Form 4: What You Need to Know | The Motley Fool (2024)
This SEC form tells you a lot about who owns shares in a company.
U.S. securities laws prohibit insider trading, and so the SEC keeps track of how much stock of their companies certain insiders own. After the SEC knows about the insider and receives an initial statement of the insider's holdings, the insider must report changes in the beneficial ownership of such securities on Form 4. As the SEC states, the primary purpose for the form is to provide information about transactions involving directors, officers, and beneficial owners of stock amounting to 10% or more of outstanding shares in companies that are registered with the regulatory body.
Filing Form 4 Insiders have two business days following the transaction in question to report it using Form 4. Most insiders have to file Form 4 electronically using the Electronic Data Gathering Analysis and Retrieval System, also known as EDGAR. Those who've received a hardship exception from electronic filing requirements can file Form 4 on paper.
What information to put on Form 4 Most of the information on Form 4 is self-explanatory. The form includes spaces for the reporting person's name and address, the company name and ticker, the date of the transaction, and the relationship of the reporting person to the company.
The most important part of Form 4 involves specific transaction information. The reporting person must include the specific type of security traded, the date of the transaction, a code reflecting the exact type of transaction, and the number of shares or units bought or sold and their price. The reporting person must also say how many shares or units remain in possession of the reporting person after the transaction.
Reporting persons must file Form 4 even if they hold shares indirectly through a trust or retirement account. In that case, they must report the ownership form as indirect and then provide details on the exact nature of the entity that owns the shares and what role the reporting person plays in it. Often, reporting persons will do multiple transactions involving various roles at the same time. To fulfill reporting requirements, entries on Form 4 must be made on separate lines for each different type of ownership and each class of security.
That information is generally easy to obtain and understand for shares of stock, but a separate section of Form 4 deals with the more complex matter of derivative securities. For derivatives, additional information is required, including the conversion or exercise date and the type and amount of underlying securities in the company that are covered under the derivative.
In general, Form 4 tells you what insiders are doing with their holdings, and you can use that information to inform your own decisions about whether to invest. For more information on the specifics of Form 4, you can see the instructions of the SEC website here(link opens PDF).
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A Form 4 must be filed before the end of the second business day following a change in ownership of securities or derivative securities (including the exercise or grant of stock options) for individuals subject to Section 16 of the Securities Exchange Act of 1934.
involves specific transaction information. The reporting person must include the specific type of security traded, the date of the transaction, a code reflecting the exact type of transaction, and the number of shares or units bought or sold and their price.
As a general rule, Form 4 filings that show substantial insider buying activity are a bullish signal. If insiders are buying, they are confident about the future and expect the company's share price to rise.
What does SEC Form 4 transaction code 'F' mean? - Quora. In layman's terms it means that the shares marked with transaction code "F" were sold to pay for the taxes or exercise liabilities on some other transaction in the same filing and this "sale" doesn't count as a reversal from buying to selling.
Insiders are members of a company's board, key executives (including the principal executive officer and principal accounting officer), and 10% shareholders. These are the people and entities who must file Form 4s. Form 144s are filed by insiders and by others.
What's a Form 4? In most cases, when an insider executes a transaction, he or she must file a Form 4. With this form filing, the public is made aware of the insider's various transactions in company securities, including the amount purchased or sold and the price per share.
If the transaction is not specifically listed, use transaction Code “J” and describe the nature of the transaction in the space for explanation of responses. If a transaction is voluntarily reported earlier than required, place “V” in the appropriate column to so indicate; otherwise, the column should be left blank.
The transaction code "M" on a SEC Form 4 filing indicates that the transaction was a "gift" or a "transfer" of securities. This means that the securities were transferred to the recipient without any payment or compensation in return.
P – Open market or private purchase of securities. S – Open market or private sale of securities. V – Transaction voluntarily reported earlier than required.
As previously mentioned, SEC Rule 145 focuses on mergers, acquisitions, consolidations, and reclassifications of assets because these actions impact investment decisions. The rule is based on whether the securities holder has to vote on the exchange of existing securities for securities in another company.
Rule 144 regulates transactions dealing with restricted, unregistered, and control securities. (Control securities are held by insiders or others with significant influence on the issuer.) These types of securities are typically acquired over the counter (OTC) or through private sales.
Form 4 must be filed with the Securities and Exchange Commission whenever there is a material change in the holdings of company insiders. If a party fails to disclose required information on a Form 4, civil or criminal actions could result.
Control stock is stock held by an affiliate, which is an insider of the company. An affiliate is any officer, director, or 10% shareholder. Basically, if you are an executive for the issuer or own a bunch of their stock, you're considered an insider (affiliate).
In general, Form 4 tells you what insiders are doing with their holdings, and you can use that information to inform your own decisions about whether to invest. For more information on the specifics of Form 4, you can see the instructions of the SEC website here (link opens PDF).
Form 4 is required to be filed within 30 days of any change in the constitution of the LLP, such as the appointment of a new partner, the resignation of a partner, or a change in the name, address, or designation of a partner.
SEC Form 4: 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.
RSI is almost always measured with a computer, typically over a seven- or nine-day range, producing a numerical result between 0 and 100 that points to oversold or overbought situations; the RSI, therefore, gives a bullish or bearish signal, respectively.
Form 4 filings include information about the insider, their relationship to the company and its securities, the type of transaction that occurred, and the amount and type of securities involved. A failure to file Form 4 timely must be reported in proxy statements or 10-Ks and can lead to fines.
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