A petition submitted to the SEC under the Holding Foreign Insiders Accountable Act (HFIAA) is sharpening questions about how US markets handle transparency for insiders at foreign companies whose shares trade domestically.
The authors – who describe themselves as ‘scholars of securities law and financial economics’ – argue that Congress directed the SEC to move quickly and that reliance on informal staff commentary risks narrowing the law’s scope.
At issue is whether large beneficial holders at foreign issuers, including those owning more than ten percent of a company, must disclose their trades and how exemptions should be applied. The outcome will affect how foreign firms participate in US markets and how investors receive timely, consistent information about insider activity.
The petition was filed by three securities law scholars whose research helped inform the HFIAA: Robert Jackson Jr, Bradford Levy and Daniel Taylor. Their academic work examined insider trading at foreign companies listed in the US and identified disclosure gaps compared with domestic firms.
Using a proprietary dataset, they estimated that insiders at foreign issuers avoided losses of more than $10 bn by trading ahead of negative information, with activity concentrated in jurisdictions beyond easy US legal reach, including China. Lawmakers cited this research as evidence that existing disclosure rules were insufficient.
The HFIAA removes a long-standing exemption that allowed foreign private issuers (FPIs) to avoid insider reporting requirements under section 16(a) of the Securities Exchange Act of 1934. Officers and directors of US companies must already report trades and holdings through forms such as Form 3, Form 4 and Form 5. FPIs historically were exempt. The new law extends these obligations to FPIs, with an effective date of March 18, 2026.
The petition’s central argument is that the SEC should implement the HFIAA through formal notice and comment rulemaking rather than informal staff interpretations. The authors point to a recent staff press release suggesting the law may not apply to beneficial owners holding more than ten percent of an FPI’s equity. If adopted, that view would allow large shareholders of US listed foreign companies to avoid disclosure obligations that apply to similarly positioned holders at US companies. The petition argues that this would weaken the law and conflict with congressional concern about opportunistic trading.
Research cited in the petition highlights the risk: the median stock return following sales by holders owning more than ten percent at US listed Chinese companies was 30.2 percent lower, reflecting significant loss avoidance. That effect exceeded what was observed at US companies and even at officers and directors at those foreign firms. The petitioners argue that excluding these major holders from disclosure would leave a key source of market risk unaddressed.
Statutory language is another focus. The title of the HFIAA provision refers to ‘disclosure by directors, officers and principal stockholders,’ which the authors say clearly includes ten percent owners. They argue that both the structure and text of the law show congressional intent to bring these holders within section 16(a).
The HFIAA requires the SEC to issue final implementing rules no later than ninety days after December 18, 2025. The law is described as self-executing, meaning compliance obligations for FPIs and their insiders begin on March 18, 2026 even if final rules are not in place. Because compliance depends on specific forms and systems, the petition argues that clear rules are needed to avoid confusion once the deadline arrives.
The petition also urges clarity on exemptions. While the law allows exemptions where foreign rules are substantially similar, the authors call for clear criteria, including disclosure timing and public accessibility. As the effective date nears, the SEC’s response will shape how foreign insider activity is disclosed and understood in US markets.