What is SEC Form 4: Statement of Beneficial Ownership Changes?

Companies must submit SEC Form 4: Statement of Changes in Beneficial Ownership to the Securities and Exchange Commission (SEC) when insiders’ holdings change significantly. Insiders include directors, officers, and stockholders with 10% or more of the company’s equity. The forms inquire about the reporting person’s corporate affiliation and equity share purchases or sales.

The Form 4 filing pertains to Sections 16(a) and 23(a) of the Securities Exchange Act of 1934 and Sections 30(h) and 38 of the Investment Company Act of 1940. Form 4 information must be disclosed and become a public record.

Understanding SEC Form 4: Beneficial Ownership Changes

There are several SEC forms for publicly traded company stock ownership. The SEC requires three forms, including Form 4.

Form 3

Individuals who are reporting their first stock purchase must fill out Form 3. The paperwork must be submitted within ten days after becoming an officer, director, or beneficial owner at the firm.

Form 4

A firm or employee must file Form 4 when insider holdings change. Form 4 must be submitted to the SEC within two days after the transaction. Form 4 covers buy-and-sell orders and business stock option exercises on two pages.

Options contracts grant the right but not the obligation to purchase or sell a stock at a specific price and date. Companies typically provide options to executives and directors as part of their employee incentive plans. Options may usually be cashed out or redeemed after a holding period.

Form 5

The company submits Form 5 if it does not report a trade of its shares via Form 4. Form 5 gives the person 45 days after the company’s fiscal year ends.

The SEC can refer cases to other governmental bodies and self-regulatory groups using SEC Form 4 information. Form 4 failure to disclose data might result in civil or criminal action.

Forms related to SEC Form 4

Other forms are essential for openness and recording public business leaders, officers, and directors’ acts. These comprise the company’s annual and quarterly financial reports, filed as 10-K and 10-Q, respectively.

Companies issuing shares for the first time must submit Form S-1, and for revisions, Form S-1A. Companies offer the 8-K for unplanned substantial events or changes. An entity’s purchase of above 5% of a public company’s equity triggers a Schedule 13D notification received by the SEC.

The SEC can utilize Form 4 information in federal securities law investigations, lawsuits, and other civil, criminal, and regulatory acts.

File SEC Form 4: Statement of Beneficial Ownership Changes

Most parties must file Form 4 online using the Commission’s EDGAR system. Due to hardship, exceptions may exist. You must complete it within two business days of the significant transaction.

Download the SEC Form 4: Statement of Changes in Beneficial Ownership here.

Genuine SEC Form 4 Example

Elon Musk, CEO of Tesla Inc. (TSLA), filed SEC Form 4 as an individual in February 2020. Form 4 and transaction data from the SEC’s EDGAR system are below.

• The reporting person, Elon Musk, and the firm address are in Section 1.
• Section 2 mentions Tesla, Inc.
• Section 3 has the February 14, 2020, transaction date.

Table 1

• Section 1 lists common stock as the security.
• Section 4 lists the number of shares, their acquisition or sale, and their price.

Conclusion

• The SEC requires reporting Form 4 for every significant change in corporate insider interests.
• A Form 4 failure to provide needed information might result in a civil or criminal action.
• You must file it within two business days of the significant transaction.