In a frosty start to the holiday season, Foreign Private Issuers (“FPIs”) and their insiders are poised to lose a decades-old exemption from the reporting requirements of the Securities Act of 1934, as amended (the “Exchange Act”).
On December 10, 2025, the House voted to pass the 2026 National Defense Authorization Act (the “2026 NDAA”) by a bipartisan vote of 312-112. The President is expected to sign this bill into law in the coming week.
Seemingly out of place for a defense bill and tucked-away on page 2718[1] is Section 8103 “Disclosures by Directors, Officers, and Principal Stockholders” or the Holding Foreign Insiders Accountable Act (the “Act”). Freshfields previously blogged[2] about the 2023 failed attempt to adopt a prior iteration of the Act in the National Defense Authorization Act for Fiscal Year 2024 (the “2024 NDAA”).
The Act amends Exchange Act Section 16(a) to require directors and officers of FPIs and beneficial owners of more than 10% of an FPI’s equity securities (“10% owners”) to promptly disclose each insider’s holdings and transactions in the issuer’s equity securities. The Act seems to have taken into consideration some of the administrative burdens contained in the 2024 NDAA, as it also permits the Securities and Exchange Commission (the “Commission”) to exempt any person, security, or transaction from the requirements of Section 16(a) if the Commission determines that the laws of a foreign jurisdiction apply substantially similar requirements. This may ease some of the tension for FPIs that are dual-listed. Freshfields plans to engage with the Commission on this particular issue and to present evidence of similar disclosure requirements in other jurisdictions.
The one bit of less chilly news for FPIs is that the Act’s amendment to Section 16(a) is “solely for the purposes of this subsection.” This means that FPIs and their insiders are still exempt from Section 16(b), which creates disgorgement liability for the insiders of domestic Exchange Act registered issuers for profits from “short-swing” transactions.
However, if this bill eventually leads to the future imposition of 16(b) liability on FPI directors, officers, and 10% owners of FPIs, the consequences on those persons and the decisions of FPIs to remain Exchange Act registered would be significant. Congress could legislate further to impose this liability on these FPI insiders. The SEC could also attempt to impose this liability via notice-and-comment rulemaking. However, by applying Section 16(a) reporting to FPIs and not Section 16(b) liability via statute, Congress has implicitly recognized the nine-decade old exemption of FPIs from this liability.
Any future imposition of Section 16(b) liability would represent a major win for plaintiffs’ law firms. Unlike insider trading cases, Section 16(b) plaintiffs need not allege or find that trading was based on material nonpublic information. Instead, plaintiffs would only have to find a purchase and then a sale (or a sale and then a purchase) that occurred within 6 months of one another and that yielded even a theoretical paper profit in order to bring a derivative lawsuit seeking recovery of that profit. Even if all of an insider’s collective trading within a 6 month window yielded a net loss, that insider could still be liable if plaintiff can match any purchase and sale (or sale and purchase) to find a paper profit between those two individual trades. Such liability would not only represent a significant burden on FPI insiders, but it may also conflict with the home country legal regimes to which many FPIs are subject.
The bipartisan support for the 2025 NDAA, coupled with prior Commission scrutiny of FPIs described in our previous blog posts, underscores the continuation of coordinated pressure toward regulating foreign entities who access the U.S. capital markets. This bill comes six months after the Securities and Exchange Commission issued a June Concept Release that expressed interest in tightening the criteria for FPI status. Freshfields has blogged and issued comment letters on that Concept release.
Next Steps for Reporting:
FPIs must already carefully consider who its “officers” are for purposes of complying with the Commission’s mandatory Clawback rules. However, FPIs would still need to doublecheck that analysis as well as analyze under Section 16 who constitutes 10% owners. In our experience, interpretations of who constitutes an officer, director or 10% owner may not map neatly onto U.S. rules and caselaw under Section 16.
Domestic issuers often have elaborate compliance systems in place for Section 16 purposes, but many still face complicated interpretative questions under the statute. FPIs would confront these issues for the first time.
If the bill becomes law as expected, issuers, directors, officers and 10% owners would need to obtain codes for filing using the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) Next. Using this system, those parties would then need to report holdings of and transactions in their FPI company’s equity securities within two business days following a transaction. Issuers should plan accordingly as we expect a backlog of applications for EDGAR codes. It remains to be seen whether the Commission will update Form 20-F to require disclosure if these reports are not timely filed.
We await comment from the Commission as to whether, and if so, which, jurisdictions may be exempt because the FPI’s home country requires substantially similar disclosure.
SEC Enforcement? Insider Trading Scrutiny:
New Section 16(a) obligations may also be an area of enforcement focus for the SEC’s new Cross-Border Task Force (“CBTF”). As we have previously noted, the formation of the CBTF and its early cases send another signal of the SEC’s priorities in scrutinizing foreign companies accessing U.S. capital markets.
More broadly, new Section 16(a) obligations would coincide with continued SEC focus on insider trading. And Section 16(a) reporting obligations might also increase governmental and private plaintiff scrutiny of trading.
Effectiveness:
The amendments will take effect on the date that is 90-days after the enactment of the Act and the Commission is required to issue final regulations (or amend or rescind, in whole or in part, existing regulations of the Commission) to carry out the Amendment in no less than 90 days.
The earliest then that these reporting obligations could take effect would be the first quarter of 2026, but SEC rulemaking required under the Act could mean an effective date for reporting obligations to kick in later in 2026.
