Glossary
Form 4
The SEC filing in which company insiders report their purchases and sales of the company's stock, generally within two business days.
On this page
Form 4 is the filing in which a public company's insiders tell the SEC they have bought, sold or otherwise changed their holdings of the company's stock. "Insiders" here means officers, directors and anyone owning more than 10% of a class of the company's registered shares. Since the Sarbanes-Oxley Act of 2002, most transactions must be reported within two business days, which makes Form 4 one of the fastest public signals of how the people running a company are positioned.
How it works
An insider files Form 3 on becoming an insider, Form 4 for each change in ownership, and Form 5 annually for certain deferred items. Each Form 4 lists the date, number of shares, price and a transaction code. The codes are the key to reading it:
- P: open-market or private purchase.
- S: open-market or private sale.
- A: grant or award from the company.
- M: exercise or conversion of an option or other derivative.
- F: shares withheld to pay the exercise price or taxes.
What to keep in mind
Insiders sell for many reasons, such as diversification, taxes or a home purchase, but they generally buy for one. Clusters of open-market purchases by several insiders get the most attention. Legal insider trading reported on Form 4 is not the same as illegal insider trading on material non-public information.
Related terms
Sources and further reading
- SEC — Insider transactions and Forms 3, 4 and 5