On December 18, 2025, President Trump signed into law the annual defense budget legislation, which includes, among other things, the “Holding Foreign Insiders Accountable Act” (the “Act”).  The Act removes the longstanding exemption from the reporting requirements of Section 16(a) of the Exchange Act for directors and officers of foreign private issuers (“FPIs”).  The SEC is required to implement the Act no later than March 18, 2026.

Section 16(a) of the Exchange Act requires a public company’s “insiders” (directors, officers and persons beneficially owning more than 10% of any registered class of its equity securities) to file public reports with the SEC disclosing their ownership of, and transactions in, the company’s securities.  These reports generally are due within two business days of a change in ownership.  Historically, Rule 3a12-3 under the Exchange Act exempted insiders of FPIs from Section 16(a)’s reporting requirements as well as from the short-swing liability provision under Section 16(b) and the restrictions on short sale transactions imposed by Section 16(c).  The Act eliminates the application of Rule 3a12-3 to Section 16(a) for directors and officers of FPIs.

Passage of the Act follows a bipartisan effort dating back to 2022 designed to apply the same set of rules to insiders of all companies traded in the U.S., including FPIs.  However, unlike earlier versions, the Act that is contained in the 2026 defense bill does not extend Section 16 to certain types of insiders of FPIs nor does it apply the non-reporting provisions of Section 16 to insiders of FPIs.  Rather, the Act is narrowly-drawn in two significant respects:

• The Act subjects only directors and officers of FPIs (“Covered FPI Insiders”) to the reporting requirements of Section 16(a).  Greater than 10% equity holders of FPIs remain exempt.  As a result, large investors that are not also directors or officers will continue to enjoy the same status as before under Section 16.¹
• Covered FPI Insiders are required only to comply with Section 16(a)’s reporting requirements and will remain exempt from the short-swing liability provision and short sale restrictions of Section 16.

However, it is possible that through rulemaking the SEC may expand the class of persons subject to Section 16(a) or apply the provisions of Sections 16(b) and (c) to insiders of FPIs. 

With the March 18, 2026 implementation date fast approaching, there are numerous action items FPIs and individuals should consider.  For example, FPIs will need to determine which of their senior management are “Section 16 officers” who will be subject to the new reporting requirements.  In addition, large investors in FPIs may need to assess whether they may be considered directors under Section 16(a) under a “director by deputization” theory.

Once FPIs and investors have determined the scope of Covered FPI Insiders, SEC filing codes will need to be obtained for all new filers prior to March 18, 2026.  Obtaining filing codes is a technical process that can be time-consuming, so beginning early is recommended.  Assuming most FPIs will undertake to assist their Covered FPI Insiders with Section 16(a) compliance, FPIs should also prepare appropriate internal processes to educate Covered FPI Insiders, assist with capturing transactions, and prepare and file timely reports.  FPIs should also consider updating their boards and compensation committees to preview the upcoming reporting requirements for equity grants that could affect early spring 2026 grants.  Finally, FPIs should consider revisiting their policies on insider trading to ensure affected insiders timely report changes in ownership internally (such as through pre-clearance requirements).

Though the Act allows the SEC to exempt any person, security, or transaction subject to “substantially similar requirements” in a foreign jurisdiction, it is unclear whether the SEC will act on its exemptive authority and, if so, what would be considered substantially similar.  Therefore, FPIs should proceed on the assumption that these Section 16(a) reporting requirements will apply to their directors and officers beginning on March 18, 2026.