U.S. Legislation Subjects Directors and Officers of Foreign Private Issuers to Section 16(a) Reporting Obligations

On December 10, 2025, the U.S. House of Representatives passed the National Defense Authorization Act for Fiscal Year 2026 (the NDAA). The NDAA is a broad policy bill that authorizes spending levels, policies, and authorities for key military and national security activities for the upcoming fiscal year. However, buried within the sweeping legislation is Section 8103, Disclosures by Directors, Officers, and Principal Stockholders, or the Holding Foreign Insiders Accountable Act (the HFIAA). Under the HFIAA, Section 16(a) of the Securities Exchange Act of 1934 (the Exchange Act) will be amended to subject directors and officers of foreign private issuers (FPIs) to the Securities and Exchange Commission (SEC) reporting requirements on Forms 3, 4, and 5. 

The NDAA is now headed to the Senate for approval, which is expected to happen prior to the upcoming holiday break. The amendments under the NDAA will take effect 90 days after it is signed into law.

Key Requirements of Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires directors, officers, and 10% beneficial owners (collectively, insiders) of a public company’s listed equity securities to publicly report their ownership and transactions in such public company’s securities. These insiders are required to report their initial ownership in the public company’s equity securities on SEC Form 3 in connection with an initial public offering by the date the registration statement becomes effective or, for already public companies, within 10 calendar days of becoming a reporting person under Section 16. In addition, these insiders are required to report 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) on SEC Form 4 within two business days of the relevant transaction. They must also report annually certain other transactions that were not reported on either SEC Forms 3 or 4, on SEC Form 5 within 45 days of the public company’s fiscal year end.

Violations of Section 16(a)

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 is permitted to seek “any equitable relief that may be appropriate or necessary for the benefit of investors.” 

Impact on FPIs: Additional Transparency for Equity Ownership and Compensation

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 apply to insiders of U.S. domestic public companies. While the NDAA does not go so far as to subject FPIs to Section 16(b) (for short-swing profit liability) or 16(c) (for short-sale restrictions), directors and officers of FPIs will soon be required to report changes in their individual beneficial ownership, including any equity compensation awards received. The NDAA does not, however, extend Section 16(a) reporting requirements to 10% beneficial owners of FPIs.  

More broadly, FPIs have historically not been required to report the individual compensation of their directors and officers unless such disclosure was required to be made in their home country, and an individual’s equity ownership in the FPI was not required to be disclosed unless it exceeded 1% of the FPI’s total outstanding class of shares. In many cases, equity compensation represents a significant portion of an officer’s overall compensation from a company, and, via Section 16 reporting, such compensation will now be made publicly available. For many insiders, this will represent the first time they need to publicly disclose their individual shareholdings.

The HFIAA does include a new provision that allows 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 will be that the SEC grants such an exemption.

Key Considerations

These changes represent a significant departure for the way FPIs report director and officer compensation and will create new filing obligations for directors and officers of FPIs. Below are a few key points to consider in connection with the implementation of the HFIAA:

• FPIs should revisit who they have designated as “executive officers” in their disclosure and in connection with the adoption of their clawback policies as those same officers will now be subject to the above Section 16 reporting requirements.
• FPIs should start to prepare for the implementation of these reporting requirements by enrolling their directors and officers in EDGAR Next, to the extent they are not already enrolled for purposes of electronically filing Forms 144, to ensure each director and officer is appropriately set up to make filings with the SEC.