SEC Section 16 Filings

SEC Section 16 Filings- Under Section 16, every person who is an insider, including officers, directors and 10% shareholders, must file an initial statement on Form 3 and file continuing changes on Form 4 within two business days following such change. Transactions required to be reported on Form 4 include acquisitions and disposition of securities including the purchases and sales of securities, exercises and conversions of options, warrants and other derivative securities, and grants or awards of securities from the Company.

The following are some specific time and filing requirements related to Section 16:

All Section 16 filings are made using the EDGAR system.

A form 3 must be filed by the effective date of the registration statement in an IPO or within 10 days if a person becomes an insider after the effectiveness of the IPO. The initial Form 3 must include all of the insider’s holding of the reporting company’s securities. An insider must file a Form 3 even if they do not have any beneficial ownership in the company’s securities. For example, a newly elected director or newly appointed executive officer must file a Form 3 even if such director or officer does not have a beneficial interest in a single share of stock.

Any change in an insider’s beneficial ownership of the company’s securities is reported on a Form 4 by the second business day following the transaction date. The Form 4 must be filed for transactions, even if such transactions are exempt from the short swing profit rules.

There are a few exemptions to the Form 4 filing requirements including gifts and inheritances, however if the person relies on these exemptions, an annual Form 5 must be filed to report the transactions. I always recommend staying current in Form 4 filings and not relying on the Form 5 filing.

Insiders are not required to report on Form 4 for transactions that effect only a mere change in the form of the insider’s beneficial ownership. For example, a change from the individuals name to their IRA or a trust in which they control.

A form 4 must be filed when a person ceases to be an insider. A form 4 contains an “exit” box to report the change. However, the insider would still be required to report a transaction after they cease to be an executive officer or director if the transaction (such as a sale) “matches” with any transaction (such as a purchase) while they were an executive officer or director during a six month period.

A company must post on its corporate website all Forms 3, 4 and 5 filings and keep the report posted for at least 12 months.