Foreign Issuer Insiders Face New U.S. Stock Disclosure Rules

Megan Gates provided commentary for an article appearing in The National Law Journal about how foreign companies that traded on U.S. exchanges will soon need to disclose their stock holdings and trades under a provision of the defense authorization act signed into law.

The rider on the authorization act, titled the Holding Foreign Insiders Accountable Act, requires officers, directors and 10% beneficial owners of a foreign company’s securities to file disclosures related to stock ownership and trading. Foreign company insiders were previously exempt from the disclosures under Section 16(a) of the Securities and Exchange Act.

Megan said the 16(a) exemption for foreign issuers was a significant accommodation that attracted foreign companies to U.S. markets.

The removal of the exemption “could serve to be a deterrent” for companies debating whether to list on a U.S. exchange, she said.

“This would be a really big change for foreign companies that file reports with the SEC,” Gates added.