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A Fresh Take

Insights on M&A, litigation, and corporate governance in the US.

| 1 minute read

Legislation Does NOT Extend the Application of Section 16 to Foreign Private Issuers and Their Insiders

The final version of the National Defense Authorization Act for Fiscal Year 2024 does not include the changes to Section 16 proposed by the Senate and described in our original October 2, 2023 post. FPIs and their insiders remain exempt from the reporting requirements of Section 16, including “short-swing” profit liability.  

The Senate amendment to the House version of the National Defense Authorization Act for Fiscal Year 2024 (H.R. 2760) contained a provision that would have amended Section 16 to extend to FPIs and their directors, officers, and +10% shareholders. However, because the House bill and Senate bills differed, it went through conference between the House and Senate, with the Senate receding on this point according to the official conference report.

It is possible that the Senate’s proposed changes described below, or other modifications, will appear in a future bill. Senators John Kennedy and Chris Van Hollen appear particularly interested in promoting these changes in the interest of insider accountability, and legislation and SEC rulemaking from the last year demonstrates a shift towards treating FPIs more like domestic issuers. Additionally, since the proposed amendment to Section 16 seems to have been prompted by an academic paper examining opportunistic trading by insiders of primarily China and Russia-based companies listed in the United States, general congressional sentiment toward each of these regions may factor into whether there is sustained interest in such legislation. For the time being, though, the Section 16 status quo remains unchanged.


capital markets and securities, corporate, corporate governance