Foreign Private Issuers: New Insider Reporting Obligations Take Effect in March 2026

A major change to the disclosure regime for directors and officers of foreign private issuers (FPIs) has been enacted via a statutory amendment included in the 3,022-page annual defense spending bill. The National Defense Authorization Act for Fiscal Year 2026, signed into law on December 18, 2025, contains a provision, the Holding Foreign Insiders Accountable Act, that eliminates the longstanding exemption that directors and officers of FPIs have had from Section 16(a) beneficial ownership reporting requirements (Forms 3, 4 and 5) under the Securities Exchange Act of 1934.

This change represents a significant shift in the treatment of FPI insiders. Historically, these individuals have only been required to comply with their home jurisdiction's reporting requirements, if any, and provide aggregate disclosure in Form 20-F filings. Insiders’ ownership has only been required to be disclosed on Form 20-F if ownership exceeds 1% of outstanding shares and equity compensation has typically been reported on an aggregate rather than individualized basis. The new legislation brings FPI directors and officers into closer alignment with their counterparts at U.S. domestic companies, though certain important distinctions remain.

The Reporting Framework

The general Section 16 reporting framework operates through three forms. Form 3 serves as an initial statement of beneficial ownership and must be filed within 10 days of an individual becoming a director or officer, or by the effective date of a registration statement for newly public companies. Form 4 captures changes in beneficial ownership and must be filed within two business days following any reportable transaction, including equity compensation grants, option exercises, open market purchases and sales, gifts and other transfers. Form 5 functions as an annual catch-all for certain transactions that were not required to be reported on Form 4 and is due within 45 days of the issuer's fiscal year-end.

The two-business-day deadline for Form 4 filings applies regardless of where the transaction occurs or whether it involves U.S. persons. All filings are due by 10:00 p.m. Eastern Time on the applicable deadline.

Beginning March 18, 2026, directors and officers of FPIs will similarly be required to publicly report their beneficial ownership of company equity securities on Form 3 and all subsequent changes in that ownership on Form 4 (or Form 5, as applicable). These reports must be filed electronically through the SEC's EDGAR system in English and will be immediately available to the public. The Form 4 timeframe means FPIs will need to establish internal systems for tracking insider transactions and preparing timely disclosures.

Scope of Coverage

The legislation applies to two categories of persons: directors and officers. Directors are not only those individuals formally elected or appointed to the board, but potentially also entities or persons who have "deputized" a representative to serve on their behalf. This deputization doctrine, recognized by both the SEC and U.S. courts, can result in a shareholder being deemed a director if it has expressly or implicitly designated an individual to represent its interests on the board.

Officers covered by the new requirements are those individuals whom an FPI identifies as executive officers in its Form 20-F filings. Additionally, the principal financial officer and the principal accounting officer (or, if there is no such accounting officer, the controller), if different than the principal financial officer, are specifically included even if not otherwise designated as executive officers. While the principal financial officer typically qualifies as an executive officer at most companies, the principal accounting officer may not always carry that designation. Nevertheless, if this individual is distinct from the principal financial officer, they will be subject to reporting requirements.

Notably, the legislation does not extend Section 16(a) reporting obligations to beneficial owners of 10% or more of an FPI's shares. This represents a key distinction from the rules applicable to U.S. domestic issuers, where major shareholders face the same reporting requirements as directors and officers. These large shareholders of FPIs remain subject only to the separate reporting requirements under Sections 13(d), 13(g) and 13(f) of the Exchange Act, as well as ownership disclosure in Form 20-F.

What Remains Exempt

While the legislation subjects FPI directors and officers to Section 16(a) reporting, it appears to preserve their exemption from other provisions of Section 16. The statutory language specifies that the inclusion of FPI directors and officers is "solely for the purposes of this subsection," suggesting that Sections 16(b) and 16(c) remain inapplicable.

Section 16(b) imposes strict liability on insiders of U.S. domestic companies for profits realized from matching purchases and sales (or sales and purchases) occurring within any six-month period. These "short-swing" profits must be disgorged to the company regardless of whether the insider possessed material non-public information or had any intent to profit from short-term trading. The provision creates significant financial exposure for insiders who inadvertently engage in matching transactions. FPI directors and officers appear to remain exempt from this liability.

Similarly, Section 16(c) prohibits insiders of U.S. domestic companies from short selling the issuer's equity securities. This restriction also appears not to apply to FPI insiders under the new legislation. These exemptions preserve meaningful distinctions between the treatment of FPI insiders and their U.S. domestic counterparts, even as the disclosure requirements converge.

Potential Exemptive Relief

Recognizing that many foreign jurisdictions maintain their own insider reporting regimes, the legislation grants the SEC authority to exempt any person, security or transaction from Section 16(a) requirements if the agency determines that the laws of a foreign jurisdiction apply "substantially similar requirements." This provision could provide relief for directors and officers in jurisdictions with comparable disclosure obligations.

However, significant uncertainty surrounds this exemptive authority, and the mechanism and timing for granting exemptions also remain unclear. Unless and until the SEC issues exemptive relief, directors and officers of FPIs should proceed on the assumption that they will be required to file.

Practical Implications

• Transparency: The new reporting requirements will result in new transparency regarding the equity compensation and shareholdings of FPI directors and officers. For many individuals, these filings will represent the first time their equity holdings and equity compensation are publicly disclosed on an individualized basis. This enhanced transparency may prompt some FPIs to reconsider their approach to executive equity compensation.
• Process: All covered directors and officers must obtain filing access codes for the SEC's EDGAR Next system, a process that requires submission of a notarized Form ID and can take several weeks to complete.
• Reporting Mechanisms: FPIs will need to implement internal reporting mechanisms requiring directors and officers to promptly report all transactions in company securities to the company. It may be advisable to adopt pre-clearance requirements for all trades by insiders, both to facilitate timely Form 4 preparation and to prevent inadvertent violations of insider trading prohibitions. While the legal obligation to file rests with the individual director or officer, many domestic issuers take responsibility for preparing and submitting Section 16 reports on behalf of their insiders.

Enforcement Considerations

Failures to timely file Section 16 reports constitute violations of the federal securities laws. The SEC has demonstrated increased focus on Section 16 compliance in recent years, bringing enforcement actions against both individuals and companies for late or missing filings. The agency possesses broad enforcement authority and may seek injunctive relief, monetary penalties and other equitable remedies for violations.

Conclusion

The extension of Section 16(a) reporting requirements to directors and officers of FPIs represents one of the most significant regulatory changes affecting foreign issuers in recent years. With less than 90 days until the compliance deadline, affected companies must act immediately to establish the necessary infrastructure, policies and procedures to ensure timely and accurate reporting. While exemptive relief may ultimately be available for certain jurisdictions, companies cannot rely on this possibility and must prepare for full compliance. The enhanced transparency regarding insider ownership and equity compensation will fundamentally alter the disclosure landscape for many FPIs and may have broader implications for compensation strategy and corporate governance.