Buried inside the annual defense spending bill that’s working its way through Congress right now is the “Holding Foreign Insiders Accountable Act.” As noted on page 2718 of this House bill (see below for the actual provision), the legislation would impose Section 16 obligations on insiders of foreign private issuers for the first time.
The House will vote this week – and the Senate next week – on the defense bill which will put it on the President’s desk to be signed into law before Christmas. It’s just a matter of whether this provision will remain in the legislation as enacted – prior attempts to enact this type of provision failed in 2023 and 2024 but it looks more likely to succeed this time around. Thanks to Cooley’s Vince Flynn for the gloss.
For those working at foreign private issuers that need guidance in how to explain Section 16 to an insider, check out my blog from earlier this year entitled “How to Explain Section 16 to a Newbie,” which includes a set of six FAQs.
Here’s the current provision in the bill:
SEC. 8103. DISCLOSURES BY DIRECTORS, OFFICERS, AND PRINCIPAL STOCKHOLDERS.
(a) SHORT TITLE.—This section may be cited as the ‘‘Holding Foreign Insiders Accountable Act’’.
(b) DISCLOSURES.— (1) AMENDMENTS.—Section 16(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78p(a)) is amended— (A) in paragraph (1), by inserting ‘‘(including, solely for the purposes of this subsection, every person who is a director or an officer of a foreign private issuer, as that term is defined in section 240.3b–4 of title 17, Code of Federal Regulations, or any successor regulation)’’ after ‘‘an officer of the issuer of such security’’; (B) in paragraph (2)— (i) in subparagraph (C), by striking the period at the end and inserting ‘‘; or’’; and (ii) by adding at the end the following: ‘‘(D) with respect to a foreign private issuer, the securities of which are, as of the date of enactment of the Holding Foreign Insiders Accountable Act, registered pursuant to subsection (b) or (g) of section 12, on the date that is 90 days after that date of enactment.’’; (C) in paragraph (4)(A), by inserting ‘‘and English’’ after ‘‘electronically’’; and (D) by adding at the end the following: ‘‘(5) AUTHORITY TO EXEMPT.—The Commission by rule, regulation, or order, may conditionally or unconditionally exempt any person, security, or transaction, or any class or classes of persons, securities, or transactions, from the requirements of this section if the Commission determines that the laws of a foreign jurisdiction apply substantially similar requirements to such person, security, or transaction.’’. (2) EFFECTIVE DATE.—The amendments made by paragraph (1) shall take effect on the date that is 90 days after the date of enactment of this Act.
(c) EFFECT ON REGULATION.—If any provision of section 240.3a12–3(b) of title 17, Code of Federal Regulations, or any successor regulation, is inconsistent with the amendments made by subsection (b), that provision of such section 240.3a12–3(b) (or such successor) shall have no force or effect beginning on the effective date described in subsection (b)(2).
(d) ISSUANCE OR AMENDMENT OF REGULATIONS.— (1) IN GENERAL.—Not later than 90 days after the date of enactment of this Act, the Securities and Exchange Commission shall issue final regulations (or amend or rescind, in whole or in part, existing regulations of the Commission) to carry out the amendments made by subsection (b). (2) ADDITIONAL RULEMAKING.—The Securities and Exchange Commission may issue such additional regulations (or amend or rescind, in whole or in part, existing regulations of the Commission) as necessary to implement the intent of this section.
Authored by
Broc Romanek