As Dave covered when it passed the House, the 2026 National Defense Authorization Act includes legislation to eliminate the exemption from Section 16 reporting available to insiders of foreign private issuers. That wasn’t the first time a repeal of the exemption was contemplated by pending legislation, but now it’s really happening. The bill was officially signed into law in December, as noted on Alan Dye’s Section16.net blog late last month. As a result, officers and directors of foreign private issuers (but not ten percent owners) will become subject to Section 16(a)’s reporting requirements (but not to Sections 16(b) and 16(c)) effective March 18, 2026. The Act directs the SEC to adopt implementing rules (effectively rescinding the existing exemption in Rule 3a12-3) before that date.

This Covington alert addresses some open questions, given the legislation’s directive:

Who is covered by these new requirements? – The NDAA specifically refers only to “officers and directors” of FPIs. Section 16(a) also applies to 10% owners. Indeed, the SEC’s current exemption applies to officers, directors and 10% owners. The SEC will have to decide whether to remove the current exemption for all insiders or just officers and directors. Extending the new requirements to 10% owners of FPIs would likely make listing in the United States even less desirable for controlling shareholders.

When will officers and directors of listed FPIs need to begin filing Forms 3, 4 and 5? – The NDAA amends Section 16 to require FPI officers and directors to file their reports within 90 days of enactment. Section 16 and the SEC’s current rules have a somewhat complicated rhythm for Section 16 reporting. Generally, there are initial holding reports on Form 3, due within 10 days of becoming an insider; transaction reports on Form 4, due two business days after the transaction; and, when applicable, an annual “catch-up”/summary report on Form 5, due after the end of the company’s fiscal year. It seems likely the SEC will interpret the timing language in the NDAA as the initial implementation date for Forms 3, but the language is ambiguous, and the SEC may provide a longer on-ramp.

Will FPI officers and directors be subject to Section 16(b) short swing profit recovery? The NDAA only makes changes to Section 16(a), which contains the reporting requirements. Section 16 has other provisions – notably subsection (b) which provides for recovery of short swing profits insiders make by trading within a six month window and subsection (c) which prohibits insiders from selling company securities short. Neither subsection distinguishes between domestic and foreign private issuers, but the longstanding SEC rule has exempted FPIs from all three subsections of Section 16. It is not yet clear whether the SEC will retain the exemption from Sections 16(b) and 16(c).

Could EDGAR Next further complicate implementation? – Last year, the SEC changed the rules for how companies and reporting persons – including Section 16 insiders – interact with the SEC’s Electronic Data, Gathering, Analysis and Retrieval (EDGAR) system, known as EDGAR Next. For filers already subject to a reporting obligation, the changes have been fully implemented, but not without some challenges. The process of signing up for “EDGAR codes” and coordinating the filing obligations of directors at multiple companies have created the most nettlesome implementation issues. Adding a new cohort of filers within a narrow window may delay compliance.

Alan’s blog also notes that it remains to be seen whether the SEC will require FPIs to comply with Reg. S-K Item 405, which requires disclosure of reporting delinquencies.

However these issues shake out, it suggests FPIs should use the time between now and March 18 to:

– Identify and train the employee(s) who will be responsible for Section 16(a) compliance

– Identify the insiders who will become subject to Section 16(a)

– Educate insiders about their new filing obligations

– Obtain EDGAR codes for any insiders who do not already have them

– Establish procedures for pre-clearing transactions and monitoring equity compensation awards to assure compliance with Form 4 filing requirements after March 18

– Prepare Forms 3 for all insiders and file them no later than March 18

For some helpful resources, check out the memos we’ve posted in our “Foreign Private Issuers” Practice Area and our “Checklist: ‘Executive Officer’ Determinations.” Section16.net members should also take a look at Chapter 2 of the Romeo & Dye Section 16 Treatise on statutory insiders.

– Meredith Ervine