Amendments to Exchange Act Section 16(a) Extending Insider Reporting to Foreign Private Issuers Enacted

Background

Section 16(a) of the Exchange Act historically applies to directors, officers, and greater-than-10% beneficial owners of issuers with a class of equity securities registered under Section 12 of the Exchange Act, requiring initial statements of beneficial ownership (on Form 3) and prompt reporting of changes in beneficial ownership (on Form 4). Section 16(b) imposes short-swing profit disgorgement requirements for non-exempt, opposite-way transactions occurring within a less-than-six-month time frame. FPI insiders have historically been exempted from all of Section 16's requirements, consistent with broader SEC accommodations for FPIs.

What's Changing

The Amendment clarifies that, for purposes of Section 16(a)'s reporting requirements, the term "director or officer" includes directors and Section 16 "officers" (generally the president, principal financial officer, and principal accounting officer, other vice presidents in charge of a principal business unit, division or function, and other policy-makers) of an FPI. This explicit extension brings FPI director and officer insiders into the Section 16 reporting framework. The Amendment does not apply to greater-than-10% beneficial owners of FPIs and does not extend the short-swing profit disgorgement requirements of Section 16(b) to FPI insiders.

For existing SEC-reporting FPIs, the Amendment provides that it will become effective by its terms on the date that is 90 days after being signed into law by President Trump on December 18, 2025. Following initial Form 3 filings upon effectiveness, officers and directors of FPIs will then generally be required to file Form 4s within two business days of reportable transactions in the FPI's securities. These Section 16 filings must be filed electronically on the SEC's EDGAR system and in English. New EDGAR filers will be required to obtain filing codes for all of these filings, and could experience substantial delays in obtaining the required codes during the implementation period.

Finally, the new legislation authorizes the SEC—by rule, regulation, or order—to exempt conditionally or unconditionally any person, security, or transaction, or class thereof, from Section 16 reporting requirements where the laws of a foreign jurisdiction apply "substantially similar requirements." While potentially significant for issuers in jurisdictions with robust insider reporting regimes, the substantive scope of and process for obtaining relief remain subject to SEC interpretation. 

Practical Implications for FPIs and Their Insiders

The extension of Section 16 reporting requirements to FPI directors and officers will require individualized disclosure of equity holdings and transactions on U.S. forms and timelines, replacing historical FPI practices that often relied on aggregate compensation disclosure and limited share ownership reporting. Although the Amendment does not extend Section 16(b) short-swing profit disgorgement to FPI insiders, the real-time reporting shift is nonetheless substantial. For many FPIs, these reporting requirements will newly expose information about grant dates and types, vesting events, tax-withholding sales, gifts, open market trades, and other equity-linked activity on a two-business-day cadence. 

Failure to comply with Section 16 reporting requirements can prompt SEC scrutiny and enforcement sweeps, carry reputational consequences for issuers and insiders, and trigger the need for corrective disclosures. 

The statutory effectiveness date for existing SEC-reporting FPI insiders—90 days after enactment—compresses the timeline for policy, process, and systems changes necessary to implement Section 16 reporting requirements. 

FPIs should immediately inventory insiders to determine the list of "officers" subject to Section 16 reporting—a list that, based on the applicable definitions, is expected to align with the list of officers subject to any U.S. securities exchange-listed FPI's recently adopted compensation clawback policy. For their directors and such officers, FPIs should then confirm beneficial ownership (applying applicable U.S. standards), establish calendar and control frameworks for Forms 3/4/5 reporting, and ensure that equity plan administration and broker interfaces are positioned to support the two-business-day deadline for transactions reportable on Form 4. Because many officers and directors of FPIs will be entering the SEC-reporting system for the first time, FPIs should plan early for obtaining log-in codes from the SEC to enable Section 16 filings within the SEC's recently upgraded EDGAR Next system—a process that can take a meaningful amount of time (and may be subject to substantial backlog if the SEC experiences a rush of new FPI insiders seeking codes during the 90-day implementation period). 

The SEC's new exemptive authority based on "substantially similar" foreign-law requirements may eventually offer relief in select jurisdictions with mature insider reporting regimes, but in light of timing, scope, and process uncertainties, FPIs should not assume that exemptions will be forthcoming or immediate. Until greater clarity emerges around the SEC's approach to such exemptive authority, FPIs should prepare for full compliance on U.S. forms and timelines. 

Effective Date

For FPIs whose securities were registered under Section 12 as of the Amendment's enactment (i.e., existing SEC-reporting FPIs), initial Form 3 reports are due "on the date that is 90 days after" enactment of the Amendment. Following the initial Form 3 filing, Section 16 reporting obligations will, generally speaking, impose: (i) a two-business-day deadline for subsequent reportable transactions on Form 4; and (ii) if applicable, a 45-day deadline from the FPI's fiscal year end for subsequent reportable transactions on Form 5.