SEC Form 4, also known as the Statement of Changes in Beneficial Ownership, is a document that must be filed with the Securities and Exchange Commission (SEC) whenever there is a material change in the holdings of company insiders. These insiders typically include executive officers, directors, and any other person who holds more than 10% of the company’s stock.
Time Frame
- Deadline: Insiders are required to file Form 4 within two business days following a change in their beneficial ownership.
- Transaction Date: The date on which the transaction took place.
- Transaction Code: Nature of the transaction (e.g., purchase, sale, gift).
- Shares or Units Acquired or Disposed: Number of shares involved in the transaction.
- Price per Share: Price at which the shares were bought or sold.
- Beneficial Ownership: Updated total holdings after the transaction.
Origins
- 1934 Securities Exchange Act: SEC Form 4 was instituted under this act to promote transparency and deter insider trading.
For Company Insiders
- Legal Compliance: Meeting regulatory requirements to avoid penalties and legal issues.
- Transparency: Ensuring market integrity by disclosing insider activities.
For Investors
- Market Sentiment: Tracking insider transactions can provide insights into the company’s future prospects.
Example 1: Executive Purchase
- John Doe, CEO of XYZ Corp: Filed a Form 4 to report the purchase of 5,000 shares at $10 per share.
Example 2: Director Sale
- Jane Smith, Director of ABC Inc: Filed a Form 4 to report the sale of 2,000 shares at $15 per share.
- SEC Form 3: Initial statement of beneficial ownership.
- SEC Form 5: Annual statement of changes in beneficial ownership.
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