SEC Form 4 Explained: Complete Guide
SEC Form 4 is the most important document for tracking insider trading activity. Learn how to read these filings and extract valuable investment insights.
What is SEC Form 4?
Form 4 is a "Statement of Changes in Beneficial Ownership" that must be filed with the SEC whenever a corporate insider buys or sells their company's stock. It's the primary way the public tracks insider trading activity.
Key Deadline
Form 4 must be filed within 2 business days of the transaction date. This ensures timely public disclosure of insider activity.
Who Must File Form 4?
- Officers: CEO, CFO, President, Vice Presidents, and other executive positions
- Directors: All board members
- 10% Shareholders: Anyone who owns more than 10% of any class of the company's stock
Form 4 Structure
Every Form 4 contains several key sections:
Header Information
- Reporting Person: Name and title of the insider
- Issuer: Company name and stock ticker
- Filing Date: When the form was submitted to the SEC
Table I: Non-Derivative Securities
This is where most common stock transactions are reported:
- Transaction Date: When the trade occurred
- Transaction Code: Type of transaction (P=Purchase, S=Sale, A=Award, etc.)
- Number of Shares: Quantity traded
- Price per Share: Execution price
- Shares Owned After: Total position after the transaction
- Direct/Indirect: Whether shares are held directly or through trusts/entities
Table II: Derivative Securities
Reports options, warrants, and other derivative instruments:
- Exercise Price: Strike price for options
- Expiration Date: When options expire
- Underlying Securities: The stock the derivative relates to
Transaction Codes Explained
Understanding transaction codes is crucial for interpreting insider activity:
Acquisition Codes
- P: Open Market Purchase
- A: Grant or Award
- M: Exercise of Option
- G: Gift Received
Disposition Codes
- S: Open Market Sale
- F: Payment of Tax Obligation
- D: Disposition to Company
- G: Gift Given
How to Interpret Form 4 Data
Purchase Analysis
When analyzing insider purchases, consider:
- Size of Purchase: Large purchases relative to existing holdings show conviction
- Timing: Purchases after price declines may indicate value buying
- Multiple Insiders: Several insiders buying simultaneously is a strong signal
- Open Market vs. Grants: Open market purchases (Code P) are more meaningful than grants (Code A)
Sale Analysis
Insider sales require more nuanced interpretation:
- Tax Sales (Code F): Often routine and less concerning
- Large Open Market Sales: May signal concerns about valuation
- Pattern of Sales: Regular selling vs. unusual large sales
- Percentage of Holdings: Selling a small portion vs. major position reduction
Common Pitfalls to Avoid
Don't Overreact to Single Transactions
One insider sale doesn't necessarily signal trouble. Look for patterns and context.
Understand the Timing
Some transactions are planned months in advance through 10b5-1 plans, reducing their predictive value.
Consider the Source
CEO and founder transactions often carry more weight than those by other insiders.
Using Insidr.Finance
Our platform simplifies Form 4 analysis by:
- Automatically parsing all Form 4 filings in real-time
- Highlighting meaningful transactions and filtering out routine ones
- Providing visual context with stock price charts
- Calculating transaction sizes relative to total holdings
- Tracking patterns across multiple insiders and time periods