The Holding Foreign Insiders Accountable Act, as part of the 2026 National Defense Authorization Act (the “NDAA”) that was signed into law on December 18, 2025, introduces a new compliance requirement that will, for the first time, subject directors and certain officers of foreign private issuers (“FPIs”) to the beneficial ownership reporting of Section 16(a) and, possibly, short-swing profit provisions of Section 16(b) of the Securities Exchange Act of 1934. This rule change represents a significant shift in compliance expectations for FPIs and aligns the insider reporting regime for FPIs with that applicable to U.S. domestic issuers.
Background
Section 16 of the Exchange Act has long required directors, certain officers, and 10% shareholders (collectively, “insiders”) of U.S. public companies to publicly disclose transactions in company securities and disgorge certain short-swing profits resulting from those transactions. Federal legislation passed in December 2025 directed the Securities and Exchange Commission (the “SEC”) to extend these obligations to insiders of FPIs. As a result, covered directors and officers of FPIs will be required to file Forms 3, 4, and 5 electronically with the SEC and will be subject to potential disgorgement obligations. The new requirements are expected to take effect on March 18, 2026.
FPIs and their insiders should begin preparing governance, compliance, and operational processes now to avoid late filings, preserve Rule 16b exemptions, and reduce disgorgement and litigation risk.
Who Will Be Covered Under the Section 16(a) Amendments
Covered Issuers
FPIs with a class of equity securities registered under Section 12 of the Exchange Act are covered under the amendments to Section 16(a). Issuers furnishing reports under the Multijurisdictional Disclosure System or otherwise qualifying as FPIs are not excluded solely by virtue of that status.
Covered Insiders
The following persons of an FPI will be subject to Section 16:
- each director of the FPI (directors serving on several public company boards must report for each); and
- each “officer” of the FPI (as defined by the Exchange Act, including the issuer’s president, principal financial and accounting officers, principal operating officer, any vice president in charge of a principal business unit, division, or function, and any other person who performs similar policy-making functions).
Section 16(a) also applies to holders of more than 10% of a registered class of equity securities (“10% holders”) of a domestic issuer. While the NDAA specifically refers only to “officers and directors” of FPIs, it is unclear if the SEC will elect to extend the applicability of Section 16(a) to 10% holders of FPIs. If so, the Section 13(d) “group” principles may apply in determining who is a 10% holder.
Interplay With FPI Status & Home-Country Practices
The new regime does not provide a broad exemption based on home-country practice. Issuers may maintain home-country governance accommodations in other areas, but Section 16(a)’s reporting rules (and possibly Section 16(b)’s short-swing profit rules as discussed below) will apply to covered FPIs and their insiders as a matter of U.S. federal law. Insiders must consolidate reporting across all transactions in the issuer’s registered class or classes of securities, whether executed in the U.S. or abroad. Broker instructions and pre-clearance policies should be harmonized across trading venues.
What Must Be Reported and When Under Section 16(a)
Form Types & Deadlines
- Initial statement of beneficial ownership (Form 3). Each covered insider must file a Form 3 disclosing all equity securities of the FPI beneficially owned by such insider (whether directly or indirectly held) within 10 calendar days of first becoming an insider of the FPI.
- Changes in beneficial ownership (Form 4). Most subsequent transactions must be reported on Form 4 within two business days after the trade’s execution date. Reportable events typically include open-market purchases and sales, grants, exercises, and conversions of options and other derivatives, and acquisitions under equity compensation plans. The two-business-day deadline is strict and applies to virtually all changes in ownership, regardless of transaction size or the market where the trade occurred. FPIs with trading on non-U.S. exchanges must map local execution times to U.S. business days and calendar conventions to determine Form 4 deadlines accurately.
- Annual statement (Form 5). Transactions eligible for deferred reporting—such as bona fide gifts—and any reportable transactions inadvertently omitted from Form 4, must be reported on Form 5 within 45 days after the issuer’s fiscal year end, if not previously reported.
Note that in all cases, it is the insider’s legally responsibility to ensure the accurate and timely filing of its forms. However, it is customary for companies to provide centralized assistance with the preparation and filing process for their directors and officers.
Filing Requirements
Forms 3, 4, and 5 use standardized transaction codes and require precise disclosure of derivative securities, exercise/conversion mechanics, and the nature of indirect ownership (e.g., through controlled entities, trusts, or family holdings).
