156 THE US-ISRAEL | Legal Review 2025/26 The SEC’s own data reveals how much the FPI population has changed. Approximately 55% of all FPIs now appear to trade exclusively in the United States. Of the FPIs that are US-exclusive, companies headquartered in China/Hong Kong and Israel together account for more than half of the total. Israel is the second-largest jurisdiction of FPI headquarters among US-exclusive issuers, trailing only mainland China. The concept release raised pointed questions about whether companies in this category - those that benefit from FPI accommodations but are not subject to meaningful foreign market regulation because they do not trade abroad - should continue to receive them. For Israeli companies, the proposed approaches in the concept release vary significantly in their potential impact. A foreign trading volume requirement, for example, could be particularly disruptive: SEC data indicates that a 1% minimum foreign trading volume threshold would exclude over 60% of Israeliincorporated FPIs. A major foreign exchange listing requirement raises similar concerns for companies that have chosen to list only in New York. On the other hand, a mutual recognition framework - akin to the Multi-Jurisdictional Disclosure System long in place for Canadian issuers - could potentially offer Israeli companies an enhanced pathway, given the deep structural alignment between Israeli securities law and its US counterpart. The Israel Securities Authority responded to the concept release with a substantive letter to the SEC, noting that Israeli FPIs have historically been incorporated and headquartered in Israel, are subject to Israel’s Companies Law and robust corporate governance requirements, and are already supervised by a professional, independent regulator. The ISA proposed the establishment of a dedicated task force with the SEC to explore mutual recognition as a formal framework. It remains to be seen how the current SEC leadership under Chairman Atkins - whose deregulatory mandate is generally favorable to reducing compliance burdens - will proceed. The concept release has not yet resulted in a proposed rule, and the comment period closed in September 2025. But the direction of travel is clear, and any Israeli company that has not thought carefully about whether its listing strategy and trading footprint would survive a revised FPI definition is not paying sufficient attention. Our advice to clients: the time to plan is now. The dual-listing structure is no longer merely a legacy consideration - it may become a legal necessity. Section 16 Comes to FPIs: A Governance Sea Change While the FPI definition review remains at the concept stage, one reform moved from concept to law with striking speed. Tucked into the National Defense Authorization Act for Fiscal Year 2026, signed on December 18, 2025, were the provisions of the Holding Foreign Insiders Accountable Act. The HFIAA amends Section 16(a) of the Exchange Act to extend insider beneficial ownership reporting obligations to directors and officers of foreign private issuers - obligations from which those individuals had been entirely exempt since the modern FPI framework was established. The original compliance deadline was March 18, 2026, ninety days from enactment. On or before that date, every officer and director of an FPI registered with the SEC must file an initial Form 3 disclosing their beneficial ownership of the company’s securities - “Call it the startup nation spirit, or simply the compulsion to keep building – whatever its source, the Israeli tech industry has spent the past two and a half years demonstrating it in conditions no boardroom simulation could replicate.”
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