The short version
Corporate insiders report their holdings and trades in their company’s stock on three forms, all filed with the Securities and Exchange Commission (SEC) and published on EDGAR, the SEC’s public filing system.
| Form | What it reports | Deadline |
|---|---|---|
| Form 3 | What the insider owns on becoming an insider | Within 10 days of becoming an insider |
| Form 4 | Changes in ownership: buys, sells, grants, option exercises, gifts | Before the end of the second business day after the transaction |
| Form 5 | Transactions that were exempt from Form 4 or should have been reported earlier | Within 45 days after the company’s fiscal year ends |
Form 3 is the starting balance. Form 4 is the running record. Form 5 is the year-end catch-up. Almost all of the insider data on WallStPal comes from Form 4, because it is the fastest of the three.
Who is an insider under Section 16
These forms come from Section 16(a) of the Securities Exchange Act of 1934. The law covers three kinds of people at a company whose stock is registered with the SEC.
Directors. Every member of the board.
Officers. The SEC’s Rule 16a-1(f) defines this by function, not title. It includes the president, the principal financial officer, the principal accounting officer (or controller), any vice president in charge of a principal business unit, division or function, and anyone else who performs a policy-making function. An executive at a parent or subsidiary counts if they make policy for the company. A person with “vice president” on their business card who does not run a major function may not be a Section 16 officer, which is why companies keep a formal list.
More than 10% owners. Anyone who beneficially owns more than 10% of a class of the company’s registered equity. Beneficial ownership here uses the same test as the 5% rules for Schedule 13D and 13G: having or sharing the power to vote or sell the shares. Certain institutions, such as banks and registered advisers holding shares for clients in the ordinary course of business, are not counted as owners of those shares for this test.
Once someone is an insider, the forms report every security in which they have a “pecuniary interest,” meaning the chance to profit from it. That includes shares held by immediate family members living in the same household (a presumption the insider can rebut), a share of holdings in a partnership they run, and derivative securities such as stock options.
Form 3: the starting point
A new director, a newly appointed officer or a new 10% holder files Form 3 within 10 days. If the company is registering its stock for the first time, as in an initial public offering, the existing insiders file by the time the registration becomes effective. That is why a cluster of Form 3s often appears on the day a company lists.
Form 3 has two tables. Table I lists non-derivative securities, mainly common stock. Table II lists derivative securities, such as options and restricted stock units, with their exercise price and expiration date. A Form 3 is filed even when the insider owns nothing yet. In that case it simply says “no securities beneficially owned.”
On its own, a Form 3 tells you little about anyone’s view of the stock. It is useful as a baseline, so later Form 4s make sense.
Form 4: the running record
Form 4 reports a change in ownership. Under Section 16(a) and Rule 16a-3, it must be filed before the end of the second business day after the transaction is executed. A trade on a Monday has to be on EDGAR by the end of Wednesday.
Each line on a Form 4 carries a one-letter transaction code, such as P for an open-market purchase, S for an open-market sale, A for a grant from the company, M for an option exercise and F for shares withheld to pay taxes. Our guide to Form 4 transaction codes lists them, and our guide on how to read a Form 4 goes box by box.
A few things are worth knowing about Form 4 deadlines:
- Plan trades and some benefit plan trades. For trades under a Rule 10b5-1 plan and certain discretionary plan transactions where the insider does not pick the date, the “execution date” is when the broker or plan administrator tells the insider, as long as that is no later than the third business day after the trade. The two-day clock starts then.
- Gifts. Since rule amendments that took effect in 2023, bona fide gifts of stock must be reported on Form 4 within two business days. Before that, many gifts were reported months later on Form 5.
- Small purchases. Some small acquisitions, totaling under $10,000 in a six-month period, can be reported later instead of on a Form 4.
- The plan checkbox. Form 4 now has a box to mark trades made under a 10b5-1 plan. See our guide to 10b5-1 trading plans.
Form 5: the annual catch-up
Form 5 is due within 45 days after the end of the company’s fiscal year. It covers transactions that were exempt from immediate Form 4 reporting, such as the small acquisitions above, and any transactions that should have been reported during the year but were not.
Most insiders do not file a Form 5 at all. It is required only if there is something to report that has not already been disclosed. Previously reported trades do not go on it.
When a Form 5 reports a trade that should have been on a Form 4, it is a late disclosure. Companies must list insiders who filed late in their annual proxy statement or 10-K, under the heading “Delinquent Section 16(a) Reports.”
Why the deadlines are short
Before the Sarbanes-Oxley Act of 2002, Form 4 was a monthly report, due within 10 days after the end of the month in which the trade happened. An insider who traded at the start of a month could wait about six weeks before anyone knew. The SEC rules implementing Sarbanes-Oxley cut that to two business days, effective August 29, 2002. Electronic filing of all three forms on EDGAR became mandatory on June 30, 2003, and companies with websites must post the forms there by the end of the business day after filing.
Those two changes are what make insider data useful for ordinary investors today. A buy by a chief executive is usually public within two days, and you can read it on our insider trades pages or our list of insider purchases.
What late filings tell you
Not every insider files on time. A late Form 4 can be an honest mistake, such as an assistant missing a deadline, but repeated lateness means investors see trades days or weeks after they happen. Our late filings page flags Form 4s filed after the two-day deadline, so you can judge how fresh a trade really is.
Being an insider also brings a second set of rules, under Section 16(b), that force insiders to hand back profits from some trades made within six months of each other. Our guide to the short-swing profit rule explains how that works.
Where the rule comes from
- Section 16 of the Securities Exchange Act, at 15 U.S.C. 78p, which sets the 10-day and two-business-day deadlines.
- Rule 16a-1, defining officers and beneficial ownership, and Rule 16a-3, which governs the forms and the Form 5 deadline.
- The SEC’s investor bulletin on Forms 3, 4 and 5.
- The SEC’s 2002 release on the two-day deadline.
Examples
The 2002 switch to two business days. In August 2002 the SEC adopted Release 34-46421, which made Form 4 due before the end of the second business day after a trade, effective August 29, 2002. Under the old rule, changes were reported monthly, within 10 days after the end of each calendar month. The SEC release also moved several kinds of transactions with the company, which had been allowed to wait for Form 5, onto Form 4. Electronic filing became mandatory the following year, as Perkins Coie summarized at the time.
The SEC’s 2023 late-filing cases. On September 27, 2023, the SEC charged six insiders and five public companies over late Form 4s and late Schedules 13D and 13G. Some filings were weeks, months or even years late, covering more than $90 million in transactions. The individuals, including a director of SolarEdge Technologies and the chief financial officer of AgEagle Aerial Systems, agreed to pay penalties from $66,000 to $150,000 without admitting or denying the findings. Several companies were charged for contributing to the failures or for not disclosing them under the “delinquent reports” heading.
Explain it like I’m 13
Think of a school club where the leaders own special club tokens.
When you become a leader, you write down how many tokens you have. That is Form 3. Every time you buy, sell or give away tokens, you write a quick note within two school days. That is Form 4. At the end of the year, if you forgot to write something down or had a tiny trade that did not need a quick note, you clean it up on one last note. That is Form 5.
Questions about this guide? Pal reads it with you and answers in plain English.
WallStPal explains public filings. Nothing here is investment advice. Editorial policy · Corrections