There are a number of important forms that need to be filed with the Securities and Exchange Commission (SEC) from time to time, and one of the most important forms is SEC Form 4. This is a Statement of Changes in Beneficial Ownership, and it needs to be filed with the SEC whenever there is a change in the holdings of company insiders. Common examples of company insiders include owners, people who sit on the board of directors, officers, and any shareholders who own more than 10 percent of the outstanding stock. The form will cover a variety of important points, including the person's relationship with the company, transactions they might have executed, and why these trades might have taken place.
What Is SEC Form 4?
SEC Form 4 is generally a two-page document. It will ask about any buy and sell orders that have been executed recently, as well as whether any company stock options have been exercised.
Stock options are typically included in contracts giving the holder of the contract the right, but not the requirement, to buy or sell company stock at a specific price by a specific date. Stock options are typically given to directors and executives, and they might be included as a part of the employee incentive plan as well.
How Is Form 4 Filed?
Typically, SEC Form 4 is filed using the Electronic Data Gathering Analysis and Retrieval System, usually shortened to EDGAR. There are situations where an extension can be granted during certain times of hardship, but the form has to be filed within two days of the transaction changing material ownership taking place. You can take a look at the specific form here.
Why Is SEC Form 4 So Important?
SEC Form 4 is important for a number of reasons, but the biggest reason is transparency. The goal is to maintain transparency regarding public companies, particularly the actions of directors and executives. If a company is publicly traded, then the public has a right to know what the company’s executives and directors are doing.
The SEC might use the information disclosed on SEC Form 4 as a part of investigations into possible violations of federal securities laws. Investors might use the information included on SEC Form 4 to try to figure out how well the company is doing. The information included in this form has to be accurate and timely, or the company could face sanctions.
In the end, Form 4 needs to be filed with the SEC if there is any material change in the holdings of company insiders. If the company, or a party, does not disclose accurate information on Form 4, or fails to file the document altogether, a variety of sanctions could ensue.
This form has to be filed within two business days of the material transaction taking place. We can help you keep up with these regulations.
Form 4