What is a Form 4? How company insiders report their trades

A Form 4 is a public filing titled the Statement of Changes in Beneficial Ownership^[1]. It is used for the primary purpose of disclosing the transactions and holdings of directors, officers, and beneficial owners of registered companies^[2], and information disclosed will be a matter of public record and available for inspection by members of the public.^[3]

Who has to file

The form is filed pursuant to Section 16(a) of the Securities Exchange Act of 1934 or Section 30(h) of the Investment Company Act of 1940^[1]. The person filing is called the "reporting person." The company whose shares are involved is called the "issuer."

On the form, the reporting person marks their relationship to the issuer. The choices are Director, Officer (give title below), 10% Owner, and Other (specify below)^[4]. If a reporting person is not an officer, director, or ten percent holder, the person should check "other"^[5] and describe why they are reporting.

To decide who counts as a ten percent holder, a person is deemed to beneficially own securities over which that person exercises voting or investment control^[6].

Disclosure of information specified on this Form is mandatory.^[7] A separate Form shall be filed to reflect beneficial ownership of securities of each issuer.^[8] Filings are made electronically through EDGAR, the Commission's Electronic Data Gathering Analysis and Retrieval System^[9].

Someone who leaves insider status must check the exit box appearing on this Form.^[10] However, Form 4 and 5 obligations may continue to be applicable.^[11]

When it is due

A Form 4 must be filed before the end of the second business day following the day on which a transaction resulting in a change in beneficial ownership has been executed^[12]. "Executed" here means the day the trade was carried out. The form is deemed filed with the Commission or the Exchange on the date it is received^[13].

Some transactions are eligible for deferred reporting on Form 5^[14], a separate form. These may, at the option of the reporting person, be reported on a Form 4 filed before the due date of the Form 5.^[15] If a transaction is voluntarily reported earlier than required, place "V" in the appropriate column^[16].

What it shows

"Beneficial ownership" is the central idea. For reporting, a person is deemed to be the beneficial owner of securities if that person has the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the securities ("pecuniary interest")^[6].

Ownership can be direct or indirect. Securities beneficially owned directly are those held in the reporting person's name or in the name of a bank, broker or nominee for the account of the reporting person.^[17] Indirect ownership is described as specifically as possible, for example, "By Self as Trustee for X," "By Spouse," "By X Trust," "By Y Corporation,"^[18] and so on.

The form has two tables. Ordinary shares go in Table I. A "derivative security" is a contract linked to a stock; these go in Table II, which covers puts, calls, options, warrants, convertible securities, or other rights or obligations to buy or sell securities^[19].

Each transaction should be reported on a separate line.^[20] Filers must also report total beneficial ownership following the reported transaction(s) for each class of securities in which a transaction was reported.^[21] Prices of securities shall be reported in U.S. dollars on a per share basis, not an aggregate basis^[22].

A check box shows whether a transaction was made pursuant to a contract, instruction or written plan for the purchase or sale of equity securities of the issuer that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c)^[23]. If so, the filer must provide the date of adoption of the Rule 10b5-1(c) plan^[24].

What it does not show

Reported prices are not the full cost of a trade. Amounts reported shall exclude brokerage commissions and other costs of execution.^[25]

The holdings total may be incomplete. Transactions and holdings eligible for deferred reporting on Form 5 need not be reflected in the month end total unless the transactions were reported earlier or are included on this Form.^[14]

For shares held through an entity such as a trust or partnership, the number can mean different things. Filers report the number of securities representing the reporting person's proportionate interest^[26], but alternatively, at the option of the reporting person, the entire amount of the entity's interest may be reported.^[27]

Each form covers a single issuer, so one filing does not show a person's holdings in other companies.

How to read one

Start at the top. The header gives the Name and Address of Reporting Person^[28], the Issuer Name and Ticker or Trading Symbol^[29], and the Date of Earliest Transaction Required to be Reported^[30].

Next, find the transaction code, a single letter describing what happened. Common codes include:

• P: Open market or private purchase of non-derivative or derivative security^[31]
• S: Open market or private sale of non-derivative or derivative security^[31]
• A: Grant, award or other acquisition pursuant to Rule 16b-3(d)^[31]
• F: Payment of exercise price or tax liability by delivering or withholding securities^[31]
• M: Exercise or conversion of derivative security exempted pursuant to Rule 16b-3^[31]
• G: Bona fide gift^[31]

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.^[32]

When an option is exercised, it shows up in both tables. Filers report the exercise or conversion of a derivative security in Table II (as a disposition of the derivative security) and report in Table I the holdings of the underlying security.^[33] In that case, leave column 8 blank and report the exercise or conversion price of the derivative security in column 2.^[34]

Read the footnotes. If consideration other than cash was paid for the security^[35], it is described there. Corrected filings, called amendments, include one or more footnotes, as necessary, to explain the amendment of the line or lines.^[36]

On GetSignal

Each company page, for example getsignal.finance/stocks/nvda, lists the company's recent open-market insider purchases and sales from Form 4, newest filing first, each linked to the filing on SEC.gov. Awards, option exercises, tax withholding and gifts are in a separate list, and a short key explains the codes P, S, A, M, F and G in plain words. In the app, you can get a push when an insider at a company you follow files a Form 4.

This page explains what a Form 4 contains. It is not legal or investment advice.