Statement on the Adoption of Final Rules Under the Holding Foreign Insiders Accountable Act Disclosure

Today, the Commission amends its rulebook to implement the requirements of the Holding Foreign Insiders Accountable Act ("HFIA Act"). The final rules ("HFIAA Rules") generally require every person who is a director or an officer of a foreign private issuer to file Section 16 reports on EDGAR.[1]

The HFIA Act and the HFIAA Rules can promote transparency in U.S. markets by providing information on insider securities transactions. The HFIA Act levels the playing field for foreign private issuers that choose to voluntarily register their securities in the United States in order to take advantage of the liquidity and efficiencies of U.S. markets. They will now be subject to requirements that have been long applicable to domestic issuers.

When implementing statutory directives, the Commission should seek to implement the plain text of the statute rather than taking expansive interpretive views that can impose significantly greater costs to market participants without commensurate benefits. This is especially true when adopting rules that would expand the categories of persons subject to aspects of SEC rules. The SEC's "clawback" rulemaking is an example of a rulemaking where the Commission adopted rules that likely went beyond the Congressional directive.[2] Specifically, Congress indicated that the clawbacks should apply to "executive officers, a very limited number of employees."[3] However, the final clawback rules captured persons far beyond the narrow scope contemplated by Congress. I am pleased that the Commission does not repeat this error today.

Notably, the HFIAA Rules do not apply to persons who beneficially own more than 10 percent of any class of equity securities registered under Section 12 of the Exchange Act ("10 percent holders"). This outcome is consistent with a plain reading of statutory amendments enacted by the HFIA Act. As the Commission's release for HFIAA Rules notes, the text and the legislative history of the HFIA Act indicate that its scope is limited to directors and officers. In fact, the final legislation specifically did not include language contained in an earlier bill that would have covered 10 percent holders. The legislative text was changed to specifically cover only directors and officers.[4] While the section title of HFIA Act references "principal stockholders," the Commission's release appropriately notes that legislative titles do not override the plain text of statutes.[5]

I thank the staff in the Division of Corporation Finance's Office of International Corporate Finance, the Division of Economic and Risk Analysis, the Office of International Affairs, the Office of the General Counsel, and the many other offices that have contributed to this release.