses an insider's beneficial ownership of all equity securities, including derivative securities such as options, warrants, restricted stock units, and convertible instruments, even if the insider owns no securities.
• Form 4 (Statement of Changes in Beneficial Ownership): FPI directors and officers must file a Form 4 to report changes in beneficial ownership (that are not otherwise exempt or excludable) before the end of the second business day following the relevant transaction. Reportable transactions include purchases, sales, option exercises, vesting and settlement of restricted stock units, equity award grants, and other acquisitions and dispositions of the issuer's securities.
• Form 5 (Annual Statement of Changes in Beneficial Ownership): In certain cases, an annual catch-up Form 5 may be required within 45 days of the issuer's fiscal year-end to report transactions eligible for deferred reporting if the filer has not voluntarily elected to report them earlier on Form 4 (such as acquisitions by bona fide gifts and inheritance, and small acquisitions under $10,000 that are not from the issuer) and any previously unreported transactions.

For FPIs that list American depositary receipts (ADRs) (but not the underlying equity securities) in the United States, the ADRs are the registered securities subject to Section 16. Directors and officers must report their beneficial ownership of and transactions in the issuer's equity on Forms 3, 4, and 5, whether held as ADRs or as underlying ordinary shares.

3. Filing Procedures and Compliance

All Section 16 reports must be filed electronically through the SEC’s EDGAR Next system by 10:00 p.m. Eastern Time on the due date. Each insider must obtain filing codes via Form ID.

While the HFIAA does not currently specify disclosure requirements for delinquent Section 16(a) filings by FPIs, the SEC may require FPIs to disclose such delinquencies in their annual reports on Form 20-F, similar to the requirement for domestic issuers to disclose delinquencies in their Form 10-K or proxy statements. Failure to timely comply with Section 16(a) obligations may subject insiders to SEC enforcement action, including civil penalties.

4. Potential SEC Exemptions

The HFIAA grants the SEC discretionary authority to exempt certain persons, securities, or transactions from Section 16(a) requirements if the SEC determines that foreign law imposes "substantially similar" obligations. However, the SEC has not yet issued guidance on how it will evaluate comparability or whether exemptions will be granted on a jurisdiction-wide, company-specific, or transaction-specific basis. Jurisdictions such as the UK, EU, and Canada, which maintain robust insider reporting regimes, may be candidates for relief.

Implications for Foreign Private Issuers

The HFIAA will require FPIs to undertake significant compliance efforts, including:

1. Identify Covered Directors and Officers

FPIs must determine which individuals qualify as “officers” under Rule 16a-1(f), as described above. This definition extends beyond executive titles to include anyone performing policy-making functions. FPIs subject to clawback rules mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 may have already completed this analysis, as the clawback rules use the same definition. However, a fresh review is advisable to ensure all policy-making officers are captured, particularly vice presidents in charge of principal business units.

2. Obtain EDGAR Filing Codes

Each covered insider must obtain SEC filing codes by filing a Form ID through EDGAR Next reporting system. This process can take several weeks, requiring immediate action to meet the March 18, 2026, deadline.

3. Gather Beneficial Ownership Information

Insiders must disclose all beneficial ownership, including indirect holdings through family members, trusts, controlled entities, and spouses and minor children sharing the same household. This also includes all derivative securities such as stock options (vested or unvested), restricted stock units, performance shares, and warrants. For FPIs with ADR programs, insiders must report both ADR and underlying share holdings.

4. Implement Ongoing Compliance Procedures

The two-business-day Form 4 deadline requires robust internal processes. Insiders should receive training on reporting obligations, particularly for equity compensation events such as option exercises, vesting, and tax withholding.

Effective Date

The HFIAA becomes effective on March 18, 2026. Directors and officers serving as of March 18, 2026, must file their initial Form 3 on that date. Directors and officers appointed after the effective date must file Form 3 within 10 days of their appointment. The HFIAA directs the SEC to issue final regulations, or amend existing regulations, to carry out the statute's requirements by this date. FPIs should monitor for SEC rulemaking or interpretive guidance.

Conclusion

The HFIAA represents a fundamental change in the regulatory obligations of FPIs and their directors and officers. Foreign companies with securities listed on U.S. exchanges should begin immediately assessing the impact of this legislation and develop comprehensive compliance programs to ensure timely and accurate reporting when the HFIAA's provisions become effective on March 18, 2026.

Our Capital Market + Securities group is monitoring developments related to the HFIAA and is available to assist clients with compliance planning and implementation.