What Is SEC Form 4: Statement of Changes in Beneficial Ownership?
Whenever company insiders—like directors, officers, or shareholders with over 10% ownership—change their stock holdings, they have to file SEC Form 4 with the SEC. This form spells out their relationship to the company and records any purchases or sales of equity shares, making sure everything stays transparent and follows federal securities rules.
Key Takeaways
You need to know that SEC Form 4 has to be filed within two business days for any major change in an insider's stock holdings. Insiders are directors, officers, and big shareholders who own 10% or more of the company's stock. If you skip filing Form 4, you could face civil or criminal penalties. It's usually filed electronically through the EDGAR system, but there might be exceptions for hardships. Related forms are Form 3 for first-time acquisitions and Form 5 for reporting late transactions.
Deep Dive Into SEC Form 4: Insider Trading Requirements
There are several SEC forms tied to owning stocks or securities in publicly traded companies, and SEC Form 4 is one of three that often come into play.
Form 3 is what individuals file when they first get a stock and register the securities. You have to file it within 10 days of becoming an officer, director, or beneficial owner at the company.
Form 4 is what the company or the individual files when there's a change in insiders' holdings. You must file it with the SEC within two days of the transaction. It's a two-page document that covers buy-and-sell orders, plus exercising company stock options. Options are contracts giving you the right—but not the obligation—to buy or sell a stock at a set price by a certain date. They're often given to executives and directors as part of incentive plans. The SEC uses the info from Form 4 to refer cases to other authorities and self-regulatory organizations.
Form 5 is for when someone trades the company's stock but misses reporting it on Form 4. It gives you 45 days after the company's fiscal year ends. Again, the SEC can use Form 4 data for referrals, and failing to disclose required info could lead to civil or criminal actions.
Related SEC Forms for Insider Ownership Transparency
Other forms are key for keeping things transparent and tracking what public company executives, officers, and directors do. These include the annual 10-K report and the quarterly 10-Q report. If a company is issuing stock for the first time, they file Form S-1, and for amendments, it's Form S-1A. The 8-K covers unscheduled big events or corporate changes. Schedule 13D lets the SEC know when someone acquires more than 5% of a public company's stock.
Important
The SEC can use info from Form 4 in investigations or litigation under federal securities laws, plus other civil, criminal, or regulatory rules.
Filing SEC Form 4
You generally file Form 4 electronically via the Commission's EDGAR system, though exceptions happen in hardship cases. It's required within two business days from the end of the day the transaction happened. Here's a link to a downloadable SEC Form 4: Statement of Changes in Beneficial Ownership.
Case Study: Elon Musk’s SEC Form 4 Filing
In February 2020, Elon Musk, CEO of Tesla Inc. (TSLA), filed SEC Form 4 as an individual. I pulled the details from the SEC's EDGAR system. Section 1 has the reporting person's name, Elon Musk, and the company address. Section 2 lists the company as Tesla Inc. Section 3 shows the transaction date as February 14, 2020.
In the table, Section 1 notes the security type as common stock. Section 4 details the number of shares, the action (acquired or disposed), and the price. The form shows Musk bought 13,037 shares at $767 each, leaving him with 34,098,597 shares total after the purchase (in section 5). There's an image of the form example for Elon Musk as Tesla's CEO.
The Bottom Line
SEC Form 4 is a vital document that insiders of publicly traded companies must file with the SEC for significant changes in their holdings. This keeps things transparent and in line with federal securities laws. You have to file it within two business days after the transaction, explaining the transaction type and ownership changes. Not filing or giving wrong info can lead to civil or criminal issues. Companies and insiders should use the EDGAR system to file efficiently and meet requirements. Getting these rules, plus forms like 3 and 5, helps avoid legal problems and maintain investor trust.
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