Statement of Changes in Beneficial Ownership (SEC Form 4) is considered to be a form that should be passed in hands of the Securities and Exchange Commission (SEC), in case of any significant asset change of an enterprise's insiders. Career executives, officials or stockholders with 10% and more of the company’s assets, can be called the insiders. The dealings between an advance holder and an enterprise, as well as a purchase and sale of its equity shares, are specified in this document.
Parts 16(a) and 23(a) of the Securities Exchange Acts (1934) and Parts 30(h) and 38 of the Investment Company Act (1940) regulate the Form submission. Disclosure of data, mentioned in the document, is obligatory and comes into the public domain.
Essence of SEC Form 4
There exists several SEC Forms, relatable to the holding of stocks and securities for publicly traded enterprises. Therefore, other forms that should be delivered to the U.S. Securities and Exchange Commission, are present.
Form 3. The document is submitted, in case of obtaining shares and checking in securities for the first time. The transition of a private entity into an executive, a chief, or a beneficial owner means filing of the document in the course of a 10 days period.
Form 4. Its application should be carried out by the organization or the private entity of the enterprise. The document contains information about the insiders shift. Within two days of the transaction being held, all the data specified in the Form 4 are supposed to be delivered to the Sec. It stands to mention, it’s a double-page form, where all the orders for purchase and sell, along with the option completion, are spanned.
Options can be considered as contracts, thanks to which the holder is entitled to purchase or sell the shares at the determined cost on a fixed date. It needs to be emphasized that the insider acquires a right but not a request. Options, in addition, are presented as the element of an employee incentive scheme for the senior officials and chiefs. As a rule, cashing out and redemption after the expiry date is possible with this type of contracts.
Form 5. The document is passed on condition that carrying out of shares’ trade completed, anyway the individual made a poor fist to report, as it was predetermined in the Form 4. So that the data in the Form 5 should be submitted in 45 days after closing the enterprise’s financial year.
There are instances where a disposal of data to the state bodies and self-regulatory organizations (SROs), made by the SEC, happens. A failure to disclose the full information demanded in the Form 4 leads to the institution of civil or criminal proceedings.
Forms referring to SEC Form 4
In order to sustain the firm's transparency and log actions of the chief executives, Forms distinctive from the above-mentioned ones, become of considerable impact. For instance, the equity’s annual and quarterly financial report submitted through a 10-K and a 10-Q, respectively.
In case the enterprise floats shares for the first time, the Form S-1 is needed to be filled. In the event there are any improvements, an application by the S-1A is necessary. The 8-K Form is introduced, whether extemporaneous fundamental occasions or enterprise modifications occur.
Admission of SEC Form 4
Most commonly, the admission of the SEC Form 4 by email via the EDGAR system is an overriding requirement. Exceptions are temporary technical difficulties. Within two working days from the major deal the enterprise’s submission is indispensable.
SEC Form 4 case
In May 2020, Reed Hastings, being the Chief Executive Officer (CEO) of the subscription streaming service and production company Netflix Inc., submitted the SEC Form 4.
All the data, described below, disclosed after the document was sent via the EDGAR system:
- Division 1 includes the individual’s identity, i.e. Reed Hastings.
- Division 2 provides the enterprise’s trading name, specifically Netflix Inc.
- Division 3 encloses the transaction date of May 20th, 2020.
Table 1 usually contains the data about share’s acquisition. Therefore, the following sectors are dedicated to:
- Division 1 uncovers a security type, that is Common Stock.
- Division 4 is stocks’ number, its purchase or selling processes and the price.
Therefore, the SEC Form 4 discloses the acquisition of 53,193 shares at the cost of $15,6657. So the total number of stocks left by Reed Hastings is 53,193.