SEC Grants Section 16(a) Exemption for Directors and Officers of Foreign Private Issuers Organized in Certain Jurisdictions
In Short
The Situation: The Holding Foreign Insiders Accountable Act ("HFIAA"), which becomes effective on March 18, 2026, removes the historically available exemption from the reporting requirements of Section 16(a) of the Exchange Act ("Section 16(a)") for officers and directors of foreign private issuers ("FPIs"). The HFIAA nevertheless granted the Securities and Exchange Commission ("SEC") exemptive authority in situations where the SEC determines that the laws of a foreign jurisdiction apply substantially similar requirements to Section 16(a).
The Result: On March 5, 2026, the SEC issued an exemptive order (the "Order") covering the following qualifying jurisdictions: Canada, Chile, the European Economic Area, the Republic of Korea, Switzerland, and the United Kingdom.
Looking Ahead: FPIs that are not organized in these qualifying jurisdictions or are not otherwise subject to the qualifying regulations described below must continue to prepare for compliance with the reporting requirements of Section 16(a). FPIs in qualifying jurisdictions and subject to qualifying regulations should analyze the Order's conditions to determine whether any directors or officers are outside of its scope and to adopt procedures to make English language reports publicly available, as required by the Order.
Background
As explained in our December 2025 Commentary, the HFIAA, enacted on December 18, 2025, amended Section 16(a) to require every person who is a director or an officer of an FPI with a class of equity securities registered pursuant to Section 12 of the Exchange Act to file Section 16 reports. On February 27, 2026, the SEC adopted amendments to Exchange Act Rules 3a12-3(b) and 16a-2, and Forms 3, 4, and 5, to reflect the requirements of the HFIAA as it continued to consider whether to exercise its exemptive authority. Jones Day submitted a letter to the SEC advocating for the application of exemptive relief with respect to several of the qualifying jurisdictions covered by the Order.
The Order exempts from the reporting requirements of Section 16(a), the directors and officers of any FPI that is: (i) incorporated or organized in a qualifying jurisdiction; and (ii) subject to a qualifying regulation.
Qualifying Jurisdictions. Under the Order, the exemption is limited to directors and officers of FPIs incorporated or organized in: Canada, Chile, the European Economic Area (all 27 European Union member states plus Iceland, Liechtenstein, and Norway), the Republic of Korea, Switzerland, and the United Kingdom.
Qualifying Regulations. The Order also identifies the following corresponding qualifying regulations as substantially similar to Section 16(a): Canada's National Instrument 55-104, Article 19 of the European Union Market Abuse Regulation, Article 19 of the United Kingdom Market Abuse Regulation, and corresponding insider reporting regimes in Chile, the Republic of Korea, and Switzerland. The SEC based its determination on the fact that these regulations are substantially similar to Section 16(a), which requires directors and officers to disclose publicly their beneficial ownership of equity and derivative securities including changes to such beneficial ownership.
Conditions for Exemptive Relief
Exemptive relief under the Order is subject to two conditions:
- Scope of Qualifying Regulation. The qualifying regulation in the applicable jurisdiction of the FPI must cover the same officers and directors as would otherwise be covered under Section 16(a). This means that each director or officer of the FPI as those terms are defined in Section 3(a)(7) and Rule 16a-1(f) of the Exchange Act ("Section 16 Officers and Directors") seeking to claim the exemption must be required to report their transactions in the FPI's securities under the applicable qualifying regulation.
- Language Requirement. Any report filed pursuant to a qualifying regulation must be made available in English to the general public within no more than two business days of its public posting, which may be achieved by posting on the company's website.
Three Key Takeaways
- Significant compliance relief for eligible FPIs, while compliance deadline approaches for others: Directors and officers of FPIs organized in qualifying jurisdictions and subject to qualifying regulations are now exempt from Section 16(a) reporting requirements. FPIs organized outside of a qualifying jurisdiction or FPIs not subject to a qualifying regulation must continue to prepare for full compliance with the reporting obligations of Section 16(a) on March 18, 2026. This may include enrollment of directors and officers in the SEC's EDGAR Next filer access and account management portal.
- Review for potential mismatches in the scope of officers: FPIs should assess whether the scope of officers required to report ownership under the applicable qualifying regulation aligns with the scope of applicable Section 16 Officers and Directors. Any Section 16 Officers and Directors that are not required to report under such qualifying regulation would be unable to claim the exemptive relief of the Order.
- English translation and timing requirements are critical: FPIs wishing to rely on this exemption must ensure that insider reports filed under qualifying regulations are made available in English within two business days of the original public posting. If such English language reports are not available on the relevant regulator's online database, the company may satisfy this obligation by posting to its website.
