What's Happening?
President Trump has signed the Holding Foreign Insiders Accountable Act (HFIAA) into law, which amends Section 16(a) of the Exchange Act. This legislation requires foreign private issuers (FPIs) to disclose insider transactions, aligning them with domestic issuers' requirements. Previously, FPIs were exempt from these disclosures, but the HFIAA mandates that officers and directors of FPIs must now report their equity securities ownership and changes. The U.S. Securities and Exchange Commission (SEC) retains the authority to exempt certain transactions if foreign laws are substantially similar. The act aims to enhance transparency and investor protection in U.S. markets.
Why It's Important?
The HFIAA represents a significant shift in regulatory requirements for FPIs,
potentially increasing compliance costs and administrative burdens. By removing exemptions, the act seeks to level the playing field between domestic and foreign issuers, enhancing market transparency. This change could deter some foreign companies from listing in the U.S. due to increased regulatory scrutiny. However, it also strengthens investor confidence by ensuring that all market participants adhere to similar disclosure standards, potentially attracting more investment in the long term.
What's Next?
FPIs must prepare for compliance by March 18, 2026, identifying covered insiders and ensuring they are enrolled in the SEC's EDGAR system for filings. The SEC is expected to issue further guidance and regulations to facilitate the transition. Companies should monitor these developments closely to ensure timely compliance. The SEC's ability to exempt certain transactions based on foreign laws may lead to further regulatory adjustments, depending on international responses and negotiations.
