# SEC Form 4 Explained: Changes in Insider Beneficial Ownership

## What Is SEC Form 4: Statement of Changes in Beneficial Ownership?

Whenever company insiders, like directors and officers or shareholders with over 10% ownership, alter their stock holdings, they must file SEC Form 4 with the [SEC](https://www.investopedia.com/terms/s/sec.asp). This form provides details on their relationship to the company and documents purchases and sales of [equity](https://www.investopedia.com/terms/e/equity.asp) shares, ensuring transparency and compliance with federal securities regulations.

### Key Takeaways

*   SEC Form 4 must be filed within two business days for any insider's material change in stock holdings.
*   Company insiders include directors, officers, and significant shareholders who own 10% or more of a company's stock.
*   Failing to file Form 4 can lead to civil or criminal penalties.
*   SEC Form 4 is filed electronically via the EDGAR system, but exceptions may be made in cases of hardship.
*   Related forms include Form 3 for initial acquisitions and Form 5 for late reporting of transactions.  
    

## Deep Dive Into SEC Form 4: Insider Trading Requirements

There are multiple SEC forms that are associated with the ownership of stocks or securities for publicly-traded companies. SEC Form 4 is one of three forms often required by the SEC.

### Form 3

Individuals file [Form 3](https://www.investopedia.com/terms/f/form3.asp) when they first acquire a stock and are registering the securities for the first time. The form must be filed within 10 days of the individual becoming an officer, director, or [beneficial owner](https://www.investopedia.com/terms/b/beneficialowner.asp) at the company.

### Form 4

Form 4 is required to be filed by a company or the individual at the company when there is a change in the holdings of company insiders. Form 4 must be filed with the SEC within two days of the transaction. Form 4 is a two-page document, which covers any buy-and-sell orders, as well as the exercise of company stock options.

[Options](https://www.investopedia.com/terms/c/calloption.asp) are contracts that give the holder the right, but not the obligation to buy or sell a stock at a certain price, and by a specific date. Options are often awarded to executives and directors of companies as part of the [employee incentive](https://www.investopedia.com/terms/e/eso.asp) plan. The SEC is able to use the information in SEC Form 4 when referring a case to other governmental authorities and self-regulatory organizations (SROs).  

### Form 5

[Form 5](https://www.investopedia.com/terms/f/form5.asp) is filed if a person conducted a trade of the company's stock but failed to report it via Form 4. Form 5 allows the individual 45 days following the close of the company's fiscal year.

The SEC is able to use the information in SEC Form 4 when referring a case to other governmental authorities and [self-regulatory organizations](https://www.investopedia.com/terms/s/sro.asp) (SROs). If a party fails to disclose the required information on Form 4, civil or criminal actions could result.

## Related SEC Forms for Insider Ownership Transparency

Several other forms are critical to maintaining transparency and recording the actions of public company executives, officers, and directors. These include the annual report filed via a [10-K](https://www.investopedia.com/terms/1/10-k.asp) and the quarterly report filed via a [10-Q](https://www.investopedia.com/terms/1/10q.asp).

If a company is issuing stock for the first time, they must file Form [S-1](https://www.investopedia.com/terms/s/sec-form-s-1.asp), and if any amendments must be made, they file Form S-1A. The [8-K](https://www.investopedia.com/terms/1/8-k.asp) is filed when there are unscheduled material events or corporate changes. [Schedule 13D](https://www.investopedia.com/ask/answers/09/schedule-13d.asp) informs the SEC when an entity acquires more than 5% of the stock of a public company.

> **Important**
>
> The SEC has the capacity to use information disclosed on Form 4 in investigations or litigation involving federal securities laws, in addition to other civil, criminal, or regulatory statutes or provisions.

## Filing SEC Form 4

Generally, parties file Form 4 electronically through the Commission's [EDGAR](https://www.investopedia.com/terms/e/edgar.asp) system. Exceptions can occur during hardship. It is mandatory within two business days starting from the end of the day the material transaction occurred.

Here is a [link](https://www.sec.gov/about/forms/form4.pdf) to a downloadable SEC Form 4: Statement of Changes in Beneficial Ownership.

## Case Study: Elon Musk’s SEC Form 4 Filing

In February 2020, Elon Musk, the [Chief Executive Officer (CEO)](https://www.investopedia.com/terms/c/ceo.asp) of the publicly-traded company Tesla Inc. ([TSLA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=tsla)), filed SEC Form 4 as an individual. Below is a copy of the Form 4 as well as the details of the transaction, which was obtained via the SEC's EDGAR system.

*   Section 1 contains the reporting person's name, which was Elon Musk, and the address for the company.
*   Section 2 has the company name of Tesla Inc.
*   Section 3 contains the transaction date of February 14, 2020.

### Table 1

*   Section 1 contains the type of security, which was common stock.
*   Section 4 contains the number of shares, the action taken (whether the shares were acquired or disposed of), and the price at which the shares were bought or sold.

The SEC Form 4 shows that Elon Musk purchased 13,037 shares at a price of $767, which left Mr. Musk with a total number of shares owned of 34,098,597 following the purchase (section 5).

![SEC Form 4 Example Elon Musk CEO of Tesla Inc.](https://www.investopedia.com/thmb/6-ZmfMF5hwtxgobNDBHsvZt2BXs=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/SECFORM4TeslaElonfromEDGAR-67a4f1b6d1534283880be38d30515214.jpg)

*SEC Form 4 Example Elon Musk CEO of Tesla Inc.*

## The Bottom Line

SEC Form 4 is a critical document that insiders of publicly traded companies must file with the Securities and Exchange Commission (SEC) when there's a significant change in their holdings. This ensures transparency and compliance with federal securities laws.

The form must be filed within two business days after the transaction, detailing the nature of the transaction and changes in ownership. Failure to file or disclose accurate information can result in civil or criminal consequences.

Companies and their insiders should utilize the SEC's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system to file this form to meet the mandatory compliance requirements efficiently. Understanding these requirements, along with related forms like Form 3 and Form 5, can prevent legal issues and uphold investor trust.  

> **Article Sources**
>
> 1.  U.S. Securities and Exchange Commission. "[Form 4](https://www.sec.gov/about/forms/form4data.pdf)." Page 1.
>     
> 2.  U.S. Securities and Exchange Commission. "[Forms 3, 4, 5](https://www.sec.gov/fast-answers/answersform345htm.html)."
>     
> 3.  U.S. Securities and Exchange Commission. "[Form 3](https://www.sec.gov/files/form3data.pdf)."
>     
> 4.  U.S. Securities and Exchange Commission. "[Form 4](https://www.sec.gov/about/forms/form4data.pdf)." Page 1-2.
>     
> 5.  U.S. Securities and Exchange Commission. "[Form 5](https://www.sec.gov/files/form5data0.pdf)." Page 1-2.
>     
> 6.  U.S. Securities and Exchange Commission. "[Form 8-K](https://www.sec.gov/answers/form8k.htm)."
>     
> 7.  U.S. Securities and Exchange Commission. "[Form 4](https://www.sec.gov/about/forms/form4data.pdf)." Page 2.
>     
> 8.  U.S. Securities and Exchange Commission. "[Edgar Search Results for Elon Musk](https://www.sec.gov/cgi-bin/browse-edgar?CIK=1494730)."