Filings must be in English and filed electronically via the SEC’s EDGAR Next platform. In order to file Forms 3, 4, and 5, each insider must obtain EDGAR Next credentials (central index key (CIK) and associated access codes). Many issuers require insiders to grant a durable power of attorney to internal compliance personnel or outside counsel to ensure timely filings. Accordingly, organizations should complete EDGAR Next account updates to manage user permissions and authorizations prior to the commencement of Section 16 reporting obligations on March 18, 2026.
Short-Swing Profit Liability & Exemptions Under Section 16(b)
At the current time, the NDAA purports to only make changes to Section 16(a) (the reporting rules). However, Section 16 has other notable provisions— namely Section 16(b), which provides for strict liability of directors, officers and 10% beneficial of domestic issuers for any “profit” realized from any purchase and sale (or sale and purchase) of the issuer’s equity securities within a six-month period, regardless of intent. Under Section 16(b), if the issuer does not pursue recovery, shareholders may bring derivative actions on its behalf. It is currently unclear if the SEC will interpret the legislation to extend to all of Section 16, or just Section 16(a).
Should Section 16(b) be deemed applicable to FPIs, pre-clearance requirements in insider trading policies help mitigate the risk of short-swing profit. Additionally, certain transactions are exempt from short-swing profit matching under Rule 16b-3 (e.g., board- or committee-approved grants and certain dispositions to the issuer) and Rule 16b-6 (derivative securities), among others. Options, restricted stock units, performance shares, and other derivative interests are subject to specific reporting and matching rules. Cashless exercises, net settlement, and same-day sales require particular attention. Robust pre-clearance and board-level approval processes help preserve exemptions and reduce litigation risk.
Transition, Effective Date & Compliance Planning
The amendments include an effectiveness date and transition mechanics for insiders who become newly subject to Section 16(a). Insiders will need to file an initial Form 3 as of the date they become subject to Section 16 and then comply with the Form 4/Form 5 regime thereafter. Should the rules of Section 16(b) be deemed applicable to FPIs, the SEC will hopefully release guidance regarding the short-swing profit matching under Rule 16b-3 for initial reports.
IMMEDIATE ACTION ITEMS
- Identify covered personnel. Titles used in non-U.S. organizations should be mapped to identify all officers who meet the Exchange Act definition of “officer.” Directors and officers of FPIs will likely need to file an initial Form 3 by or promptly following the effective date of the amendments, and then comply with the Form 4/Form 5 rules thereafter.[1]
- Update related policies and procedures. Review and update insider trading and equity award policies to address Section 16 reporting and short-swing profit rules proactively, including Form 3/4 workflows, blackout calendars, pre-clearance, and standardized documentation supporting Rule 16b-3 approvals.
- Prepare for initial EDGAR filings. Select a filing agent or system and obtain or confirm EDGAR credentials for all insiders. Consider implementing powers of attorneys and setting internal cut-offs earlier than the two-business-day standard for Form 4 filings.
- For information regarding the SEC’s new EDGAR Next enrollment process, see our prior alert: COUNTDOWN TO EDGAR NEXT: Compliance Deadline is Rapidly Approaching — Are You Ready?.
- Train and communicate. Provide targeted training for directors, officers, plan administrators, and brokers on what is reportable, when, and by whom, with special emphasis on time-zone and non-U.S. market executions.
NEXT STEPS
For questions about scope of coverage, short-swing profit rules, or how to structure equity awards and insider trading policies under Section 16, contact a member of the Davis Graham Public Companies & Capital Markets Group to help you build a tailored compliance plan and filing protocol.
- [1] The Section 8103(b)(1)(D) of the NDAA amends Section 16(a) to require FPI officers and directors to file their reports within 90 days of enactment. However, Section 8103(d)(a) requires the SEC to issue final regulations effecting the legislation within 90 days of enactment. It remains unclear if the SEC will interpret the legislation as requiring Form 3s to be due by the effective date of its final regulations or for the 10-day reporting deadline of Form 3 to commence on the effective date.[SF1]
[SF1]Link to the regulation for your verification: https://www.congress.gov/bill/119th-congress/senate-bill/1071/text#:~:text=SEC.%208103.%20DISCLOSURES%20BY%20DIRECTORS%2C%20OFFICERS%2C%20AND%20PRINCIPAL%20%0ASTOCKHOLDERS (search for “SEC. 8103. DISCLOSURES BY DIRECTORS, OFFICERS, AND PRINCIPAL STOCKHOLDERS”)