Tucked within the National Defense Authorization Act of Fiscal Year 2026 (the NDAA) are the provisions of the Holding Foreign Insiders Accountable Act (the HFIAA). The HFIAA was signed into law on December 18, 2025 and amends Section 16(a) of the Securities Exchange Act of 1934 (the Exchange Act) to extend Section 16(a) reporting obligations to the directors and officers of foreign private issuers (FPIs). Prior to its enactment, directors and officers of FPIs were exempt from such reporting requirements.
Beginning on March 18, 2026, FPI directors and officers will be required to publicly report their beneficial ownership, and all transactions involving the equity securities of, an FPI that is listed on a U.S. securities exchange or registered with the Securities and Exchange Commission (SEC). As a result, the Section 16(a) insider reporting obligations of FPI directors and officers will, for the first time, largely mirror the insider reporting requirements of directors and officers of U.S. domestic issuers.
In light of the upcoming March 18, 2026 reporting deadline, FPIs should immediately begin evaluating the new Section 16(a) reporting requirements, consider the build out of their Section 16(a) compliance protocols, and should commence educating and assisting their directors and officers, who will be affected by the changes ahead.
Background of Section 16(a)
Section 16(a) of the Exchange Act mandates the timely disclosure of beneficial ownership of a company’s registered equity securities and any changes in beneficial ownership by directors, officers, and any person who beneficially owns more than 10% of any registered class of a U.S. public company’s equity securities (collectively, “insiders”). Insiders must publicly disclose, in filings with the SEC, transactions in securities or derivatives of such securities on Form 3 (initial statement of beneficial ownership), Form 4 (statement of changes in beneficial ownership) and Form 5 (annual statement of changes in beneficial ownership).
Historically, Rule 3a12-3(b) of the Exchange Act exempted FPIs from Section 16 requirements. Instead, FPI insiders only had to comply with the insider reporting requirements of their home jurisdictions and specified share ownership disclosure requirements in annual reports on Form 20-F.
New Reporting Requirements for Directors and Officers of FPIs
General Forms 3, 4 and 5 Reporting
Beginning on March 18, 2026, directors and officers of FPIs must file electronically in English on the SEC’s filing platform known as EDGAR:
- Form 3: directors and officers of FPIs listing or registering securities on or after March 18, 2026 must report their initial equity holdings on a Form 3 upon listing or the effectiveness of a registration statement under Section 12(g) of the Exchange Act, while directors and officers of FPIs that are already public must report their initial ownership within 10 days after an individual becomes a director or officer of the company. Directors and officers of FPIs that are public as of the date of this post need to report their ownership on Form 3 on March 18, 2026.
- Form 4: directors and officers must report changes in beneficial ownership—including open-market trades, gifts, equity compensation grants, vesting events, option exercises, and tax withholdings— on Form 4 within two business days.
- Form 5: directors and officers must file annual statements of changes in beneficial ownership on Form 5 within 45 days after the end of the applicable fiscal year.
Equity Compensation Reporting
Prior to the enactment of the NDAA, FPIs historically were allowed to disclose compensation information for directors and officers on an aggregate basis, unless individual disclosure was made in the home country. In addition, share ownership of each director and officer needed to be disclosed only if it was greater than 1% of a class of shares. The NDAA’s new Section 16(a) reporting obligations will elicit individualized, real-time disclosure of equity compensation information, such as individual grants (i.e., on an award-by-award basis) and aggregate holdings or ownership in the company.
Potential Exemptions
The NDAA grants the SEC the authority to provide exemptions from the Section 16(a) reporting requirements if the SEC determines that the laws of a foreign jurisdiction apply “substantially similar” requirements to such person, security, or transaction. However, it is unclear what would be considered “substantially similar”, and whether or how the SEC might exercise such exemptive authority.
What is Not Covered by the NDAA (for now)
- Limited Scope: No 10% Owner Reporting (Yet): notably, the NDAA applies only to directors and officers of FPIs and does not specify reporting for 10% insiders of FPIs.
- Exemption from Short-Swing Liability (For Now): Section 16(b) “short swing profit disgorgement” and Section 16(c) “short sale restrictions” are not specifically addressed. However, the NDAA grants the SEC broad rulemaking authority to expand these requirements or provide exemptions for jurisdictions with “substantially similar” laws.
Next Steps
The NDAA has a short 90-day implementation window. As such, FPIs will need to consider taking the following next steps as soon as possible.
- Identify Who is Subject to Section 16 Reporting and Inform Identified Directors and Officers
- FPIs should begin to identify their Section 16 directors and officers. In most instances, this group will be equivalent to the “senior management” identified in a Form 20-F and will consist of persons who are currently subject to the FPI’s clawback policies.
- The identification of who constitutes an officer is facts-and-circumstances driven, constantly changing with changes in management, and is colored by Section 16(a)’s definition and interpretations of “officer” under Rule 16a-1(f).
- Section 16 reporting will be new for most FPI directors and officers. FPIs should consider how best to inform and educate their Section 16 directors and officers about the new requirements.
- Establish an Internal Reporting Framework
- FPIs should establish a beneficial ownership and trading monitoring framework and should consider adopting mandatory pre‑clearance protocols for all transactions in issuer equity and related derivatives by directors and officers.
- Insider trading policies (existing or new) will also need to be assessed and aligned with the new Section 16(a) reporting requirements.
- Obtain EDGAR Codes ASAP
- If not already enrolled, FPIs will need to enroll their identified Section 16(a) directors and officers in EDGAR Next immediately in order for such persons to be able to timely file their mandatory reports on EDGAR. The process of enrollment may take as long as two weeks and will need to be considered in order to meet filing deadlines. See our prior client alert here for more details.
- Identify and Report Beneficial Interests
- Directors and officers will need to identify all of the securities over which they have a reportable beneficial interest under Section 16(a).
- Such interests may include shares, options, warrants and other securities that are held directly or are held by family members, trusts and affiliated or controlled entities.
- Directors and officers also should be aware that beneficial ownership under Section 16 can differ from beneficial ownership as reported for Section 13(d) or 13(g) purposes.
Conclusion
The NDAA will introduce significantly more complexity in insider reporting and compliance for FPIs and their directors and officers. The implementation timeline of March 18, 2026 requires immediate planning and preparation. FPIs will need to also be attentive to possible changes ahead as the NDAA is still subject to the SEC rulemaking, which may further impact FPIs’ reporting obligations. Gibson Dunn’s lawyers are available to assist with any questions you may have regarding these developments.
Thank you to Of Counsels Marie Kwon and Rodrigo Surcan and associate Stephen Huie for their assistance with this update.