SEC Adopts Rules to Implement Section 16 Filing Requirements for Insiders of FPIs; Separately Adopts Conditional Exemptions to Requirements for Insiders of FPIs Incorporated in Select Countries

On February 27, the Securities and Exchange Commission (SEC) announced the adoption of final rule and form amendments to implement the Holding Foreign Investors Accountable Act’s (HFIAA) requirement that officers and directors of foreign private issuers (FPIs) disclose their holdings of, and transactions in, the issuer’s equity securities through filings with the SEC known as Section 16 reports. The rules will become effective on March 18. See this Goodwin PCAP Client Alert for more details on the amendments. On March 5, the SEC issued an order granting conditional exemptive relief from the Section 16(a) reporting requirements for directors and officers of FPIs incorporated or organized in the following jurisdictions: Canada, United Kingdom, Switzerland, South Korea, Iceland, Norway, Liechtenstein and the current member states of the European Union. See this Goodwin Client Alert for more details on the conditions that must be satisfied to take advantage of the exemptive relief.

Following up on the releases discussed above, on March 9, the SEC’s Division of Corporation Finance issued five Frequently Asked Questions relating to the implementation of the new filing requirements for insiders of FPIs. The questions touch on the need to file through the EDGAR system; whether individuals who were insiders when the HFIAA was passed but have since ceased to be are required to make Section 16 filings; and the required timing for filings tied to different director and officer appointment, securities registration, and transaction scenarios occurring between passage of the HFIAA and March 18.

On March 3, The Nasdaq Stock Market filed with the SEC a rule proposal that would allow it to delist companies where the SEC has previously suspended trading and Nasdaq determines it appropriate and in the public interest to do so. As background, the filing notes that “Nasdaq has recently observed problematic or unusual trading in certain listed companies, apparently effectuated through recommendations made to investors by unknown persons via social media to purchase, hold, and/or sell the securities. The [SEC] has expressed concern about this activity, and in some cases suspended trading in the securities, stating its belief that these recommendations appear to be designed to artificially inflate the price and volume of the securities and that the public interest and the protection of investors require a suspension of trading in the securities.” Key factors that Nasdaq will consider in delisting a company in these circumstances include: where it is located; whether a person or entity exercises substantial influence over the company; whether public float and trading patterns raise concerns about adequate liquidity and concentration of ownership; disclosure of material news by the company that might have influenced trading activity; whether there are issues concerning its advisors — auditors, underwriters, or lawyers; and whether there is a going concern opinion and concerns about the integrity of management. SEC approval of the proposed rule is required.

On March 6, the SEC’s Division of Corporation Finance announced the issuance of a set of new or revised Compliance and Disclosure Interpretations (C&DIs), most of which address issues associated with Rule 701 under the Securities Act of 1933. The new C&DIs address the following:

• Whether the requirement to do disclosure under Rule 701(e) is triggered if the value of the options, based on their exercise price, granted during a consecutive 12-month period (plus the aggregate sales price of additional securities sold in reliance on the rule during the same 12-month period) exceeds $10 million where the issuer issued options valued at $9.9 million, $10.1 million and $9.6 million in consecutive periods? Answer: the disclosure requirements only apply to options granted in the second period where the value exceeded $10 million. Securities Act Rules C&DI 271.26.
• What are the consequences for failing to make that required disclosure for the option issuance in the second period described above? Answer: the Rule 701 exemption is lost for the entire offering that took place during the second period but not for those occurring during the first and third periods. Securities Act Rules C&DI 271.27.
• If a company reorganizes from an LLC to a C corporation, does it need a new CIK for EDGAR filings? Answer: No, but it should update the company’s information in the EDGAR system to reflect the organization. Securities Act Forms C&DI 101.06.
• If a company fails to check the smaller reporting company (SRC) status box on a filing, does it lose its SRC status? Answer: No. Regulation S-K C&DI 102.06.

On March 4, SEC Chairman Paul S. Atkins delivered remarks at the Financial Stability Oversight Council’s Artificial Intelligence Innovation Series Roundtable on Strategy and Governance Principles, outlining how the SEC is approaching AI as both a regulatory tool and a market development. In his remarks, he addressed the implications of AI for investors, capital allocation, and regulatory oversight. Chairman Atkins also highlighted the creation of the SEC’s AI Task Force in August 2025 to facilitate development and deployment of AI tools across the agency. These tools are intended to support:

• Risk assessments for examinations
• Detection of potential fraud and rule violations
• Review of disclosures with greater speed and efficiency
• Analysis of public input on new proposals
• Evaluation of market-wide risks to capital markets

On the topic of disclosure by issuers about the impact of AI on their business, he emphasized the importance of principles-based rules that are rooted in materiality; whether there is a substantial likelihood that a reasonable shareholder would consider the information important in making an investment decision. One should not expect to see proposals for prescriptive AI-specific disclosure rules from this SEC.

On March 12, the Securities and Exchange Commission’s Investor Advisory Committee held a public meeting to discuss three topics: (1) public company disclosure reform; (2) fund proxy voting; and (3) consideration of a recommendation regarding the tokenization of equity securities. Chairman Paul Atkins and Commissioners Hester Peirce and Mark Uyeda provided opening remarks at the meeting, and we will focus on their comments on disclosure reform. In his speech, Chairman Atkins, in discussing disclosure reform efforts, expressed a goal that we move to “a minimum effective dose of regulation” by using materiality as the north star, scaling disclosure requirements with a company size and maturity (e.g., extending an “IPO on-ramp” for compliance obligations by a number of years), and moving away from “regulation by shaming” that attempts to impose governance orthodoxy on companies. In her remarks, Commissioner Peirce emphasized that disclosure reform should address companies spending a lot of time and attention preparing disclosures that may obfuscate, rather than add to, the mix of information on which investors rely, citing certain mandatory executive compensation tables. In his speech, Commissioner Uyeda echoed these comments, noting that effective disclosure requires significant effort; the SEC should consider reforms that might reduce unnecessary burdens on public companies without compromising investor protection and capital raising. The panel discussions on disclosure reform included input from investors and securities lawyers.

Key topics included:

• What information is most important to investors: financial statements and crisp and digestible MD&A
• Materiality: one panelist raised whether the SEC could provide more guidance on the standard of materiality; regulations should recognize that certain items, such as human capital and materials costs, are more material for some companies than others so the level of disclosure should be different
• Risks and potential benefits of more scaled disclosure for smaller companies
• Risks and potential benefits of moving away from mandatory quarterly reporting requirements
• Reining in overly long risk factor disclosure
• Specific provisions of Regulation S-K that could be revised or eliminated: related party disclosure, stock price performance graph, dilution, capitalization, quantitative and qualitative market risk disclosure, executive compensation, and exhibit requirements
• The Form S-3 registration statement regime

A recording of the webcast should be posted on a future date on the SEC’s Past Meetings & Events page.